MID MORNING MARKETS 25-07-19

The ASX 200 is up 15 points in mid-morning trade after a mixed night. IT and H/care on top, Materials lag on  iron ore ↓ & broker ↓grades in the sector. Q reports from FMG & NCM, Good IFL flows & MQG AGM/update, ECB tonight #ausbiz

m1m2mm3TODAY

  • RBA Gov Philip Lowe Speech
  • Q production reports – Fortescue Metals Group (FMG), Newcrest Mining (NCM)
  • Macquarie Group (MQG) – AGM

TONIGHT

  • UK CBI Distributive Trades
  • ECB Interest Rate Decision
  • US economic data – Adv. Intl. Trade in Goods, Adv. Retail Inventories, Adv. Wholesale Inventories, Durable Orders
  • US earnings – 3M (MMM), American Airlines (AAL), Bristol-Myers (BMY), Hershey Foods (HSY), KKR. After The Close – Alphabet (GOOG), Amazon (AMZN), Starbucks (SBUX)

COMPANY NEWS

  • Macquarie Group (MQG) – AGM and 1Q update. Operating groups performing in line with expectations; 1Q20 operating group net profit contribution1 broadly in line with 1Q19 and slightly down on 4Q19; Financial position comfortably exceeds regulatory minimum requirements (Group capital surplus of $A5.0bn and Bank CET1 ratio 12.0% (Harmonised: 14.9%); Leverage Ratio 5.4% (Harmonised: 6.0%); LCR 166%4,5; NSFR 111%); Continue to expect FY20 result to be slightly down on FY19
  • ANZ – ASIC will commence civil penalty proceedings against the bank in relation to the charging of fees for periodical payments in certain circumstances prior to February 2016. These fees were the subject of a class action which was settled in December 2018 for $1.5million, pending court approval. ANZ expects ASIC to seek pecuniary penalties in respect of 1.3 million occasions where the fees were applied.
  • Fortescue Metals Group (FMG) – Pretty good result. Down on iron ore pricesRecord quarterly shipments of 46.6mt including 4.7mt of West Pilbara Fines; FY19 shipments of 167.7mt, one per cent lower than FY18 due to the impact of Cyclone Veronica; Average revenue received increased by 30 per cent to US$92 per dry metric tonne (dmt) compared to the March quarter of US$71/dmt; C1 costs of US$12.78/wmt, five per cent lower than the March quarter (US$13.51/wmt); Payment of a fully franked A$0.60 per share dividend in June 2019, bringing total FY19 dividend payments to date to A$0.90 per share; Official opening of the Judith Street Harbour in Port Hedland marking the completion of Fortescue’s towage infrastructure and fully integrated supply chain; Approval of the US$287 million investment in the Queens Valley mining area development at the Solomon Hub; Eliwana Mine and Rail and Iron Bridge Magnetite projects progressing on schedule and budget.

m1

  • Newcrest Mining (NCM) – June Quarter 2019: Gold production of 661koz, up 6%on pcp; Copper production of 29kt, up 14%; Group AISC of $720 per ounce, lower by $18; Group AISC margin of $589 per ounce, higher by $26; Record quarterly gold production of 241koz at Cadia
  • IOOF (IFL) – FUMA of $149.5bn, up 18.7% on pcp or up 5.9% when excluding ANZ Wealth aligned dealer group FUA acquired during the year. Net Q flows – Portfolio & Estate Administration: $561m net inflow (prior comparative period (pcp): $666m net inflow); Financial Advice: $432m net inflow (pcp: $2.5bn net inflow that included a one-off large client transfer of approximately $2 billion); Investment Management: $181m net outflow (pcp: $130 million net inflow).

OVERNIGHT

m10m11

SPI FUTURES +4

US EQUITIES – S&P500 +14 (+0.47%), Dow Jones -79 (-0.29%), NASDAQ +70 (+0.85%)

Main themes

  • Earnings mixed (see below)
  • Weaker European PMI numbers
  • Justice Department announced a broad antitrust review of big tech companies. Congress and the DOJ will investigate claims of anticompetitive behaviour

EUROPEAN MARKETS – Mixed. STOXX600 +0.05%, UK FTSE -0.73%, German DAX +0.26%, French CAC -0.22%,

  • German manufacturing PMI was lowest level in seven years while France’s flash Manufacturing PMI returned to 50.0, which represents the border between expansion and contraction.

CURRENCIES

  • The USD is unchanged at 97.73.
  • The Aussie dollar is lower at US69.77

BONDS – 2-yr: -1 bp to 1.82%, 3-yr: -1 bp to 1.79%, 5-yr: -1 bp to 1.82%, 10-yr: -2 bps to 2.05%, 30-yr: -3 bps to 2.58%

COMMODITIES

  • Oil – WTI futures was down US89c or 1.6% to US$55.88 a barrel, despite a bigger than expected drawdown in inventories (10.8mb vs 4mb expected) amd increasing tensions in the middle east
  • Gold futures were up 0.1% or US$1.90 to US$1,423.60
  • Iron Ore – CommSec has iron ore down US$3.00 or 2.5% to US$115.10 a tonne.
  • LME metals – All stronger. Cu +0.45%, Ni +2.25%, Al +0.41%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – Weekly MBA Mortgage Index -1.9% (prior -1.1%); June New Home Sales +7.0% to 646,000 (consensus 660,000; prior 604,000)
  • US earnings – AT&T (T), Boeing (BA), Caterpillar (CAT), T. Rowe Price (TROW), UPS. After The Close – Facebook (FB), Ford Motor (F), PayPal (PYPL), Tesla (TSLA)
  • European data – Weak manufacturing data from Europe: Germany’s Manufacturing PMI fell to seven-year low Eurozone’s flash July Manufacturing PMI 46.4 (expected 47.6, prior 47.6), flash Services PMI 53.3 (as exected, prior 53.6); German flash July Manufacturing PMI 43.1 (expected 45.1, prior 45.0) and Services PMI 55.4 (expected 55.3, prior 55.8.); French July Manufacturing PMI 50.0 (expected 51.6, prior 51.9) and Services PMI 52.2 (expected 52.7, prior 52.9). July Business Survey 101 (expected 102, prior 102).

US EARNINGS

  • UPS (+8.66%) after earnings and revenue that topped analyst expectations. Higher demand for its Next Day Air and Ground services drove its strong results.
  • AT&T +3.6% after reporting net phone subscriber growth ahead of estimates. Also raised its 2019 free cash flow guidance.
  • Caterpillar (-4.5%) weaker-than-expected earnings and revenue amid rising costs. Under pressure from US/China tariffs
  • Boeing (-3.1%) on big losses as costs increase on 737 Max jet remains grounded. May suspend production
  • Facebook (+0.66% in after hours trade) earnings $1.99 vs $1.88exp. Recorded a $2 billion charge in the quarter tied to the FTC settlement. It previously set aside $3 billion. 1.59b active users
  • Ford (-5.71% in after hours trade) 32c vs 31c expected
  • About a quarter of S&P 500 companies had reported second-quarter earnings through Wednesday’s open. Of those companies, 78% have posted a better-than-expected profit, according to FactSet data.

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