MID MORNING MARKETS 11-03-19

The ASX 200 is down 10 points in mid-morning trade after Chinese and US growth concerns. Gold and other defensive sectors +ve but Energy and others ↓. IVC back on, APX acquisition, Vic holiday. #ausbiz

m1m2m3TODAY

  • Exdividend – Contrarian Value Fund (CVF) 2.0c, Equity Holdings (EQT) 44.0c, ICSGlobal (ICS) 2.5c, Imdex (IMD) 0.8c, Lovisa Holdings (LOV) 18.0c, Noni B (NBL) 9.0c, Naos Emerging Opportunities Company (NCC) , 3.8c, Over The Wire Holdings (OTW) 1.3c, OZ Minerals (OZL) 15.0c,
  • Japanese – Machine Tool Orders

TONIGHT

  • US economic data – Business Inventories

CHINESE DATA

Trade data on Friday was weaker than expected. February imports decreased 5.2% year-over-year (expected -1.4%; last -1.5%) while exports fell 20.7% year-over-year (expected -4.8%; last 9.1%). The weakness was partly attributable to the timing of Chinese New Year, so many are economists are suggesting looking at the combines January and February numbers which aren’t as weak.

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COMPANY NEWS

  • Invocare (IVC) – The Institutional Placement has been completed and very well supported – raised approximately $65m at $14.00, representing a 2.4% discount to the last close price of $14.34 on Thursday,
  • Appen (APX) – Trading halt due to capital raising and acquisition. Has acquired San Francisco-based Figure Eight Technologies, Inc. Figure Eight is a best in class machine learning software platform which uses highly automated annotation tools to transform unstructured text, image, audio and video data into customised high quality artificial intelligence training data. Figure Eight “materially increases the quality of Appen’s revenues and the breadth of its customer base via high growth, high-gross margin recurring revenue from annual platform subscription fees (SaaS model) earned from its ~200 customers.” Payment of upfront consideration of US$175m (5.7x FY18 revenue) plus earn-out consideration payable in March 2020, expected to be US$60-80m based on Figure Eight’s FY19 budget (5.1-5.4x incremental revenue) and capped at US$125m. Upfront consideration funded via a fully underwritten placement of A$285m at an offer price of $21.50 per new Appen share, representing an 11.8% discount to last closing price of Appen shares on ASX. Also conduct a nonunderwritten share purchase plan to existing eligible shareholders capped at A$15m. Payment of the earn-out consideration will be funded via arrangements for up to US$1252 million of new debt facilities expected to be drawn down at the time of payment in March 2020.
  • Newcrest Mining (NCM) – Has acquired 70% of the Red Chris mine from Imperial Metals for a cash amount of US$806.5 million. Newcrest to be the operator. 1. Supports strategic goals – Measured entry into North America and Operating mine with potential to become a Tier 1 asset; 2. Immediate asset and geographic diversification; 3. Large mineral endowment; 4. Significant upside opportunity – Early application of Edge transformation approach, Potential to apply technical expertise in block caving and processing, and Promising exploration potential in the acquired prospective land package; 5. Utilises balance sheet strength and liquidity

S&P REBALANCING (repeat from Friday)

All changes are effective at the open on 18 March.

  • S&P/ASX20 – No change
  • S&P/ASX50 – No change

S&P/ASX200

  • Addition – Pinnacle Investment Management Group Limited (PNI), HUB24 Limited (HUB)
  • Removal – Infigen Energy (IFN), Automotive Holdings Group Limited (AHG)

S&P/ASX300

  • Addition – AUB Group Limited (AUB), Carnarvon Petroleum Limited (CVN), Redcape Hotel Group (RDC), Mount Gibson Iron Limited (MGX), Jumbo Interactive Limited (JIN), Ramelius Resources Limited (RMS), Macmahon Holdings Limited (MAH), Baby Bunting Group Limited (BBN), Paladin Energy Ltd (PDN), Silver Lake Resources Limited (SLR)
  • Removal Webster Limited (WBS), Servcorp Limited (SRV), Blue Sky Alternative Investments Limited (BLA)

