Tag Archives: Base Metals and Minerals

article 3 months old

Material Matters: Miners, Copper And Iron Ore

Conditions favouring bulk miners; copper's price surge; iron ore outlook.

-Chinese steel consumption expected to hold up, US infrastructure agenda supportive
-Copper makes sharp gains on improved fundamentals and likely US infrastructure spending
-Macquarie suspects iron ore prices have overshot and risk is to the downside
 

By Eva Brocklehurst

Miners

Morgan Stanley analysts have come away from their trip to China with the belief steel consumption could hold up, allowing higher metallurgical (coking) coal prices and necessitating the use of higher quality iron ore.

China's domestic iron ore supply is likely to be slow to respond to demand and, while there is a coal supply response under way after the relaxation of mining restrictions, it is not affecting the price yet because of re-stocking.

Hence, Morgan Stanley believes conditions are constructive and favours the bulk miners. While uncertainty remains high, the broker acknowledges, the agenda of infrastructure spending and tax reform in the US also underpins expectations and presents potential upside risk to demand growth.

The US share of major commodity demand is about half what it was back in 2000, so even conservative estimates for a stimulus plan may result in material upside to growth forecasts, Morgan Stanley asserts.

As the broker favours bulk miners, BHP Billiton ((BHP)), South32 ((S32)), and Iluka Resources ((ILU)) are in the top five. BHP is considered a nod to quality and longevity, while South32 has cash flow drivers and the broker envisages Iluka is leveraged to the US and Chinese property market.

The broker also includes gold names such as Evolution Mining ((EVN)) and Perseus Mining ((PRU)), as inflation and debt issuance associated with an infrastructure program should support gold, the risk being a US dollar bull scenario.

Copper

Macquarie upgrades copper price forecasts by 11-15% for the next four years. Spot copper prices have surged from a tight trading range and improving supply/demand fundamentals are expected to provide some support. This broker also suspects, given increased infrastructure demand in the US, there is little reason for prices to retreat back to the previous range.

Copper was the one big commodity to gain nothing in the year to date then rally sharply ahead of the US election, peaking at US$6025/t on November 11. The rally was unprecedented in recent copper history, Macquarie observes and, despite the later sell-off, the broker cannot envisage the price retracing to pre-November levels easily.

The election victory of Donald Trump was the major trigger, the broker believes, given US dollar weakness and expectations of increased stimulus in China and infrastructure spending in the US.

Copper was probably supported by a bearish skew among speculators, which provided a short stop-loss means for prices to climb. Also, China has cleared a lot of physical stock in the last few months, leaving it vulnerable to metal shortages, and this in turn, the broker notes, influences its huge futures trading sector.

While the impact of Donald Trump's election may have helped tighten the copper balance further Macquarie stresses that the major upgrade to its price forecasts is more heavily motivated by the realities of the price pushing to new levels. The broker envisages some oversupply in 2018/2019 which will moderate prices to below US$5000/t, before a deficit takes hold and puts prices back in the low US$6000/t region.

Incorporating the improved outlook, Macquarie upgrades earnings estimates for both Sandfire Resources ((SFR)) and OZ Minerals ((OZL )). Both are upgraded to Outperform from Neutral. Newcrest Mining's ((NCM)) outlook is enhanced by the upgrades to copper price forecasts but Macquarie retains a Neutral rating ahead of the company's investor seminar.

Improved copper prices have also translated to a material improvement for the short to medium term outlook for both BHP and Rio Tinto ((RIO)). Macquarie notes copper leverage is higher for Rio Tinto in the near term from an earnings perspective.

The upgrades to copper price forecasts have taken care of some of the upside risk to the broker's base case, but there is still material upside risk envisaged to its iron ore, coking coal, thermal coal, aluminium and alumina price forecasts.

Iron Ore

Iron ore prices have breached US$74/t for the first time since January 2015. Macquarie observes this move comes despite an apparent lack of fundamental support, and most market players are pointing to short covering. Meanwhile, in the physical market there is a widely disparity between grades. The demand for high grade fines and pellets is very strong as mills look to minimise the use of coking coal.

