MIDDAY MARKETS

The ASX 200 is down 9 points at midday after recovering from weak leads after Fed hops on the fence. Gold the worst, Disc and banks ok. URW & JHG results, Dow update, PME in ASX200. RIO results ahead, as well as BoE decision and ISM index #ausbiz

TODAY

Economic data – AIG Manufacturing Index, CommBank Australia Manufacturing PMI Final, HIA New Home Sales, Import Prices/Export Prices
Earnings – Rio Tinto (RIO) – Consensus is for underlying EBIT of US$10bn, up 8.7% from the $9.2bn in 1H18. Focus will be iron division, revenue expected to be US$.9bn, as a result of strong iron ore prices. Maybe even more cash returned to shareholders. Consensus US$1.78
Ex-dividend – AMCIL (AMH) 3.5c, VanEck Vectors Australian Banks ETF (MVB) 58.0c, NB Global Corporate Income Trust (NBI) 0.9c
Japanese data – Jibun Bank Manufacturing PMI Final
BoJ Amamiya Speech
Chinese data – Caixin Manufacturing PMI

TONIGHT

European data – Markit Manufacturing PMI Final
UK – Markit/CIPS Manufacturing PMI
BoE Interest Rate Decision – difficult in light of Brexit. Market expecting rates to be unchanged by but growth forecasts to be cut.
US economic data – Construction Spending, ISM Manufacturing Index
US earnings – Amcor (AMCR), Archer-Daniels (ADM), General Motors (GM), Kellogg (K), Verizon (VZ), Yum! Brands (YUM). After The Close – Fluor (FLR), U.S. Steel (X)

COMPANY NEWS

ProMedicus (PME) – Replaces DLX in the ASX200 following its takeover by Nippon Paint.
Downer (DOW) – Update on Murra Warra Wind Farm. Has now quantified the financial impact of Senvion’s insolvency, with total losses expected to be $45m before tax ($31.5m after tax). This includes the cost-to-complete and contingency relating to construction, performance and liquidated damages. Guidance apart from that remains in line…
Janus Henderson (JHG) – Strong investment performance (72% and 80% of AUM outperforming relevant benchmarks on a 3 and 5 year basis, respectively); 2Q net income of US$109.4m and adjusted net income of US$119.7m); AUM of US$359.8bn, up 1% compared to the prior quarter, reflecting positive markets partially offset by net outflows of US$9.8bn; Completed US$75 million of share buybacks during the second quarter; US$94 million remains; Board declared quarterly dividend of US$0.36c
Northern Star (NST) – Group Resources increased 31% or 4.9Moz, to 20.8Moz (after depletion of 915,000oz and 1.9Moz at Kalgoorlie Operations shifted to unclassified and removed); Resource grade is up 46% to 4.1gpt; Group Reserves increased 35% or 1.4Moz, to 5.4Moz (after depletion of 915,00oz); Reserve grade is up 16% to 4.4gpt; Reserves are calculated conservatively using an assumed price of A$1,500/oz and US$1,150/oz compared with the current spot price of ~A$2,100/oz; Importantly, Measured and Indicated Resources increased 15% to 11.25Moz with grade rising 31% to 4.1gpt; This underpins continued replacement of Reserves in coming years; Increased inventory paves way for further organic growth in production and mine lives; Northern Star’s FY20 strategy is designed to lay the foundations for the next round of growth in production and mine lives; As part of this growth strategy, Northern Star has budgeted a record A$76M for exploration in FY20; FY20 Group guidance is 800,000-900,000oz at A$1,200-A$1,300/oz (US$840-US$910/oz) (Jundee 260,000-280,000oz at A$1,115-A$1,195/oz (US$780-US$840/oz); Pogo 200,000-240,000oz at US$850-US$925/oz (A$1,210-A$1,320/oz)*, (H1: 80,000-100,000oz; H2: 120,000-140,000oz); Kalgoorlie 340,000-380,000oz at A$1,260-A$1,370/oz (US$880-US$960/oz)); In addition to production guidance, a further 60,000oz is forecast to be stockpiled at Jundee stemming from Ramone open pit (options are being evaluated to crystallise the significant profit contained in this stockpile)
Unibail-Rodamco-Westfield (URW) – Very strong tenant sales growth in Flagship destinations: +5.7% in Continental Europe, +7.1% in the UK, and +4.9% in the US. Group Net Rental Income (NRI) like-for-like (Lfl)(1) increased by +3.3%. Lfl growth in Shopping Centres in Continental Europe was +2.1%, in the UK -3.1%, and in the US growth in comparable Net Operating Income (NOI)(2) was +2.2%, of which +5.5% in Flagship; Continental European rental uplift of +12.2%, of which +13.8% in Flagships; Average cost of debt: 1.6%, and average debt maturity extended to a record 8.0 years(3); EPRA NAV: €216.10 / stapled share (-2.6%); Development pipeline scaled back to €10.3 Bn; Disposals: €1.2 Bn agreed or closed, bringing total completed disposals since June 7, 2018, to €3.2 Bn; LTV: 37.5% pro-forma for the Majunga disposal(4); Upgrading 2019 AREPS guidance by €0.30 to €12.10 – €12.30
Qantas (QAN) – ACCC concerns about QAN’s acquisition of 19.9% of Alliance Airlines (AQZ), which took place on 1 February 2019. The ACCC notes that AQZ competes strongly with QAN with its charter air services to corporate customers in Queensland, the Northern Territory and Western Australia; mainly mining and resources companies requiring services for their fly-in-fly-out workforces, and is also QAN’ only competitor on regular passenger transport routes between Brisbane and the important regional centres of Bundaberg and Gladstone. The holding affects AZQ’s future growth, its ability to compete, raise funds, consider other approaches and address customer perceptions about independence.

