MID MORNING MARKETS 04-06-19

The ASX 200 is up 13points in mid morning trade, after another swinging night (making my morning radio very challenging). Materials best, IT worst again. NHW outlook, CSL sells SPC. Retail sales today and RBA (I’ve placed my bet on no ∆). #ausbiz

m1m2m3TODAY

  • Economic data – Retail Sales, Current Account
  • RBA Interest Rate Decision
  • RBA Gov Lowe Speech Speech by Philip Lowe, Governor, at the RBA Board Dinner with the business community, Sydney.
  • Ex-dividend – Incitec Pivot (IPL) 1.3c

TONIGHT

  • UK – Construction PMI
  • European data – Unemployment Rate, Inflation Rate
  • US economic data – Factory Orders
  • Fed Speak – New York Fed President John Williams (FOMC voter), Fed Chair Jerome Powell (FOMC voter), Fed Governor Lael Brainard (FOMC voter)

COMPANY NEWS

  • NRW Holdings (NWH)– Gascoyne Resources Mining Contract and FY20 Outlook. Gascoyne in voluntary administration. NRW’s current exposure to the Gascoyne contract is ~$35m representing working capital, a 2nd ranking secured loan of $10m and equity in Gascoyne of ~$4.3m. Following recent contract awards, the order book now includes $1.1bnof work secured for FY20, (excluding any contribution from the Gascoyne contract). In addition, the RCRMT and Urban businesses are expected to generate ~$200m of revenue. NRW expects to deliver full year revenues in FY20 of ~$1.5bn.
  • Incitec Pivot (IPL) – Has entered into multiple arrangements to allow continuation of manufacturing operations at its Gibson Island plant through to 31 December 2022. Implications – IPL Group FY20 EBIT to increase by ~$5m over forecast EBIT in FY 19, assuming a urea price of US$280/t and A$0.69. EBIT for FY 20 includes the impact of a major turnaround required to be undertaken to enable the operation of the plant to December 2022. The turnaround is scheduled to occur early in CY 20, and is expected to last approximately 2 months and cost approximately $60 million. The cost of the turnaround will be depreciated over three years. Gas supply from Australia Pacific LNG will commence following this turnaround.
  • APA has followed this up with an announcement that it has signed a 3 year extension to an existing gas transmission agreement.
  • Fletcher Building (FBU)- has completed the sale of the Formica Group (‘Formica’) to Broadview Holding. The agreed sale price of US$840m is subject to certain deductions (principally transaction costs and debt-like items retained in Formica) and a working capital adjustment.
  • St Barbara (SBM) – Offering retail shareholders the option of withdrawing their application for new shares.
  • Coca-cola Amatil (CCL) – Has sold its SPC fruit and vegetable processing business to Shepparton Partners Collective Pty Ltd for $40m. A profit on sale of $10-15m is expected to be recorded upon completion (before the end of June). There is also a four-year deferred payment which, subject to business performance, could result in up to an additional $15 million of sale proceeds at that time

m10m11

SPI FUTURES +18

US EQUITIES – S&P 500 -8 (-0.28%), Dow +5 (+0.02%), NASDAQ -120 (-1.61%).

Major themes

  • Tech stocks – Facebook -7.51% (FTC impact on digital competition), Google -6.12% (DOJ antitrust probe), Amazon -4.64% (FTC and DOJ agreement for FTC to review) and Apple -1.01% (reports similar jurisdiction) amid reports they could soon face antitrust scrutiny by the DOJ and/or FTC
  • Chinese white paper blames US for current trade stand-off
  • Mexican tariffs continue to weigh
  • European PMI data disappointed
  • “Flight to safety” trade and interest-rate differential trade provide ongoing support

EUROPEAN MARKETS – All higher. STOXX600 +0.39%, German DAX +0.56%, French CAC +0.65%

CURRENCIES

  • The USD is lower at 97.20.
  • The Aussie dollar is stronger at US69.77.

BONDS – 2-yr: -12 bps to 1.83%, 3-yr: -11 bps to 1.79%, 5-yr: -9 bps to 1.84%, 10-yr: -6 bps to 2.08%, 30-yr: -4 bps to 2.54%

COMMODITIES

  • Oil – WTI futures fell US25c or 0.5% to US$53.25, as continued trade concerns mostly offset optimism that Saudi Arabia and Russia would manage oil supply to avoid a surplus.
  • Gold futures rose 1% to US$1,324.50
  • Iron Ore – IRESS has iron ore down US$3.00 at US$105.50 a tonne. CommSec has iron ore down US$1.85 or 1.9% to US$97.95 a tonne.  
  • LME metals – Mixed. Cu +0.51%, Ni -0.96%, Al -1.23%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – ISM Manufacturing Index for May 52.1 (consensus 52.6; Prior 52.8) the lowest reading since October 2016, Construction Spending 0.0% (consensus 0.4%; Prior revised to +0.1% from -0.9%)
  • European data – Manufacturing PMI data for May out generally disappointing and relatively weak. revised May Manufacturing PMI 47.7 (expected 47.7; last 47.7)
  • Fed Speak – St. Louis Fed President Bullard (FOMC voter) suggests rate cut may soon be warranted to boost inflation
  • German SPD Leader Nahles announced her resignation.

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