Earlier this year the Chinese government raised trading fees on the Dalian exchange and on the Shanghai futures exchange, which resulted in a sharp drop in trading volumes and prices. Recently the government took similar measures regarding speculators.

Macquarie is unsure whether these measures will lead to a reassessment of the recent bullish trading activity in bulk commodities in China, which has been driven by inflation expectations and concerns about depreciation of the renminbi.

Market fundamentals are unchanged and the broker continues to believe that prices have overshot and should ease back to trade in a fundamentally supported US$45-55/t range.

While Chinese steel demand has exceeded expectations, the broker still expects that seasonal and sequential steel output in China will fall in the months ahead. The broker observes iron ore supply is plentiful already and will continue to rise in the months ahead.

Citi suggests changes being called to the Western Australian iron ore royalty are a risk for both BHP Billiton and Rio Tinto. The changes being proposed are part of the long-standing tension over GST raised in WA being used to subsidise other Australian states.

The issue has been heightened by the pressure on WA's budget from infrastructure projects committed to during the mining boom, which have to be paid for when commodity prices are significantly lower.

There are two forms of royalty payments in WA, a royalty for ore and a 25c/t rental that applies after 15 years of production on a mining lease. The rental is what the WA National Party is looking to increase to $5/t and is currently only being paid by the former two miners and Cliffs' Koolyanobbing mine, although other producers are likely to be captured over time if they have production over 15 years.

In 2015 the tax collected $120m, affecting 470mt of BHP/RIO production and suggesting, in Citi's calculations, a cost of $2.2bn, with a net impact after minority interests/tax of US$500m for each company. This would lower net present value (NPV) and net profit by 4% at spot prices, increasing the risk that BHP and Rio Tinto would expand production by 20mt and 30mt respectively.

Fortescue Metals ((FMG)) is not liable to pay the tax for a number of years but such a scenario would also re-shape the cost curve, in the broker's view, making Vale the lowest cost producer.
 

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article 3 months old

Material Matters: Supply, Oz Miners, Aluminium, Coal And Mineral Sands

Outlook for metals; downside risks diminish for Oz miners; oversupply in aluminium; thermal coal set to weaken; strengthening in pigment markets.

-Macquarie not expecting resurgence in growth projects for metals in the near future
-Capital management potential opening up for Rio Tinto, inevitable at South32
-Increasing evidence suggests thermal coal price may be peaking
-Ord Minnett unable to identify positive catalyst for zircon
 

By Eva Brocklehurst

Commodity Supply

Macquarie believes prices for most metals and bulk commodities are now at a level where producers are making money, given the cost reductions that have occurred over the past year. In many cases current prices are near, or below, the broker's long-run forecasts, most notably base and precious metals. As a result Macquarie does not expect a resurgence in growth projects in the near future.

There are three major metals on which more than 10% of the market is still making losses. Even with the price moving back above US$5000/tonne, a proportion of copper supply does not break even, notably the smaller mines in Chile and Chinese domestic output.

In nickel, despite strong gains recently, a substantial portion of global output cannot cover cash costs, on the broker's analysis. Much of this is because the nickel price is being anchored by the cost of nickel pig iron production in China. Uranium, with the spot price moving below US$20/lb, is the only market where increased supply loses money now compared with back in January.

In bulks, coal and manganese prices are well above the level Macquarie would expect to incentivise new projects. Nickel, copper, uranium and platinum group metals, meanwhile, are below the broker's long-run expectations. Many others, including zinc and gold, are only just above. The broker notes marginal units of iron ore have come back into the market, with both Chinese domestic output and China's imports from small suppliers recovering.

The most spectacular turnaround story for 2016 is coal, Morgan Stanley notes. The broker believes the next few weeks are critical as trade flows typically leap 20-50% in November to December. Prices should then fall. Other price winners of the year include steel and most of its raw materials.

