MID MORNING MARKETS 28-11-18

The ASX 200 is down 20 points in mid morning trade despite improving US markets. US↑, affecting $A and commodities. Banks ok, Materials ↓ AMP remediation update, CSR sells glass, OML contract and APT working with ASIC. Big US Fed tonight #ausbiz

m1m2m3TODAY

  • Economic data – Construction Work Done QoQ Q3
  • Ex-dividend – Civmec (CVL) 0.6c, Graincorp (GNC) 8.0c

TONIGHT

  • US economic data – GDP – Second Estimate, Adv. International Trade in Goods, Adv. Retail Inventories, Adv. Wholesale Inventories, New Home Sales
  • FOMC Minutes
  • Fed Speak – Chair Jerome Powell.

COMPANY NEWS

  • CSR – Will sell its Viridian Glass business to Crescent Capital Partners for $155m. This transaction includes the Viridian property site at Dandenong, Victoria. CSR will retain the property at Ingleburn (estimated market valuation in excess of $60m) with a long term lease arrangement. Announced the sale in July 2018 following a strategic review. Completion is expected by January 2019. Following completion of the sale of all Viridian assets, CSR expects to realise a pre-tax loss of approximately $20-$30m in FY19, primarily due to the disposal of Viridian-related deferred tax assets.

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  • Wesfarmers (WES) – Completion of sale of 13.2% interest in Quadrant Energy for US$170m. Expects to report pre-tax profit of US$98m in 1H19.
  • Afterpay (APT) – Response to ASIC report. ASIC has recommended extending its product intervention powers as the most appropriate way to regulate the buy now pay later industry. APT says it is looking forward to working with ASIC as it continues to monitor the industry and has reinforced the reasons it is such a model financial citizen.

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  • oOh!media (OML) – Notes media reporting today suggesting the Brisbane City Council has announced a ten year street furniture contract with Adshel (recently acquired by OML) and today confirms it has been awarded that contract.

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  • AMP – Confirms the $415m pre-tax ($290m post tax) additional advice remediation provision recognised in its 1H 18 financial results. The total program estimate is now $778m. The figure of $1.185bn referenced in the Royal Commission was an early estimate of the total program costs (now estimated as $778m). This estimate was based on a nine year timeframe for remediation that was rejected as unacceptable for customers by management and the Board. The difference in cost was materially attributable to the time frame. AMP is also investigating the provision of general advice to corporate super plans

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OVERNIGHT

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SPI FUTURES -5

US EQUITIES – S&P 500 -6 (-0.23%), Dow-91 (-0.37%), NASDAQ -16 (-0.23%)

Main themes

  • Volatile night for markets – the Dow was dwon as much as 224 points before rally to close on the highs.
  • US President Trump reiterates threat to impose tariffs on remaining imports from China and increase the duty to 25.0% from 10.0%, says it is “highly unlikely” that the increase (om $200bn) would be delayed. He added that a 10% tariff could be imposed in Iphones and laptops imported from China.

EUROPEAN MARKETS – All moderately lower. STOXX500 -0.26%, UK FTSE -0.27%, German DAX -0.40%, French CAC -0.24%.

CURRENCIES

  • The USD is up 0.4% at 97.48.
  • The Aussie dollar is lower at US72.05c.

BONDS – 2-yr: UNCH at 2.83%, 5-yr: -1 bp to 2.90%, 10-yr: -1 bp to 3.06%, 30-yr: -1 bp to 3.31%

COMMODITIES

  • WTI crude futures were down US7c or 1.63% at US$51.56, with market sentiment dominated by the G20 meeting on November 30-December 1 , followed by the OPEC meeting on December 6.
  • Iron Ore – IRESS reports iron ore down US$1.5 at US$72.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was up US5c at US$64.75 dry ton. (CFR Tianjin port)
  • LME metals – Large falls. Cu -1.09%, Ni -0.92%, Al -1.08% the exception

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – September Case-Shiller 20-city Home Price Index 5.1% (consensus 5.3%; prior 5.5%) and September FHFA Housing Price Index 0.2% (prior 0.4%); November Consumer Confidence 135.7 (consensus 135.5; prior 137.9)
  • Fed Speak – Vice Chairman Richard Clarida said the Fed was “much closer ” to a neutral rate than it was in December 2015, when hikes began. “How close is a matter of judgment, and there is a range of views on the FOMC.”
  • Brexit – UK Prime Minister Theresa May’s withdrawal bid will face a vote in parliament on December 11.
  • Italian Fiscal crisis – Prime Minister Giuseppe Conte reportedly said that the deficit target for 2019 will be reduced to 2.2% from 2.4% but cutting spending by EUR3.60 billion. Italy’s Lower House will begin a full budget debate on Monday.
  • European economic data – French Consumer Confidence 92 (expected 94; last 95); Italian Consumer Confidence 114.8 (expected 115.9; last 116.5) and Business Confidence 104.4 (expected 104.1; last 104.9)
  • UK November CBI Distributive Trades Survey 19 (expected 10; last 5)
  • Capital Economics on US 10-year yields – “Investors are now discounting roughly two rate hikes between now and end-2019, rather than the three that they were anticipating a few weeks ago, and that we continue to forecast…Nonetheless, they still haven’t priced in looser monetary policy in 2020, when we think that the Fed will cut rates significantly in response to a slowing economy…With that in mind, we think that Treasury yields will drop back later next year. For example, our forecast is that the 10-year yield will end 2019 at only 2.5%, which compares with just over 3.0% now. In the process, the yield curve is likely to flatten further in the near term before steepening again from mid-2019.”

QUOTE OF THE DAY

It’s very expensive to be me. It’s terrible the things I have to do to be me.” – Anna Nicole Smith, American model born this day in 1967. Died 8 February 2007.

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