MID MORNING MARKETS 08-02-19

The ASX 200 is down 26 points in mid-morning trade, but off the lows. Defensives ok but growth-facing stocks not so. NAB fall-out and REA doing it tough. $A still under pressure 70.99 #ausbiz

m2m3m4TODAY

  • Ex-dividend – AFIC (AFI) 18.0c, Australian Masters Yield Fund No 4 (AYK) 24.0c, Australian Masters Yield Fund No 5 (AYZ) 57.0c, BKI Investment Company (BKI) 5.1c, Oceania Healthcare (OCA) 1.7c

COMPANY NEWS

  • REA Group (REA) – Revenue growth driven by a 15% increase in the Australian business, reflecting a strong performance in the Residential business as well as the inclusion of the Hometrack. Also FY contribution from Smartline.  Despite challenging market with lower listings and fewer new dwelling commencements. Outlook – Market conditions are not expected to improve in the short term. Listings may be weaker in the lead up to the NSW election in March and the Federal election (expected in May). The BIS Oxford forecast for new apartment commencements indicates a continued decline for the remainder of this year. These factors are expected to result in a lower rate of revenue growth in the second half. In January overall, residential listings were down 11% with Sydney down 19% and Melbourne down 13%. January is seasonally a low listings month therefore movements are not typically representative of the longer term. As previously advised, the rate of revenue growth is expected to exceed the rate of cost growth for both the second half and the full year, however, this will not be the case in the third quarter.

m1

  • News Corp (NWS) – 2Q results. Revenues rose 21% to $2.63bn, reflecting the consolidation of Foxtel and continued strength at the Book Publishing and Digital Real Estate Services segments.
  • National Australia Bank (NAB) – In addition to the management changes, the Q report was out yesterday after market. Cash earnings down 3% on the year. Lower margins but expenses down.

NEXT WEEK

  • Domestic data – Housing finance on Tuesday, Westpac Consumer confidence on Wednesday,
  • Chinese trade data on Thursday and inflation on Friday.
  • UK – GDP and industrial production Monday, inflation on Wednesday and retail sales on Friday.
  • European industrial production on Wednesday and GDP on Thursday
  • US – CPI on Wednesday, retail sales for December on Thursday and for January on Friday. Also industrial production on Friday.

Big earnings

  • Monday – Amcor (AMC), Bendigo Bank (BEN) and J B Hi-fi (JBH)
  • Tuesday – Challenger (CGF) and Transurban (TCL)
  • Wednesday – CSL
  • Thursday – AMP, ASX, Telstra (TLS), Newcrest (NCM), South32 (S32), Woodside Petroleum (WPL)
  • Friday – Domain Group (DHG), Medibank (MPL),

 


OVERNIGHT

m10m11

SPI FUTURES -41

US EQUITIES – S&P 500 -26 (-0.94%), Dow -221 (-0.87%), NASDAQ -87 (-1.18%)

Main themes

Re-emergence of worries that a trade war between the U.S. and China will continue. Reports that President Donald Trump and President Xi Jinping are unlikely to meet before a critical March deadline.

Twitter (-9.84%) beat analyst expectations but provided light guidance.

EUROPEAN MARKETS – All weaker. STOXX500 -1.49%, UK FTSE -1.11%, German DAX -2.67%, French CAC -1.84%.

CURRENCIES

  • The USD is higher at 96.8.
  • The Aussie dollar continues to soften after the RBA directional change to US71.04c.

BONDS – 2-yr: -6 bps to 2.47%, 3-yr: -5 bps to 2.45%, 5-yr: -5 bps to 2.46%, 10-yr: -5 bps to 2.65%, 30-yr: -5 bps to 2.99%

COMMODITIES

  • WTI crude futures were down US$1.05 or 2.5% at $52.64 on the trade war risk.
  • Iron Ore – IRESS rerpots iron ore up $4.00 or 4.62% to US$90.50 a tonne. The CommSec site shows iron ore up US$3.85 or 4.4% to US$90.50 a tonne. Chinese markets closed.
  • LME metals – Mixed. Copper -0.535, nickel +0.46%, aluminium -0.68%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – weekly Initial Claims 234,000 (consensus 220,000; prior 253,000) and Continuing Claims 1.736m (prior 1.782m); December Consumer Credit $16.6bn (consensus $16.10bn; prior $22.40bn)
  • US earnings growth tradking at 14.1% yoy. But 1Q19 earnings are now forecast to fall more than 1% (the first yoy decline in over 2 years).
  • The European Commission officially lowered its forecast for 2019 Italian GDP growth to 0.2% (from 1.2%), for Germany to 1.1% (from 1.8%) and across the eurozone to 1.3% (from 1.9% but rebounding to 1.6% in 2020.).
  • The Bank of England voted unanimously to keep rates unchanged (as expected) and lowered its 2019 GDP growth forecast to 1.2% from 1.7%, the slowest pace since 2009.
  • European data – German Industrial Production fell 0.4%mom (expected 0.7%; last -1.3%) and -3.9%yoy (last -4.0%); Italian Retail Sales decreased 0.7%mom (expected 0.7%; last 0.6%) to be -0.6% yoy (last 1.7%). Spanish Industrial Production fell 6.2%yoy (expected -2.3%; last -3.2%)
  • The Reserve Bank of India cut its repurchase rate by 25-basis points to 6.25%. The move comes ahead a general election that will be held between April and May.

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