The broker notes China's credit-backed, steel-intensive infrastructure programs have pulled 40-50m tonnes more crude steel into the construction industry and the typical pull-back in September to October has been delayed.

Morgan Stanley still expects this pull-back to occur by mid winter but the impact will probably be mitigated by positioning for another year of stable steel production in China. The broker remains a bull on nickel and zinc because of tight supply and subdued about aluminium and copper, as global supply growth exceeds China's moderating demand.

Australian Miners

Credit Suisse observes, after China returned from its Golden Week holidays, there was a break out in iron ore, coal and nickel prices. The broker believes downside risks have diminished and there is a positive skew for Australian miners' earnings. While the bears will argue China has too much stimulus and there is a risk policy settings will now tighten too aggressively, the broker believes the balance of risks remains reasonable.

Credit Suisse also expected steel input prices would have eased by now, as production slows ahead of reduced construction in the Chinese winter. Instead prices are climbing as buyers readily accept higher prices, which the broker believes points to strong demand preventing a glut of materials. The rally in commodity prices is envisaged to be strong enough and last long enough to banish balance-sheet concerns for Australian mining names.

Valuations are considered to be around fair value, based on an average of the broker's base, upside and downside cases. The broker believes capital management possibilities are once again, opening up for Rio Tinto ((RIO)). Capital management also seems inevitable for South32 ((S32)).

Aluminium

National Australia bank analysts expect the aluminium market to be shaped by significant capacity additions in China's north-western region, where there is access to coal mines and lower cost electricity. This is despite the industry being singled out by the Chinese government in its new five-year plan for the non-ferrous metal sector as having severe over-capacity.

The analysts expect demand growth in China will continue to slow and growth in the rest of the world is unlikely to be fully offsetting over-supply. The run up in premiums has now reversed and the analysts note inventory levels at various London Metal Exchange locations have been on the decline. Premiums now more closely reflect underlying supply and demand factors.

They do flag some positive long-term trends for demand, such as increasing use of aluminium in car manufacturing and use of aluminium wire in preference to copper in the power sector. Overall, the analysts forecast a well-supplied market in 2016 and 2017, with prices averaging US$1595/t and US$1670/t respectively. In 2018 demand prospects may improve and a higher average price is forecast of US$1740/t.

Coal

Macquarie examines high-frequency port data which indicates thermal coal production run rates have increased materially. Rail deliveries into northern Chinese ports are now running at rates that are higher than when the 276-day rule was first implemented. The strength of the coal price over the past month has been underpinned by scepticism that the Chinese were actually raising production. The market is also suspicious that supply will be large enough to fill the entire deficit.

The broker has increasing evidence which suggests thermal coal prices may start to roll over. Any normalisation of coal markets will be determined by China, as its domestic market is 2.5 times the size of the whole seaborne market. While the data is not directly applicable to coking (metallurgical) coal, Macquarie continues to favour being long metallurgical coal versus short thermal coal exposure.

This is because the Chinese government appears to be more concerned about the effects of rising thermal coal prices than it is about steel-maker margins. Also, the seaborne thermal coal market is relatively more flexible in terms of supply compared with the seaborne coking coal market.

Mineral Sands

Ord Minnett observes strengthening pigment markets are likely to flow through to titanium dioxide while the prices for sulphate ilmenite have started to move higher. Commentary from the TZMI conference about zircon markets was more subdued than expected, with most participants expecting a surplus over the next two years. The broker has strengthened its view that titanium dioxide feedstock markets will improve.

The sulphate ilmenite market is observed to be moving into deficit from a surplus, with positive price momentum set to continue. Chinese domestic ilmenite tonnage has fallen and this is a key driver of the rise in domestic prices over the last six months and an opportunity, the broker envisages, for ilmenite importers such as Base Resources ((BSE)).

