MIDDAY MARKETS 18-07-19

The ASX 200 is down 18 points in mid-morning trade on weak leads. Gold ok but no lustre elsewhere. CIM result, LLC deal with Google, Q #s from WPL, STO, S32 &AWC, employment data mixed #ausbiz

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TODAY

  • Economic data – Mixed report overall. Skew to FT is +ve, participation rate +ve. Underemployment fell to 8.2% from 8.6% also +ve.

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  • Q reports – South32 (S32), Santos (STO), Woodside Petroleum (WPL)
  • Japanese data – Balance of Trade, Imports/Exports

TONIGHT

  • UK – Retail Sales
  • US economic data – Philadelphia Fed Index, Leading Indicators
  • US earnings – Blackstone (BX), Morgan Stanley (MS). After market – Microsoft (MFST)

COMPANY NEWS

  • South32 (S32)

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  • Woodside Petroleum (WPL) – Delivered sales revenue of $738m (-39.6% on Q1 and -31.8% on pcp) and production of 17.3 MMboe (-20.3% on q! and -21.7$ on pcp); Achieved strong LNG production performance from North West Shelf

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  • Santos (STO) – Record 1H production, up 32% to 37 mmboe. Sales volumes up 19% to 45.2 mmboe and sales revenues up 18% to $2bn. 2019 Guidance: Production guidance is narrowed to 73-77 mmboe and sales volume guidance to 90-97 mmboe. Unit production cost guidance is lowered to $7.25-7.75/boe.

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  • Alumina Limited (AWC) –

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OVERNIGHT

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SPI FUTURES -15

US EQUITIES – S&P500 -20 (-0.65%), Dow Jones -116 (-0.42%), NASDAQ -38 (-0.46%)

Main themes

  • Trade – still focusing on Trump’s tweet about there being a “long way to go” with trade and China.
  • Earnings – Bank of America (+0.69%) better than expected due to strong retail operations. But the CFO warned of lower net interest income due to lower interest rates. Kraft Heinz (KHC).
  • After market earnings – Alcoa (-2.68%), eBay (+6.02%), IBM (-1.18%), Netflix (-12.32%),
  • 7% of S&P 500 companies have reported 2Q earnings (FactSet data). 85% have posted profits that beat analyst expectations with earnings growth of about 3.1%.

EUROPEAN MARKETS – Mostly lower. STOXX600 -0.37%, UK FTSE -0.55%, German DAX -0.72%, French CAC -0.76%, Euro zone inflation data showed improvement, but still fell short of ECB targets, so unlikely to dampen expectations of monetary policy easing. UK inflation in line with BofE targets at 2.0%.

CURRENCIES

  • The USD is lower at 97.20.
  • The Aussie dollar is little changed at US70.12

BONDS – 2-yr: -1 bp to 1.85%, 3-yr: -2 bps to 1.82%, 5-yr: -4 bps to 1.84%, 10-yr: -5 bps to 2.08%, 30-yr: -4 bps to 2.59%

COMMODITIES

  • Oil – WTI futures was down US84c or 1.5% to US$56.78 a barrel. There was a larger than expected drawdown in EIA crude stockpiles last week (3.1mb vs 2.7mb expected) but large builds in refined product inventories (gasoline and distillate) kept prices lower.
  • Gold futures b to US$1,408.90 an ounce
  • Iron Ore – CommSec has iron ore up US$1.45 or 1.2% to US$120.75 a tonne.
  • LME metals – Mostly stronger. Cu +0.26%, Ni +2.86%, Al +0.08%.

ECONOMIC DATA, NEWS & POLITICS

  • US Beige Book – Economic activity continued to expand at a modest pace overall from mid-May through early July, with little change from the prior reporting period. Although some Districts continued to report healthy expansion in the transportation sector, others noted that activity declined modestly. On the whole the Beige Book stated that the outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty. On costs, the Beige Book noted that districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs. However, firms’ ability to pass on cost increases to final prices was restrained by brisk competition.
  • US economic data – Weekly MBA Mortgage Index -1.1% (prior -2.4%); June Housing Starts 1.253m (consensus 1.270m; prior 1.265m) and Building Permits 1.220m (consensus 1.300m; prior 1.299m)
  • European economic data – June CPI +0.2% (expected 0.1%; last 0.1%) to be 1.3%yoy (expected 1.2%; last 1.2%). June Core CPI +0.4% (expected 0.3%; last 0.3%) to be 1.1%yoy (expected 1.1%; last 0.8%); UK June CPI 0.0% (expected 0.3%; last 0.3%) to be 2.0%yoy (as expected, last 2.0%). June Core CPI +1.8%yoy (as expected, last 1.7%). June Input PPI -1.4% (expected -1.0%; last 0.0%) and Output PPI -0.1% (expected 0.1%; last 0.3%). June House Price Index increased 1.2%yoy (as expected, last 1.5%); Italian May Industrial New Orders +2.5% (expected -1.4%; last -2.2%) to be -2.5%yoy (expected -4.2%; last -0.2%). May Industrial Sales +1.6% (expected -0.5%; last -1.1%) to be 0.3%yoy (expected -2.5%; last -0.8%)

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