All Ordinaries

  • Addition – Coronado Global Resources Inc. (CRN), Spotless Group Holdings Limited (SPO), Redcape Hotel Group (RDC), Carnarvon Petroleum Limited (CVN), Evans Dixon Limited (ED1), Paladin Energy Ltd (PDN), Nickel Mines Limited (NIC), Livetiles Limited (LVT), Synlait Milk Limited (SM1), Comet Ridge Limited (COI),Over The Wire Holdings Limited (OTW), Tungsten Mining NL (TGN), Terracom Limited (TER), Clover Corporation Limited (CLV), Stanmore Coal Limited (SMR), Auscann Group Holdings Ltd (AC8), City Chic Collective Limited (CCX), Phoslock Environmental Technologies Limited (PET), Sheffield Resources Limited (SFX), Audinate Group Limited (AD8), Seafarms Group Limited (SFG), Schaffer Corporation Limited (SFC), Volpara Health Technologies Limited (VHT), Meridian Energy Limited (MEZ), Avita Medical Ltd (AVH), Australian Ethical Investment Limited (AEH), Byron Energy Limited (BYE), Gazal Corporation Limited (GZL), Rhipe Limited (RHP), Vitalharvest Freehold Trust (VTH), Aeon Metals Limited (AML), Bellevue Gold Limited (BGL), Supply Network Limited (SNL), Helios Energy Ltd (HE8), Isignthis Ltd (ISX), Genesis Energy Limited (GNE), Millennium Minerals Limited (MOY), Engenco Limited (EGN), A Horizon Oil Limited (HZN), Opthea Limited (OPT), Reef Casino Trust (RCT), Pivotal Systems Corporation (PVS), Australian Vintage Ltd (AVG), Kina Securities Limited (KSL), Consolidated Operations Group Limited (COG), McPherson’s Limited (MCP), Paradigm Biopharmaceuticals Limited. (PAR), Strike Energy Limited (STX), APN Property Group Limited (APD), Galilee Energy Limited (GLL), Wattle Health Australia Limited (WHA), Elmo Software Limited (ELO), Shine Corporate Ltd (SHJ), People Infrastructure Ltd (PPE)
  • Removal – Australian Mines Limited (AUZ), Brainchip Holdings Ltd (BRN), Rand Mining Limited (RND), ImpediMed Limited (IPD), Boart Longyear Limited (BLY), Bionomics Limited (BNO), BSA Limited (BSA),Credible Labs Inc. (CRD), SomnoMed Limited (SOM), Netcomm Wireless Limited (NTC), Tpi Enterprises Limited (TPE), Berkeley Energia Limited (BKY), Alkane Resources Limited (ALK), Nzme Limited (NZM), Donaco International Limited (DNA), Eden Innovations Ltd (EDE), Ovato Limited (OVT), Gascoyne Resources Limited (GCY), Artemis Resources Limited (ARV), Getswift Limited (GSW), Reva Medical, Inc (RVA), Blue Sky Alternative Investments Limited (BLA), Adacel Technologies Limited (ADA), Medlab Clinical Limited (MDC), Reckon Limited (RKN), Xanadu Mines Ltd (XAM), Onemarket Limited (OMN), Silver Chef Limited (SIV), Retail Food Group Limited (RFG), Blue Energy Limited (BUL), Yojee Limited (YOJ), Titan Minerals Limited (TTM), Isentia Group Limited (ISD), Airxpanders Inc. (AXP)

LAST WEEK

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THIS WEEK

  • Australia NAB business confidence on Monday, housing finance on Wednesday
  • China – Retail sales, industrial production on Wednesday
  • Japan – Bank of Japan meeting
  • UK – Parliamentary vote on Brexit and GDPon Wednesday
  • Europe – industrial production on Wednesday and inflation on Friday.
  • US – CPI and PPI, industrial production
  • Big dividends – CSL

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FRIDAY NIGHT

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SPI FUTURES -14

US EQUITIES – S&P 500 -6 (-0.21%), Dow -23 (-0.09%), NASDAQ -13 (-0.18%)

Main themes

  • Growth concerns – weaker Chinese trade data and US jobs numbers came after ECB growth downgrade.
  • Broad-based losses.

EUROPEAN MARKETS – All weaker. STOXX500 -0.89%, UK FTSE -0.74%, German DAX -0.52%, French CAC -0.70%.

CURRENCIES

  • The USD is a bit weaker at 97.36
  • The Aussie dollar is stronger at US70.55.

BONDS – 2-yr: -2 bps to 2.44%, 3-yr: -2 bps to 2.42%, 5-yr: -1 bp to 2.43%, 10-yr: -1 bp to 2.63%, 30-yr: -2 bps to 3.01%

COMMODITIES

  • Oil – WTI futures were down US66c or 1,2% at US$56.00 on the weaker jobs report. The Baker Hughes rig count fell by 9 during the week, the third straight week of falls.
  • Iron Ore – IRESS reports iron ore down US$2 to US$86.00 a tonne. CommSec reports iron ore was down US$2.20 or 2.5% to U$84.85.
  • LME metals – Mostly weaker. Copper -0.71%, nickel -1.10%, aluminium +0.11%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – February Nonfarm Payrolls 20,000 (consensus 173,000; prior 311,000), Nonfarm Private Payrolls 25,000 (consensus 165,000; prior 308,000), Unemployment Rate 3.8% (consensus 3.8%; prior 4.0%), Average Hourly Earnings 0.4% (consensus 0.3%; prior 0.1%), Average Workweek 34.4 (consensus 34.5; prior 34.5), January Housing Starts +18.6% to 1230K (consensus 1180K; prior 1037K) but -7.8%yoy, and Building Permits +1.4% to 1345K (consensus 1280K; prior 1326K) but -1.5% yoy.
  • The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.3% versus 8.1% in January. Over the last 12 months, average hourly earnings have risen 3.4%, versus 3.2% for the 12 months ending in January, the highest since April 2009.
  • ECB – Reports that President Mario Draghi pushed for a fresh stimulus package at Thursday meeting. ECB member Ewald Nowotny also said that the details of the new TLTRO will be released in June.
  • European data – German Factory Orders -2.6% (expected 0.5%; last 0.9%); Italian Industrial Production +1.7% (expected 0.1%; last -0.7%) but -0.8%yoy (expected -3.0%; last -5.5%); Spanish Industrial Production +2.4%yoy (expected -1.4%; last -5.9%).
  • FED SPEAK – Fed Chairman Jay Powell will appear on Sunday’s broadcast of 60 Minutes, alongside former Fed Chairs Yellen and Bernanke

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