MID MORNING MARKETS 17-07-19

The ASX 200 is up 26 points in mid-morning trade despite US volatility on strong data and Trump trade tweet. Energy worst, Utilities & Staples best. BHP Q, IVS acq, ELD online, EHE class action and AXP shuts shop. UK & Euro Inflation numbers ahead #ausbiz

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TODAY

  • Economic data – Westpac Leading Index
  • Q reports – BHP, Alumina Limited (AWC),
  • Chinese data – Industrial Capacity Utilization

TONIGHT

  • UK data – Inflation Rate
  • European data – Inflation Rate, Construction Output
  • US economic data – Housing Starts, Building Permits, Fed’s Beige Book
  • US Earnings – Bank of America (BAC), Kraft Heinz (KHC). After market – Alcoa (AA), eBay (EBA), IBM (IBM), Netflix (NFLX),

COMPANY NEWS

  • BHP – Q Report. Exceeded full year production guidance for petroleum and met revised guidance for copper and iron ore. Metallurgical coal and energy coal production marginally below guidance predominantly as a result of lower than expected wash plant yields and adverse weather impacts during the June 2019 quarter; Group copper equivalent production increased by 11% in the June 2019 quarter reflecting a strong operational performance across the portfolio, particularly at Western Australia Iron Ore and Queensland Coal which achieved annualised run rates above 290 Mt (excluding the impact of Tropical Cyclone Veronica) and 48 Mt respectively during the quarter; Group copper equivalent production for the 2019 financial year declined by 2%, with annual production records at two petroleum and four minerals operations offset by grade and natural field decline, weather-related interruptions and several unplanned outages; We expect to achieve full year unit cost guidance at Petroleum, Escondida and Western Australia Iron Ore. Queensland Coal and New South Wales Energy Coal unit costs are expected to be marginally above guidance (based on 2019 financial year guidance exchange rates of AUD/USD 0.75 and USD/CLP 663); Group copper equivalent production for the 2020 financial year is expected to be slightly higher than the 2019 financial year despite a ~7% decline in petroleum volumes largely due to natural field decline; In Petroleum, the Bélé-1, Tuk-1 and Hi-Hat-1 exploration wells in Trinidad and Tobago all encountered hydrocarbons during the quarter. Over the full year, seven out of nine wells drilled were successful; All major projects under development are tracking to plan; Underlying improvements in productivity were largely offset by the impact of unplanned production outages of US$835 million during the first half, in addition to grade decline in copper and higher unit costs in coal. A negative movement of approximately US$1 billion is now expected to be recorded for the 2019 financial year;

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  • Estia Health (EHE) – Class Action, from Phi Finney McDonald in the Federal Court of Australia. The proceeding alleges breaches of market disclosure obligations in 2015 and 2016 and has been filed on behalf of shareholders who bought shares/exposure between 12 August 2015 and 6 October 2016. Estia will vigorously defend the proceeding. Estia is not in a position to state whether the proceeding is likely to have a material impact on its financial position or performance.
  • Invocare (IVC) – Has acquired Australian Heritage Funerals located in Toowoomba Queensland. Australian Heritage Funerals is a highly successful business in the region, performing circa 300 funerals, per annum and generating annual revenue of approximately AU$2 million.
  • AirXpanders (AXP) – Ceasing operations. Immediately sacking 27 employees (23 down to 8) with more to come. Ceasing sale of all products immediately, and will not be providing customer service or sales support after Thursday, July 18, 2019. Filing for US bankruptcy.
  • Austal (ASB) – Guidance – Expects FY2019 EBIT of ~$92m, with group revenue consistent with Austal’s previous revenue guidance of $1.8–$1.9bn. Normally doesn’t normally provide guidance, analysts are out of whack for FY20, where ASB expects EBIT >$105m, with the increase over FY2019 largely driven by improvement from Austal’s Australasia shipyards as well as continued strong performance on Austal’s two major vessel programs for the US Navy.

OVERNIGHT

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SPI FUTURES -13

US EQUITIES – S&P500 -10 (0.34%), Dow Jones 24 (-0.09%), NASDAQ -35 (-0.43%)

Main themes

  • Stronger than expected retail sales
  • President Trump says we have a “long way to go” with China on trade, adding the US can slap tariffs on an additional $325 billion worth of Chinese goods “if we want.”
  • Oil prices fall after Secretary of State Mike Pompeo says Iran is “prepared to negotiate” regarding its nuclear program

EUROPEAN MARKETS – Mostly higher. STOXX600 +0.35%, UK FTSE +0.60%, German DAX +0.35%, French CAC +0.65%,

CURRENCIES

  • The USD is lower at 97.43.
  • The Aussie dollar is stronger at US70.14

BONDS – 2-yr: +2 bps to 1.85%, 3-yr: +3 bps to 1.84%, 5-yr: +3 bps to 1.88%, 10-yr: +3 bps to 2.12%, 30-yr: +2 bps to 2.63%

COMMODITIES

  • Oil – WTI futures was down US$2.46 or 4.2% to US$57.09 9.58 after Trump said a lot of progress had been made with Iran and that he was not looking for regime change, with US Secretary of State Mike Pompeo adding that Iran had said it was prepared to negotiate about its missile program
  • Gold futures b to US$1,408.90 an ounce
  • Iron Ore – CommSec has iron ore up US$2.85 or 2.4% to US$121.40 a tonne.
  • LME metals – Mostly stronger. Cu -0.50% the exception, Ni +2.34%, Al +0.16%.

ECONOMIC DATA, NEWS & POLITICS

  • Fed SpeakFed Chair Powell maintained the dovish-minded outlook in Paris speech, Dallas Fed President Robert Kaplan (non-FOMC voter) observed that the Fed might need to do a rate cut, but that it shouldn’t be thinking about much more easing than that. Chicago Fed President Charles Evans said that low inflation along with economic uncertainty indicate a need for up to two rate cuts before the end of 2019.
  • US economic data – Retail Sales +0.4% (consensus +0.2%; Prior revised to +0.4% from +0.5%); Retail Sales, Ex-Auto +0.4% (consensus +0.2%; Prior revised to +0.4% from +0.5%); Import Price Index -0.9% (Prior revised to 0.0% from -0.3%); Export Price Index for June -0.7% (Prior -0.2%); Industrial Production for June 0.0% (consensus +0.2%; Prior +0.4%); Capacity Utilization 77.9% (consensus 78.2%; Prior 78.1%); Business Inventories for May +0.3% (consensus +0.4%; Prior +0.5%); NAHB Housing Market Index for July 65 (consensus 62; Prior 64)
  • US earnings – Goldman Sachs (+1.86%) on better-than-expected results, driven by the investment banking and trading divisions. J.P. Morgan Chase (+1.07%) results also topped estimates. Johnson & Johnson (-1.64%) fell despite reporting a 42% profit surge in the previous quarter. After market – CSX (-6.29%), United Airlines (+0.24%),

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