In zircon, half of the projects under development that were analysed by TZMI have an inducement price below US$1000/t, which indicates to the broker that long-term consensus zircon pricing could be optimistic. On the other hand, Iluka Resources ((ILU)) believes zircon demand may be underestimated. This is because some market participants are not factoring in the movement in inventories.

Illuka believes it holds over half the world's zircon inventory and does not plan to release this until market conditions are appropriate. At the conclusion of the conference, Ord Minnett came away positive about titanium feedstock prices the near-term, with miners exposed to sulphate ilmenite particularly likely to benefit. The broker was unable to identify a positive catalyst for zircon.
 

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article 3 months old

Material Matters: China And The Outlook For Steel Inputs

Outlook for Chinese demand for metals and steel inputs; Factors in coal price rise; what is underpinning iron ore prices?

-Upside risks for aluminium, steel and coal prices from China's supply-side reforms
-Coal price correction after the peak season may be mild
-Iron ore benefitting from depreciating Chinese currency
 

By Eva Brocklehurst

China Outlook

The rebound of the Chinese property market has been an important driver of the improvement in demand for most metals, Deutsche Bank observes. The measures to cool the market being introduced by the government are relatively mild compared with previous property cycles, according to the developers the broker met on its visit to China. The outlook for infrastructure construction is also robust.

The Chinese government appears serious about supply-side reform, the broker observes. The 276-day policy has instilled a belief in industries which are at over-capacity that supply discipline can improve profitability. Deutsche Bank is skeptical supply discipline will last forever - and in some cases the supply chain has been disrupted by logistics constraints - yet for now believes this poses upside risks for the aluminium, alumina, steel, thermal and coking (metallurgical) coal balances.

While Deutsche Bank expects Chinese domestic coal prices will remain elevated into the lunar new year, there are troubling signs the fundamentals have not kept pace with the price rise. The decline in European demand has outpaced the rise in Chinese import demand through the month of September.

Seaborne export prices have now risen in excess of the domestic Chinese price increase, suggesting Chinese demand should not rise much further. A supply response is expected to eventually be realised towards the end of the year from the government's looser restrictions on 789 mines, allowing them to produce up to the 330-day level. Higher output from export producers is likely to be limited, the broker asserts, as many are skeptical of the longevity of current prices.

Steel

Deutsche Bank has become more bullish on the near-term outlook for steel. Upside risk to the broker's 2017 steel demand forecasts in China is driven by increasing demand for infrastructure construction, aided by the increase in public-private partnership funding. Over the medium term, steel demand is still expected to ease, with long products most at risk.

The broker believes steel demand, driven by the property segment, may not decline as much as originally expected. Based on the broker's observations, 2017 steel demand forecasts are upgraded to be flat versus prior expectations of a 2.9% decline. Because of the upgrading of demand growth the broker believes the profitability of steel mills will be similar to 2016.

China Coal

The main message Deutsche Bank garnered from coal producers in China is that they cannot ramp up production very quickly, and only around 50% of the production that was shut can be re-started in the December quarter and March quarter of next year. Deutsche Bank also observes a reluctance by smaller coal companies to re-hire labour.

The expectation remains for coal prices to remain robust and possibly appreciate into the December quarter. Deutsche Bank's calculations imply year-end monthly coal production might be at a level that is still about 6-10% lower than in previous winters. The low inventory suggests to the broker the coal price correction after the peak season may be mild.

Macquarie notes, since China announced a relaxation of production controls on coal, spot Newcastle coal is up more than $20 a tonne and spot Australian hard coking coal is up $42/t. These price moves may be counter-intuitive but suggest to the broker the market is sceptical that production is actually increasing. Inventories remain at low levels and, even if a production increase did materialise, it may not bridge the entire supply gap.

As a result, Macquarie makes material upgrades to hard coking coal and thermal price forecasts for the next two to three quarters. The broker maintains a bearish trajectory in its forecasts, expecting a supply response will eventually materialise and put prices under pressure next year.

