MID MORNING MARKETS 29-01-18

The ASX 200 is down 21 points in mid-morning trade after weak o/s leads. Materials and telcos ok but blah for the rest. TPM ceases 5G rollout, CCP result, IPL outages, ECX downdate, RMD↓ on analyst downgrades. HUGE week ahead – RC report and CPI, FOMC and US jobs and earnings, Brexit Plan B vote and big EU data. #ausbiz

m1m2m3TODAY

  • Economic data – NAB Business Confidence
  • Ex-dividend – Djerriwarrh Investments (DJW) 10.0c

TONIGHT

  • UK – Parliamentary Vote on Brexit Deal
  • US economic data – S&P Case-Shiller Home Price Index, Adv. Intl. Trade in Goods, Adv. Retail Inventories, Adv. Wholesale Inventories, Consumer Confidence

COMPANY NEWS

  • Credit Corp (CCP) – NPAT up 13% to $33.6m; 18% growth in the consumer loan book to $203m; 71% growth in US revenue and initial purchases from two new issuers; Upgraded full year outlook for NPAT, purchasing and net lending. Increased US investment and unexpectedly strong consumer lending book growth in the period, 2019 earnings guidance has been revised to represent profit growth in the range of 7-9%. The company has also increased its PDL acquisition and net lending guidance

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  • TPG Telecom (TPM) – Has decided to cease the rollout of its mobile network in Australia due to the gov’t decision to prohibit the use of Huawei equipment in 5G networks, which has blocked it upgrade path to 5G. Still committed to the merger with Vodafone. No impact from this decision on its FY19 guidance and does not anticipate having to write-down, at this time, the mobile network costs capitalised to-date.
  • Incitec Pivot (IPL) – Unplanned outages at its Louisiana and Phosphate Hill plants are expected to have a combined EBIT impact of approximately $45m for the financial year ending 30 September 2019. Louisiana reduction of 80kt and $25m, Phosphate Hill 950kt and $20m.
  • sKYCITY (SKC) – Strong finish to the year. Expects normalised EBITDA in 1H19 to be around $189m (up around 10% on 1H18 and normalised NPAT in 1H19 to be around $97m (up around 11% on 1H18).
  • Eclipx (ECX) and McMillan Shakespeare Group (MMS) – ECX currently expects FY19NPAT to be in line with FY18, representing single digit growth. Estimates NPBT will show larger growth (tax rate of 25% in FY18 versus 29% in FY19). Expecting softer 1H19, implementing a cost reduction program. MMS notes the EXC announcement and is considering it and the further work required. This is likely to take time and the parties have agreed the date for the first Court hearing of 1 February 2019 will be rescheduled. A further update will be provided in due course.

LAST WEEK

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THIS 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%).

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OVERNIGHT

Friday night markets

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Last night

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SPI FUTURES -18 (but were up 5 points yesterday)

US EQUITIES – S&P 500 -21 (-0.78%), Dow -209 (-0.84%), NASDAQ -79 (-1.11%)

Main themes

  • Caterpillar (-9.13%) missed earnings estimates and guided fiscal 2019 earnings below consensus, citing the impact of tariffs and slower sales in China.
  • Congress and the Trump administration agreed to reopen the government for three weeks. The government had been shut down for 35 days — the longest stoppage in US history.
  • Tailings dam collapsed at Vale’s Corrego do Feijao iron ore mine in southeastern Brazil on Friday -17.5.

EUROPEAN MARKETS – All weaker. STOXX500 -0.97%, UK FTSE -0.91%, German DAX -0.63%, French CAC -0.76.

CURRENCIES

  • The USD is weaker at 95.74.
  • The Aussie dollar is stronger at US71.69c.

BONDS – 2-yr: -2 bps to 2.58%, 3-yr: UNCH at 2.57%, 5-yr: -1 bp to 2.58%, 10-yr: -1 bp to 2.74%, 30-yr: UNCH at 3.06%

COMMODITIES

  • WTI crude futures were down US$1.70 or 3.2% to $51.99 on weaker Chinese profit data, The Baker Hughes rig count increased by 10.
  • Iron Ore – IRESS reports iron ore was up US50c US$75.30 a tonne. CommSec reports iron ore was up US$3.30 or 4.4% at US$78.70.
  • LME metals – Mostly weaker. Copper -0.89%, nickel -1.17%, aluminium -2.76%

ECONOMIC DATA, NEWS & POLITICS

  • US earnings – Microsoft (-1.95%), Amazon (-1.96%), Apple (-0.93%), and Facebook (-1.03%) all weaker ahead of their earnings reports this week. So far, about 70% of the companies that have already reported have beaten analyst expectations.
  • Yesterday’s Chinese news. Industrial profits were up 10.3% over the year, down from 11.8%. News flow about the health of Chinese companies. The South China Morning Post reported that 3 companies based on China’s mainland have missed CNY2.50bn in debt payments, despite having reported solid cash holdings, over the last few months.
  • British Prime Minister Theresa May reportedly told lawmakers that she does not want to rule out a no-deal Brexit, because the possibility serves as a bargaining chip.
  • Retailing – Tesco plans to cut 15,000 jobs while German Galeria Kaufhof plans to fire about 2,600 employees.

QUOTE OF THE DAY

“Think of giving not as a duty but as a privilege” – John D. Rockefeller, Jr., American businessman born this day in 1874. Died 11 May 1960

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