MID MORNING MARKETS 26-07-19

The ASX 200 is down 28 points in mid-morning trade after a -ve night. Utilities only +ve sector, IT, Industrials and H’care the worst. RMD Q good, GUD result, US GDP tonight and then a big week for data, earnings and central banks #ausbiz

m1m2m3TODAY

  • Resmed (RMD) – Q Earnings
  • GUH Holdings (GUD) – Earnings

TONIGHT

  • US economic data – GDP (Market expectation is to see a drop to 1.8% from 3.1% previously)
  • US earnings – Goodyear Tire (GT), McDonald’s (MCD), Twitter (TWTR)

COMPANY NEWS

  • ResMed (RMD) – Revenue increased 13% to $705.0m; up 15% on a constant currency basis; Gross margin expanded 120 bps to 59.3%; Net operating profit decreased 18%; non-GAAP operating profit up 18%; GAAP diluted earnings per share of $0.48; non-GAAP diluted earnings per share of $0.95; Quarterly dividend increased by 5% to $0.39 per share. “Our pipeline is solid; we are well-positioned as we enter fiscal year 2020 on a trajectory to improve 250 million lives in out-of-hospital healthcare in 2025.”
  • Aurizon (AZJ) – An appeal has been lodged by customers affected by the Supreme Court decision in June which confirmed Aurizon Network’s ability to charge fees agreed by customers under the Wiggins Island Rail Project Deeds.
  • Transurban (TCL) – Has reached financial close on the US$565 million Fredericksburg Extension project, following the successful issuance of US$262 million private activity bonds.
  • GUD Holdings (GUD) – FY19 Earnings: Revenue from continuing operations up 9% on pcp; Underlying EBIT from continuing operations up 6% on pcp; NPAT from Continuing Operations up 18% on pcp, 13% net of tax provision writeback. Solid automotive result in challenging environment: Automotive revenue growth of 12%: 1% organic, 11% acquired; Strong performance from acquired Disc Brakes Australia (DBA). Water business saw modest revenue and EBIT growth in down market. Cash conversion improved in line with H1 projections and FY19 target: Working capital to provide continued support for sales growth. Final fully franked dividend of 31 cents, up 11% on pcp, FY19 up 8%

m1


NEXT WEEK

Economic Events

  • US/China trade talks start Tuesday
  • Domestic data – Inflation (a pick-up to 1.5% annually is expected from 1.3% previously)
  • Chinese data – Official PMI numbers, Caixin manufacturing index
  • Japan – BoJ meeting as well as unemployment, IP
  • Bank of England meeting
  • Europe – Flash GDP, inflation and unemployment
  • FOMC
  • US economic data – PCE prices, ISM manufacturing index, trade balance and unemployment

Corporate Events

  • Investor Days- Orica (ORI)
  • Earnings – Alacer Gold (AYC), Credit Corp (CCP), CYB, Genworth Mortgage (GMA), James Hardie (JHX), Uniball-Rodamco-Westfield (URW), Rio Tinto (RIO
  • AGMs – Australian Agriculture (AAC), ALS (ALQ)
  • Q production – Infigen Energy (IFN), Independence Gold (IGO), Northern Star (NST), Origin Energy (ORG)

OVERNIGHT

m10

SPI FUTURES -34

US EQUITIES – S&P500 -16 (-0.53%), Dow Jones -129 (-0.47%), NASDAQ -83 (-1.00%)

Main themes

  • Stronger than expected US economic data – durable goods +0.2% and ex-transport +1.2%
  • Mostly negative reactions to earnings reports
  • ECB signals more dovish-minded policy stance

EUROPEAN MARKETS – All lower. STOXX600 -0.56%, UK FTSE -0.17%, German DAX -1.28%, French CAC -0.50%,

CURRENCIES

  • The USD is unchanged at 97.79.
  • The Aussie dollar is lower at US69.54

BONDS – 2-yr: +3 bps to 1.85%, 3-yr: +3 bps to 1.82%, 5-yr: +3 bps to 1.85%, 10-yr: +2 bps to 2.07%, 30-yr: +3 bps to 2.60%

COMMODITIES

  • Oil – WTI futures was up US14c or 0.3% to US$56.02 a barrel. Key factors were the bigger than expected drop in oil inventories, Middle East tensions, offset by weak manufacturing data.
  • Gold futures were down 0.55% to US$1,415.60
  • Iron Ore – CommSec has iron ore up US$1.90 or 1.7% to US$117.00 a tonne.
  • LME metals – Mostly lower. Cu -0.34%, Ni -3.68%, Al +0.00%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – June Advance International Trade in Goods -$74.20bn (prior -$75.00bn), June Advance Retail Inventories -0.1% (prior 0.3%), June Advance Wholesale Inventories 0.2% (prior 0.4%), June Durable Orders 2.0% (consensus 1.0%; prior -2.3%), June Durable Orders ex-transportation 1.2% (consensus 0.3%; prior 0.5%), weekly Initial Claims 206,000 (consensus 215,000; prior 216,000), and Continuing Claims 1.676m (prior 1.689m)
  • ECB – Rates unchanged, as expected. ECB President Draghi said the ECB is ready to adjust all instruments as appropriate and that it is looking at tiered rates and QE purchases. Notes that recession risk is low.
  • British Prime Minister, Boris Johnson, said that he is ready to negotiate a Brexit deal with EU officials, but he noted that the request for an Irish backstop is not feasible.
  • European data – German ifo Business Climate Index fell 95.7 (expected 97.1, prior 97.5), July Current Assessment 99.4 (expected 100.4, prior 101.1) and Business Expectations 92.2 (expected 94.0, prior 94.0).
  • Reserve Bank of Australia Governor, Philip Lowe, said that the RBA is ready to lower the cash rate again.
  • US earnings – 3M (-0.72%), American Airlines (-8.44%), Bristol-Myers (+5.02%), Hershey Foods (+2.02%). After The Close – Alphabet (+0.10%), Amazon (-1.69%)

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