MID MORNING MARKETS 13-08-19

The ASX 200 is down 9 points in mid morning trade after bounce. Could be worse!. IT & Energy the best, H’care lagging. Banks lower. Market likes CGF result and guidance, MFG cap raising and new fund (and result). US CPI ahead. #ausbiz

m1m2m3TODAY

  • RBA – Christopher Kent Speech speaking at the Finance & Treasury Association Breakfast Event, Sydney. “The Usual Transmission – Monetary Policy and Financial Conditions”.
  • Exdividend – Flagship Investments (FSI) 4.3c, Genworth Mortgage Insurance Australia (GMA) 30.9c. Macquarie Media (MRN) 2.0c
  • Earnings – Challenger (CGF), Magellan Financial Group (MFG)
  • Economic data – NAB Business Confidence
  • Japanese data – PPI, Tertiary Industry Index, Machine Tool Orders

TONIGHT

  • UK – Average earnings and unemployment
  • Europe – ZEW Economic Sentiment Index
  • US economic data – CPI, Core CPI

COMPANY NEWS

  • Magellan Financial Group (MFG) – Trading halt for capital raising. Average FUM up 28% to $75.8bn; Adjusted NPAT up 35% to $364.2m; 111.4c dividend for the half (Total dividends for the year up 38% to 185.2c), Announces launch of Magellan High Conviction Trust and $275 million institutional share placement. Placement is at $55.20, (last price was $59.83 and div $1.114)

m1

  • Challenger (CGF) – Group AUM +1% to $81.8bn; Normalised NPBT $548m, up $1m; in line with the revised guidance provided in January 2019; Normalised NPAT $396m, down $10m; Statutory NPAT $308m, down $15m; Strong capital position with $1.5bn of excess regulatory capital and Group cash; Full year dividend 35.5c. Record low cost to income ratio of 32.6% with expenses down $1m to $267m. Total Life sales -18% to $4.6bn. This included lower annuity sales, down $0.5bn to $3.5bn, and lower Other Life sales, also down $0.5bn to $1.0bn. The biggest driver of the decline in annuity sales was MS Primary sales in Japan, which were down 54% due to the higher US interest rates relative to Australia. Domestic annuity sales -4% to $3.3bn,despite significant disruption to the major advice hubs. Funds Management – strong underlying earnings were offset by lower performance fees, which were down $16m to $3m. Outlook – Targeting normalised NPBT of $500-$550m.
  • Monadelphous Group (MND) – Has been awarded a contract from RIO on its privately-owned rail network in the Pilbara region of Western Australia. 3-year contract, with 2 additional 3-year extension options, valued at $60m.

OVERNIGHT

m11m12

SPI FUTURES -53

US EQUITIES – S&P500 -36 (-1.23%), Dow Jones -391 (-1.49%), NASDAQ -96 (-1.20%)

Main themes

  • Safe haven assets boosted by growing concern about protests in Hong Kong and the risk of a crack-down by Chinese authorities. Hong Kong flights were cancelled.
  • The Dow Jones has fallen below 26,000.
  • The 10-year bond yield is down 11bp to 1.63% and the 2-10 year spread narrowed to almost 5 basis points.
  • Banks and financial stocks hurt by lower bond yields and flattening yield curve

EUROPEAN MARKETS – All lower. STOXX600 -0.31%, UK FTSE -0.37%, German DAX -0.12%, French CAC -0.33%.

CURRENCIES

  • The USD is a little lower at 97.43.
  • The Aussie dollar is lower at US67.52.

BONDS – -2yr: -5 bps to 1.68%; 3-yr: -6 bps to 1.51%; 5-yr: -8 bps to 1.48%; 10-yr: -10 bps to 1.64%; 30-yr: -12 bps to 2.13%

COMMODITIES

  • Oil – WTI futures were up 43c or 0.8% to US$54.93 after earlier falls.t of economic slowdown and a ramping up of the US-China trade war.
  • Gold futures rose 0.94% to US$1,523.20.
  • Iron Ore – CommSec has iron ore unchanged at US$94.80 a tonne.
  • LME metals – Mixed. Cu -0.54%, Ni +0.19%, Al -0.31%.

ECONOMIC DATA, NEWS & POLITICS

  • Chinese currency – The PBoC fixed the yuan at 7.0211 per dollar, down from the previous fix of 7.0136.
  • Italian politics – Parliament is expected to schedule a confidence vote that is likely to lead to a dissolution of the current government. Deputy Prime Minister, Matteo Salvini, said he will cut taxes if Lega wins the election. Fitch affirmed Italy’s BBB rating with a Negative outlook.
  • Argentine election – President Mauricio Macri performed poorly in primary elections, receiving just 32.1% of the vote while opposition candidate Alberto Fernandez (supported by former president Cristina Fernandez de Kirchner) achieved a much wider-than-expected 15.5 percentage point margin. The Argentinian share market was down 31%.
  • Economic downgrades – Goldman Sachs has lowered its 4Q GDP forecast to 1.8% (from 2.0%) and no longer expects a trade deal before the 2020 election. Bank of America raised the chance of a recession to 1 in 3.

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