Bank of England (from ING) – Market expecting rates to be unchanged by but growth forecasts to be cut.

Market pricing a 50% chance of a rate cut this year, despite forecasts suggesting the economy is at risk of overheating and its guidance hints at a possible tightening.

OVERNIGHT

SPI FUTURES -29

US EQUITIES – S&P500 -33 (-1.09%), Dow Jones -334 (-1.23%), NASDAQ -98 (-1.19%)

Main themes

Fed Cut rates 25bp as expected, but commentary suggests a once-off
Trade talks described as “constructive” – agree to meet again in September

EUROPEAN MARKETS – Mixed. STOXX600 +0.17%, UK FTSE -0.78%, German DAX +0.34%, French CAC +0.14%,

CURRENCIES

The USD is stronger at 98.66.
The Aussie dollar is lower at US68.40c

BONDS – 2-yr: -1 bp to 1.84%, 3-yr: -2 bps to 1.80%, 5-yr: -2 bps to 1.83%, 10-yr: -4 bps to 2.02%, 30-yr: -5 bps to 2.54%

COMMODITIES

Oil – WTI futures was up 53 or 0.8% to US$58.58 a barrel on rate cuts and a bigger than expected draw down in US inventories (-8.5mb vs -2.6mb expected)
Gold futures were down 0.4% to US$1,431.30 an ounce, falling after the Fed decision.
Iron Ore – CommSec has iron ore down US$2.80 or 2.3% to US$118.35 a tonne.
LME metals – Mostly higher. Cu -0.08%, Ni +1.75%, Al -0.17%.

ECONOMIC DATA, NEWS & POLITICS

FOMC cut the fed funds rate range by 25 bps, as widely expected.
Mid-cycle adjustment and “insurance” – suggesting the move was not the start of a trend although Powell suggested that policy could still accommodate another cut if necessary
First rate cut since 2008 (during the GFC)
Boston Fed President Eric Rosengren and Kansas City Fed President Esther George voted to keep rates unchanged. The split reflects the mixed nature of recent economic data, and makes the future path of Fed policy more uncertain. St. Louis Fed President James Bullard had also been seen as a possible dissenter if the Fed went for a deeper rate cut
Reference to economic uncertainties and inflation levels that were running below its target for its rate decision
The Fed’s balance sheet reduction efforts will end in August, two months earlier than previously indicated
US economic data – Weekly MBA Mortgage Index -1.4% (prior -1.9%); July ADP Employment Change 156,000 (consensus 150,000; prior 102,000); Q2 Employment Cost Index 0.6% (consensus 0.6%; prior 0.7%); July Chicago PMI 44.4 (consensus 50.5; prior 49.7)
US earnings – General Electric (-0.76%), Peabody Energy (BTU)
European data – Flash Q2 GDP +0.2% (as expected (last 0.4%) to be 1.1%yoy (expected 1.0%; last 1.2%). July CPI +1.1% (as expected, last 1.3%) and core CPI +0.9%yoy (expected 1.0%; last 1.1%). June Unemployment Rate 7.5% (as expected, last 7.6%). German June Retail Sales +3.5%mom (expected 0.5%; last -1.7%) to be -1.6%yoy (expected 2.7%; last 3.8%). July Unemployment Change +1,000 (expected 2,000; last -1,000) and Unemployment Rate 5.0% (unchanged, as expected). UK July Nationwide HPI +0.3%mom (expected 0.2%; last 0.1%) to be +0.3%yoy (expected 0.1%; last 0.5%). French flash Q2 GDP +1.1%yoy (expected 1.3%; last 1.2%). Flash July CPI -0.2%mom (expected -0.3%; last 0.2%). Italian June Unemployment Rate 9.7%(expected 10.0%, previous 9.8%). Flash July CPI 0.1%mom (as expected, last 0.1%) to be +0.5%yoy (as expected, last 0.7%). Flash Q2 GDP unchanged (expected -0.1%; last 0.1%) and unchanged and (expected -0.2%; last -0.1%)
China/Taiwan – Travel permit issuance to Taiwan will be halted for people from 47 cities
North Korea launched two short-range missiles, according to South Korea’s Joint Chief of Staff.
Chinese data yesterday

Japan’s June Housing Starts +0.3%yoy (expected -2.2%; last -8.7%) while Household Confidence 37.8 (expected 38.5, from 38.7)
Australian CPI yesterday – Generally higher than expected and close to the WBA’s target range. While largely once-off (petrol prices +10.2%), higher fuel costs will translate to higher prices generally and it lowers rate cut pressure on the RBA