MID MORNING MARKETS 25-01-18

The ASX 200 is up 17 points in mid-morning trade after a mixed US session. Healthcare the worst, dragged down by RMD Q update. Materials ok and banks mixed. AMP warnings, NWL update, ILU Q. HUGE week ahead – RC report and CPI, FOMC and US jobs, Brexit Plan B vote and big EU data. #ausbizm1m2m3


COMPANY NEWS

  • AMP – Guidance downdate. Expects underlying profit of around $680m (down from $1.04bn) and profit attributable to shareholders of approximately $30m (from $844m). blamed “costs arising from the royal commission response, portfolio review, increased investment in risk, governance and controls, and advice remediation.” “Recognising the 2H 18 performance of the business, the related capital impacts and the uncertainties in the operating environment” final dividend of 4c expected (from 14.5c). Result will be announced on 14 Feb. FY19 outlook earnings (retained businesses) expected to be affected by external market conditions, the regulatory environment, implications of the future strategy and a number of previously advised factors including MySuper pricing changes to Australian wealth management of $35m; Unwinding the internal distribution arrangements and adjustments for tax and products transferring on sale to Resolution Life with an annual impact of approximately $85m; Stranded group office costs of approximately $40m. AMP reaffirmed its guidance in relation to these items.
  • ResMed (RMD) – 2Q report. Was -6.65% in after-hours trade in the US. Revenue increased 8% to $651.1 million ($673m expected); up 9% on a constant currency basis; Gross Margin expanded 70bps to 58.9%; Net operating profit increased 8%; non-GAAP operating profit up 15%; GAAP diluted earnings per share of $0.86; non-GAAP diluted earnings per share of $1.00. US revenue, Can and LA +9% driven by masks and device. Europe, Asaia +1% (device sales in France and Japan were impacted as customers completed their connected device upgrade programs. Device sales outside France and Japan grew well). SAS +63%. Selling, general and admin costs +6% (+8% on constant currency basis). For the half year, underlying profit +20% for the half to US$338.1m. revenue rose 10% (or 11% on constant current basis.)
  • Netwealth (NWL) – Update. FUA at $19bn. Net flows of $876m were offset by negative market movements of $1.2bn.  FUA up 23% over the last 12 months. Flows significantly below expectations. New competitor pricing delayed decision making but NWL says it has still been winning business. RC provides opportunities. Received 51.4% in the 12 months to Sep 18.

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  • Iluka (ILU) – Q report.

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  • Resolute Mining (RSG) – Ravenswood Update. Agreement with Queensland Government for the relocation and construction of new Ravenswood school; Significant potential enhancements to the Ravenswood Expansion Project identified; Strategic Review of Ravenswood Expansion Project has commenced with results expected during 2019

Pilbara Mineral (PLS) –

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  • Viva Energy (VEA) – Refining Margin Update

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NEXT WEEK

  • Banking Royal Commission Report
  • Domestic data – Inflation on Wednesday. (Exp 0.4%/2.0% up from 1.9%). Also monthly business confidence Tuesday.
  • Chinese industrial profits on Monday, official PMI on Thursday, Caixin manufacturing PMI on Friday.
  • Japanese retail sales, consumer confidence, unemployment and the manufacturing PMI
  • Brexit – vote on the Plan B deal on Tuesday and the market manufacturing index
  • European GDP on Thursday (0.2%/1.2% expected, from 0.2%/1.6% previously). Also unemployment on Thursday and inflation on Friday.
  • US FOMC meeting (no change in rates expected) and employment and wages data (forecasts are for 183K, down from 312K, with the unemployment rate to stay at 3.9%).

OVERNIGHT

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SPI FUTURES +20

US EQUITIES – S&P 500 +4 (+0.14%), Dow -22 (-0.09%), NASDAQ +48 (+0.68%)

Main themes – A mixed session

  • Ongoing uncertainty around trade, global growth prospects, and government shutdown (now Day 34).
  • Positive reaction to upbeat earnings reports from chipmakers and transport companies provided support more broadly

EUROPEAN MARKETS – Mostly weaker. STOXX500 +0.22%, UK FTSE -0.35%, German DAX +0.53%, French CAC -0.65%.

CURRENCIES

  • The USD is stronger at 96.51.
  • The Aussie dollar is weaker at US70.97c.

BONDS – 2-yr: -3 bps to 2.56%, 3-yr: -4 bps to 2.53%, 5-yr: -4 bps to 2.55%, 10-yr: -4 bps to 2.71%, 30-yr: -4 bps to 3.03%

COMMODITIES

  • WTI crude futures were up US51c or 1.00% to $53.13, on the prospect for US sanctions against OPEC member Venezuela if the current political and economic turmoil deepens.
  • Iron Ore – IRESS reports iron ore was unchanged at US$74.80 a tonne. CommSec reports iron ore was up US80c or 1.1% at US$75.40.
  • LME metals – Mixed. Copper -0.50%, nickel +0.60%, aluminium +-0.97%

ECONOMIC DATA, NEWS & POLITICS

  • ECB meeting – The ECB made no changes to its policy stance and said it would keep rates unchanged through the summer. ECB President Mario Draghi acknowledged that economic risks in the eurozone are tilted to the downside. There were also reports (Handelsblatt) that the German government has downgraded its 2019 GDP growth forecast to 1.0%, down from 1.8% forecast in October and 2.1% forecast prior to the October revision
  • US economic data – Weekly Initial Claims 199K (consensus 217K; prior 212K) and Continuing Claims 1713K (prior 1737K); December Leading Indicators -0.1% (prior 0.2%)
  • US earnings – American Airlines (+6.35%), Texas Instruments (+6.91%), Intel -6.53% in after-hours trade), Starbucks (+1.95% in after-hours trade)
  • China-US trade – Commerce Secretary Wilbur Ross said the US and China are still “miles and miles” from reaching a trade deal, and Mr Draghi acknowledged that significant stimulus is still needed for the eurozone
  • Bank of England Chief Economist Andy Haldane said there is room for the BoE to hike rates, but it will change its stance if the British economy weakens.


QUOTE OF THE DAY

“It’s a funny thing about life; if you refuse to accept anything but the best, you very often get it.” – W. Somerset Maugham. British playright born this day in 1874. Died 16 December 1965.

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