MID MORNING MARKETS 21-06-19

The ASX 200 is down 4 points in mid morning trade despite +ve leads. Energy and Materials ↑ on commodity prices, H’care dragged down by CSL transition effect. LYC update, BLD deal with MGR, DLX ex-div. G20 next in mostly quiet week with MTS and CKF results #ausbiz

m1m2m3TODAY

  • Economic data – CommBank Australia Services PMI Flash, CommBank Australia Manufacturing PMI Flash, CommBank Australia Composite PMI Flash
  • Ex-dividend – DuluxGroup (DLX) 43.0c
  • Japanese data – Inflation Rate , Nikkei Manufacturing PMI Flash

TONIGHT

  • European data – Markit Composite PMI Flash, Markit Manufacturing PMI Flash, Markit Services PMI Flash
  • US existing home sales

COMPANY NEWS

  • CSL – Transition to own distributor model in China. The transition to CSL’s own GSP distributor will create a ‘one-off’ financial effect in FY20. Expectations for key financial line items include – Lower reported albumin sales of approximately $340 – $370 million; Profit effect in line with historical CSL Behring margins; A more modest impact on cashflow as the Company continues to collect outstanding receivables from existing distributors. In addition, the cash collection cycle will improve under the new model. Annual sales of albumin in China are expected to return to a more normalised level in FY21, following completion of the transition.
  • Lynas (LYC) – Update to 2025 Growth Plans, rare earth markets and related matters.
  • A2Milk (A2M) – China e-commerce announcement. The announcement references an intention to increase the focus on supervision and enforcement of the ecommerce legislation and in the process, standardise e-commerce business practices, enhance the integrity of the digital market trading environment (including advertising and marketing), and maintain a good ecommerce market order. The announcement also references an intention to ensure that no counterfeit product is being transacted via all e-commerce platforms, including social e-commerce and cross-border e-commerce channels.
  • Boral (BLD) – BLD has entered into a property development management deed with Mirvac in relation to its Scoresby site (also known as Wantirna South) in Victoria. Mirvac will manage the urban development of the 171-hectare site over a multidecade period, including a proposed new housing community and substantial new parklands. Boral expects to receive approximately $66 million of EBITDA through to FY2026, including $3 million in FY2019. Additional significant earnings are projected from the development of Scoresby from FY2027 through to anticipated project completion in 2035. Boral expects Scoresby to deliver in excess of $300 million of earnings over the life of the project, subject to rezoning, including removal of the existing Victorian State Government parks acquisition overlay, and market conditions over that period.
  • Domino’s Pizza (DMP) – Speculation in the UK media that its CEO Europe, Andrew Rennie, has been identified as a leading candidate to replace the outgoing Managing Director of Domino’s Pizza Group, plc, the holder of the Domino’s Pizza master franchise in the United Kingdom & Ireland. DPE advises that there is no substance to that speculation and Andrew has confirmed that he is committed to his current role.

OVERNIGHT

m10m11

SPI FUTURES -4

US EQUITIES – S&P 500 +28 (+0.95%), Dow +249 (+0.94%), NASDAQ +64 (+0.80%).

Major themes

  • Global markets continue rising amid dovish signals from global central banks
  • Iran shot down a US military drone – President Donald Trump said “Iran made a very big mistake”, fuelling concerns of a conflict between the two countries.

EUROPEAN MARKETS – All higher. STOXX600 +0.36%, UK FTSE +0.28%, German DAX +0.38%, French CAC +0.31%

CURRENCIES

  • The USD is lower at 96.63.
  • The Aussie dollar is stronger at US69.25.

BONDS – 2-yr: -3 bps to 1.72%, 3-yr: -2 bps to 1.67%, 5-yr: -3 bps to 1.74%, 10-yr: -3 bps to 2.00%, 30-yr: -1 bp to 2.53%

COMMODITIES

  • Oil – WTI futures rallied US$2.89 or 5.4% to US$56.65 after the drone and Trump comments
  • Iron Ore – CommSec has iron ore up US$3.30 or 2.9% at US$117.55 a tonne.
  • LME metals – Mostly stronger. Cu +1.22%, Ni +1.36%, Al +0.14%

ECONOMIC DATA, NEWS & POLITICS

  • Economic data – Weekly Initial Claims 216,000 (consensus 220,000; prior 222,000), Continuing Claims 1.662m (prior 1.699m), Q1 Current Account Balance -$130.40bn; consensus -$125.00bn; prior -$143.90bn), and June Philadelphia Fed Index 0.3 (consensus 11.5; prior 8.5); May Leading Indicators 0.0% (consensus 0.1%; prior 0.1%)
  • US politics – The final round of voting for the next leader of the British Conservative party will take place today.
  • The Bank of England voted unanimously to leave its bank rate and the purchase program at their respective 0.75% and GBP435bn, as expected. The central bank lowered its forecast for Q2 GDP growth to 0.0% from 0.2%.
  • UK data – Retail Sales -0.5% (expected -0.5%; last -0.1%) to be +2.3%yoy (expected 2.7%; last 5.1%). May Core Retail Sales -0.3% (expected -0.4%; last -0.3%) to be +2.2%yoy (expected 2.5%; last 4.7%)

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