MID MORNING MARKETS 23-01-18

The ASX 200 is down 12 points in mid-morning trade after the US catch-up on growth doldrums. Energy, Materials and banks all ↓.  CGF experiencing “challenging” conditions, APE +ve update. RRL, SBM and NSW Qs. BoJ likely to downgrade CPI forecasts #ausbiz

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TODAY

  • Bank of Japan meeting – expectations that inflation forecasts will be lowered
  • CYBG Limited (CYB) earnings

COMPANY NEWS

  • Challenger (CGF) – Expects normalised NPBT of $270 million for 1H19 and normalised NPAT of $200m, with volatility having an impact. This included lower cash distributions on Life’s absolute return portfolio (AUM $800m), which were $10m in 1H19, representing a yield of 1.3% for the half year. This was approximately $13m lower than the prior corresponding period; and lower Funds Management performance fees, which were $2m in 1H19 and were $4m lower than the prior corresponding period. CGF has reduced its FY19 guidance to a range of $545-565m vs prior guidance of $591-613m. Results released 12 February.
  • Galaxy Resources (GXY) – Increase in the Mt Caitlin resource by 42% to 16.7Mt
  • St Barbara (SBM) – Q Production. FY19 consolidated production guidance increased; GEP is progressing well and GMX feasibility study is on track; Continued significant drill results from Gwalia deep drilling program suggest greater gold endowment than previously modelled; Sulphide drilling results at Simberi continue to be positive, indicating significant additional sulphide and oxide mineralisation present; Debt free, $357 M cash and term deposits2; Fully funded near-term growth; Positioned for in-organic growth
  • AP Eagers (APE) – Expects to report a statutory NPAT of $101.2m for FY18, up 3.0%. NPBT expected to be $133.7, ahead of guidance of $126-130m. Ahead of guidance due to stronger operating net profit before tax for both the car and truck retailing businesses.

OVERNIGHT

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SPI FUTURES -28

US EQUITIES – S&P 500 -39 (-1.46%), Dow -337 (-1.36%), NASDAQ -119 (-1.56%)

Main themes

  • US markets responds to growth concerns from Chinese growth and cut to IMF global growth forecast
  • Falls follow a 4-week rising streak, with the S&P500 up 10% since Christmas Eve, so considered to have a technical basis.
  • There were reports late in the day that the US had cancelled the trade meetings with Chinese officials, which were later denied by the White House.
  • IBM (+6.78 in after-hours trade) reported earnings and guidance ahead of guidance

EUROPEAN MARKETS – Mostly weaker. STOXX500 -0.36%, UK FTSE -0.99%, German DAX -0.41%, French CAC -0.42%.

CURRENCIES

  • The USD is a little lower at 96.33.
  • The Aussie dollar is weaker at US71.19c.

BONDS – 2-yr: -4 bps to 2.57%, 3-yr: -5 bps to 2.55%, 5-yr: -5 bps to 2.57%, 10-yr: -5 bps to 2.73%, 30-yr: -4 bps to 3.05%

COMMODITIES

  • WTI crude futures were down US$1.23c or 2.3% to $52.57. It comes after recent strength however, with WTI up 18% over the last 3 weeks.
  • Gold is up US$2.00 or 0.16% at $1284.60.
  • Iron Ore – IRESS reports iron ore was unchanged atUS$74.50 a tonne. CommSec reports iron ore down 1.8% to US$74.60.
  • LME metals – Mixed. Copper -0.77%, nickel -1.82%, aluminium +1.67%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – December Existing Home Sales 4.99m (consensus 5.25m; prior 5.33m) to the lowest level in 3 years
  • European data – January ZEW Economic Sentiment -20.9 (expected -20.1; last -21.0); German ZEW Economic Sentiment -15.0 (expected -18.4; last -17.5) and ZEW Current Conditions 27.6 (expected 43.5; last 45.3)
  • German Chancellor Angela Merkel and French President Emmanuel Macron signed a renewed treaty of friendship and cooperation, calling for the formation of an EU army.
  • Chinese data on Monday showed growth in line with expectations, albeit at the slowest rate in 28 years. Mot sure anyone really has any faith in the numbers, though. GDP Grew 6.6% from the previous year. (The 6.4% represents the growth in 4Q 2018 compared to growth in 4Q17, while the 6.6% is entire 2018 GDP compared to total 2017 GDP).
  • IMF growth forecasts cut again – It’s the second cut in 3 months, to a 3.5% growth rate worldwide for 2019 and 3.6% for 2020 — 0.2 and 0.1 percentage points below its last forecasts in October. The cut in October related to the impact of US and Chinese tariffs. The additional reflect broader softer momentum in 2H18, including in Germany, Italy, and Turkey, and also weakening financial market sentiment. Risks are seen skewed to the downside (trade, Brexit and China)
  • Earnings season – Johnson & Johnson forecast 2019 sales that fell short of analysts’ estimates and said it expected further pressure on US prescription drug prices, weighing on the broader pharmaceutical sector.

QUOTE OF THE DAY

“A mathematical theory is not to be considered complete until you have made it so clear that you can explain it to the first man whom you meet on the street.” – David Hilbert, German mathematician born this day in 1862. Died 14 February 1943

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