MID MORNING MARKETS 21-11-18

The ASX 200 is down 23 points in mid morning trade after big falls o/n. FANGS ↓>20%. IT and H/care the worst. Gold best. Banks mostly ↓ amidst RC. AGM updates from A2M, FBU, PME (and contract). WES demerges Coles tomorrow.  #ausbiz

m1m2m3

TODAY

  • The final round of the banking Royal Commission
  • RBA Meeting Minutes
  • RBA Gov Lowe Speech

TONIGHT

  • UK CBI Industrial Trends Orders
  • US economic data – Housing Starts, Building Permits

COMPANY NEWS

  • A2 Milk (A2M) – AGM and outlook update. Revenue up 40.5% for the first 4 months (to October). NPAT +64.5%. China MBS distribution up from ~10,000 to ~12,000 stores. US distribution from ~6,000 to ~9,000 stores

m1

  • NRW Holdings (NWH) – Updated guidance – “Despite some weather impact on Queensland projects during October activity levels for the year to date remain on track to deliver full year revenue in line with our guidance of $1.1 billion. I am exceptionally pleased however with our operational performance so far this year which has continued to improve across all parts of the business and is clearly demonstrated in our earnings outlook”. Revenue expected at $500m (+45% on pcp), EBITDA expected at $70m (compared to $40.3m); Earnings ~$45m (up 100% on pcp.
  • Fletcher Building (FBU) – Expects that EBIT before significant items for HY2019 will be approximately 10% lower than HY2018 due to emerging challenging Australian trading conditions and the timing of house sales in the Residential Division to date. There is no change to the B+I provisions announced in February 2018. EBIT for FY2019 to be in the range of $630-680m. While the company continues to target a result at the top end of this range, FY2019 EBIT will be impacted by the outage at the Golden Bay Cement plant, the slowdown in the Australian residential market, and the reduction in Land Development earnings compared to last year. Aims to recommence dividends.
  • BHP Billiton (BHP) – Change of name to BHP Group.
  • Sydney Airport (SYD) – October result was driven by both seat capacity growth and stable load factors. Named Australia’s best Capital City Airport for the 2nd year at the prestigious Australian Airports Association (AAA) national industry awards.

m2

  • Wesfarmers (WES) – Coles lists tomorrow and its up to the market to determine the price (unlike other forms of splitting a company such as an IPO). Expected to trade at 5-10% discount to WOW. Most brokers think shares will trade somewhere between $13-14. Some specifics – Citi $14.20 a share, Morgan Stanley has a wide range with a midpoint at $11.09, CLSA is also at $14.20 and Deutsche Bank team is at $13. This put Coles market cap at $18bn and PE of 18x compared with WOW on 19.8x FY2020 years earnings. Wesfarmers (WES) now trades at 44.30 with PE of 16.9x this year and 16.3x next year earnings.

OVERNIGHT

m10m11

SPI FUTURES -16

US EQUITIES – S&P500 -46 (-1.66%), Dow Jones -396 (-1.56%), Nasdaq -219 (-3.03%).

Main themes

  • Big falls in tech stocks. Apple -3.96% on reports it had cut production orders, Facebook -5.72% on reports Mark Zuckerberg was blaming Sheryl Sandberg for data scandal. FAANG stocks now in correction territory (-20+%)
  • Thanksgiving on Thursday having an impact on volumes and volatility.

EUROPEAN MARKETS – All lower. STOXX500 -0.73%, UK FTSE -0.19%, German DAX -0.85%, French CAC -0.79%.

CURRENCIES

  • The USD is eased 0.2% to 96.20.
  • The Aussie dollar has also weakened to US72.96c.

BONDS – 2-yr: -2 bps to 2.78%, 5-yr: -2 bps to 2.87%, 10-yr: -1 bp to 3.07%, 30-yr: UNCH at 3.33%

COMMODITIES

  • WTI crude futures closed up 30c at US$56.76 in mixed trading on concerns about the impact on demand from US-China trade relations and as the Russian energy minister refuses to commit to a decision on cutting production.
  • Gold is up US1.30 at US$1,224.30.
  • Iron Ore – The CommSec site says China Import (Fines 62% Fe) was up US35c at US$75.45dry ton. (CFR Tianjin port)
  • LME metals – Mixed. Cu +0.87%, Ni -1.58%, Al -0.31%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – NAHB Housing Market Index 60 (consensus 68; prior 68) the lowest level since August 2016
  • Nissan Chairman Carlos Ghosn arrested over allegations of financial misconduct – Ghosn and board director, Greg Kelly, have been under-reporting compensation amounts to the Tokyo Stock Exchange securities report “over many years”. For Ghosn, “numerous other significant acts of misconduct have been uncovered, such as personal use of company assets.” Also made inappropriate investments. A whistle-blower had passed information to Nissan’s auditors who then began a wider investigation. The evidence was then passed to Japan’s public prosecutor.

QUOTE OF THE DAY

“The techniques I developed for studying turbulence, like weather, also apply to the stock market.” – Benoit Mandelbrot, French mathematician born this day in 1924.0 Died 14 October 2010.

m13.png

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s