The ASX 200 is up 9 points in mid morning trade despite a rebound in the US. Other markets less convinced by US enthusiasm. Eg Gold ↑ Energy ↓ Europe ↓. CBA result disappoints, SUN result ok, TCL in halt, Housing finance data ahead. The cat has not meowed…yet.  #ausbiz


  • Earnings – Transurban (TCL), Commonwealth Bank (CBA), Suncorp (SUN)
  • Economic data – AIG Construction Index, Home Loans
  • BoJ Summary of Opinions


  • UK – Halifax House Price Index
  • US economic data – Consumer Credit


  • Commonwealth Bank of Australia (CBA) – Statutory net profit -8.1% to $8,571m, Cash net profit -4.7% to $8,492m, Full year dividend $4.31, unchanged on year. Operating income -2% with growth in lending and deposits offset by a drop in NIM, customer fee removals/reduction and the impact of weather. Net interest income down 1.2% and NIM 210bp,down 5bp for the year but stable half on half. Expects RBA rate cuts to reduce it further by 4bp. Business lending up 4%. Operating expenses +2.5% due to customer remediation costs, risk and compliance costs, wages and IT. Credit quality – Loan impairment expense up 11% – 16bp from 15bp. Home loan arrears improved 2bp with pockets of stress in areas of Perth, Melbourne and Sydney. On June 2019 valuations, approximately 3.5% of Australian home loan accounts and 4.5% of balances are in negative equity. 72% of negative equity relates to Western Australia and Queensland. Has signed an agreement with APT ompetitot Klarna and has “committed an investment of US$100m into Klarna Holding AB, as part of its US$460 million capital raise.”

Outlook – More broadly on the economy, we are in a lower growth environment but we are seeing improvement in the housing market including improved clearance rates, stabilisation of prices in Sydney and Melbourne, and slightly higher housing credit growth. Unemployment is likely to remain low and there is a pipeline of stimulus including taxcuts and infrastructure spending which has not yet flowed through. Population growth will remain supportive and commodity prices are helping to drive a strong trade performance. Ultimately household income growth will be key, as will the links to consumer and business sentiment in the coming years.”

Update on aligned advice businesses. Will close Financial Wisdom Limited, following the sale of Count Financial Limited to CountPlus Limited, which received approval from its shareholders this week, and the recent decision to allow Commonwealth Financial Planning Limited-Pathways (CFP-Pathways) advisers to transition to a self-licensing arrangement or move to another licensee. The estimated pre-tax costs of supporting the Financial Wisdom and CFP-Pathways businesses, their advisers and their customers through this transition, as well as other internal project costs, is approximately $26m. The exit of Financial Wisdom and CFP-Pathways will result in CBA exiting businesses that, in FY19, excluding remediation provisions, incurred a post-tax loss of approximately $11m


  • Suncorp (SUN) – Cash earnings +1.5% to $1,115m. Aslo some management changes.


  • Transurban (TCL) – FY19 results, distribution guidance for FY20 of 62cps, +5%, the acquisition of the remaining minority interests in the M5 West, a $500 million Placement1 and Security Purchase Plan (SPP). FY19 highlights: Average daily traffic (ADT) grew by 2.0%; Proportional toll revenue increased by 10.3% to $2,581m; Underlying cost growth of 2.0%; or 0.7% excluding foreign exchange impact; Proportional EBITDA before significant items increased by 12.3% to $2,016m; Free cash flow of $1,527m; Statutory profit of $170m; Four projects open to traffic – New M4 Tunnels, Logan Enhancement Project, Gateway Upgrade North and Inner City Bypass; WestConnex acquisition currently ahead of investment case; 374,000 hours in average workday travel-time savings from July 2018 to June 2019; $15m in fees avoided by customers during FY19 primarily from fee reduction initiatives and process improvements
  • Galaxy Resources (GXY) – Impairment of $150-185m based on inventory review.
  • G8 Education (GEM) – Changed reporting for lease commitments. Leases now recognised in the balance sheet and depreciated over time, No impact on cash earnings/cashflow o debt covenants etc. But significant non-cash impact.
  • AGL Energy (AGL) – the Australian Energy Regulator (AER) has commenced legal proceedings in the Federal Court against AGL and other wind farm operators in relation to allegations by the AER that AGL has breached certain obligations under the National Electricity Law. The allegations, which are highly technical in nature, relate to the response of the Hallett 1 (Brown Hill), Hallett 2 (Hallett Hill), North Brown Hill and The Bluff wind farms during the weather event on 28 September 2016. AGL has previously stated that it considers that it has complied with its legal obligations in relation to the events of 28 September 2016 but will review the allegations made by the AER and consider its position.




US EQUITIES – S&P500 +37 (+1.30%), Dow Jones +312 (+1.21%), NASDAQ +107 (+1.39%)

Main themes

  • Market rebounded after better Chinese currency setting
  • Rebound in previously sold stocks

EUROPEAN MARKETS – Still lower. STOXX600 -0.47%, UK FTSE -0.72%, German DAX -0.78%, French CAC -0.13%,


  • The USD is a little higher at 97.58.
  • The Aussie dollar is little changed at US67.58c

BONDS – 2-yr: +3 bps to 1.61%, 3-yr: +1 bp to 1.55%, 5-yr: +1 bp to 1.55%, 10-yr: UNCH at 1.74%, 30-yr: -3 bps to 2.27%


  • Oil – WTI futures were down US78c or 1.9% to US$53.92 on the global growth story.
  • Gold futures were up 0.5% to US$1,483 an ounce.
  • Iron Ore – CommSec has iron ore down US$1.25 or 1.3% to US$97.90 a tonne.
  • LME metals – Mixed. Cu +0.31%, Ni +0.61%, Al +0.06%.


  • US economic data – June Job Openings and Labor Turnover Survey 7.348m; prior 7.268m
  • Fed Speak – St. Louis Fed President, James Bullard, said that the FOMC should not rush with another rate cut but he conceded that he expects one more cut before the end of 2019.
  • Italian politics – Deputy Prime Minister, Matteo Salvini, said that working with his coalition partner, M5S, had become difficult in recent months.
  • European economic data – German June Factory Orders +2.5% (expected 0.5%; last -2.0%)
  • The RBA left its cash rate at 1.0%, as expected.

Australian trade balance yesterday – Record surplus $8.036bn (bigger than the $6bn expected). Another record high. Previous number revised up to $6.17bn from $5.74bn. Exports up 1%, Non-rural +3%. Rural -4% (Increase in metal ores and minerals (iron ore) which jumped by 5%; Coal exports were also up 4% from May; Exports of other mineral fuels (LNG) fell by 8%). Imports down 4% domestic demand softer (consumption goods down 6% and non-industrial transport (cars) down 13%; fuel imports slipped by 11%, reflecting the decline in global crude oil prices. Civil aircraft imports also fell by $307 million)

China – The PBoC announced that CNH30bn worth of offshore-denominated yuan bills will be sold on August 14. China’s Commerce Ministry confirmed that state-owned enterprises have suspended purchases of agriculture products from the U.S.

Chinese currency fixing yesterday – The PBoC set the Yuan fixing at 6.9683, a further depreciation from the 6.9225 on Monday – but below the estimate of 6.9871.

The market response has been more balanced because it is close to the estimates of those analysts why try to replicate the PoBC’s model of setting the mid-point relative to trading partners.

It is still a big move and double the increase on Monday. With the 2% trading band permitted, spot could be 7.108.

The PBoC also announced it would issue 30bn of yuan bills in Hong Kong next week, which is larger than needed to replace maturing bills.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s