As a fair level for thermal coal, the broker makes reference to China's earlier guidance that it wants thermal coal prices to fall back towards RMB450/t during industry restructuring, which is a Newcastle price equivalent of $60–65/t. For metallurgical coal Macquarie assumes contract prices will fall back towards a fair level of $120/t, which is around the top of the seaborne cost curve.

Macquarie is also receiving questions on how the coal price rise is affecting the aluminium market. The broker reports that those buying grid power have witnessed no impact. Those that suffer from a competitive perspective are smelters that buy spot coal to generate their own power - around one-third of Chinese capacity.

Such smelters have seen costs rise by more than RMB2,500/t from the lows in the first quarter, although more than half of this relates to increasing gains on alumina prices. The main winners are those located close to coal production bases, such as in Xinjiang and Inner Mongolia. These are the regions Macquarie expects will make capacity additions in aluminium over the coming two years.

Manganese ore has been on a substantial bull run but Macquarie does not believe the gains are sustainable. Australia excluded, most global supply that shut down in early 2016 has now been re-instated.

Iron Ore

Goldman Sachs observes that since the Chinese market re-opened after holidays in October, ferrous prices have increased significantly. Iron ore is up 22% and rebar 15%. The broker believes growth expectations and supply/demand fundamentals are unlikely to be the explanation. Iron ore inventory has been building and shipments from Australia and Brazil have been rising.

Higher coal prices cannot explain the increase in iron ore either. Historical data suggests that higher coal prices should affect rebar and aluminium prices the most but have a negligible impact on iron ore.

Goldman Sachs believes a weaker Chinese currency maybe the most important driver of the iron ore price increase. The Chinese currency has resumed its depreciation against the US dollar, which has broken RMB6.7 for the first time since 2010 and is now approaching RMB6.8, pushing onshore investors to diversify into dollar-linked assets.

Iron ore may be the first in line to benefit from such investment flows. To the extent that a higher US dollar also leads to a weaker local currency on a trade-weighted basis, iron ore may benefit from higher Chinese steel exports. Additionally, rebar and iron ore are the most traded commodities in the onshore futures exchanges.

By the broker's estimates, about 60% of the iron ore price rally in October can be explained by the depreciation in the Chinese currency.
 

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article 3 months old

Copper Set To Rally?


Bottom Line 28/10/16

Daily Trend: Neutral
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 206 / 202 / 195
Resistance Levels: 222 / 229 / 234 / 240 - 250

Technical Discussion

[Note: All prices USc/lb]

Copper prices are at weekly highs as reports indicating that China is still willing to add further stimulus to its economy, fueled some immediate demand. Two sessions ago when price spiked, it was also aided by the U.S Dollar Index rejecting off its recent 99.06 high point, which is also very near to our short term wave equality target on the currency. With major resistance also just above on the Greenback price is now in a clear cut inflection zone. So if weakness suddenly becomes a theme, then this is also likely to keep metal prices nicely on the bid. As for China though, even though supply is still an issue for Copper, it accounts for nearly half of all global copper demand. So if fiscal stimulus is still on the agenda, this could easily keep prices supported at these lower levels for the time being.

Reasons to remain bearish :
→ longer term bearish momentum continues to sustain
→ 195.00 support remains in the spotlight
→ above 250.00 puts a more positive spin on things
→ surpluses reverting to deficits later in 2016 now being questioned

Price being supported at lower levels and price actually indicating it is ready to head on higher, are two completely different matters. Obviously as traders we want to become involved in trends, not sideways patterns which is what we have here at the moment. Price has been coiling within what we have defined as a symmetrical triangle bottoming out process, and as it has been in this sideways mode all year, we are continuing to look for signs of a breakout higher rather than lower. Two sessions ago, we may have witnessed the first early signal of this possibly building towards happening as levels continue to head closer and closer towards the apex of the pattern, which is where major directional decisions are made. The volume on this day was also well above average so clearly buyers were getting involved.

Price is now nudging the 200 day moving average which has held price below it for a many number of years. So if we can break higher from here off a well over sold position on our divergence indicator, then this may finally be the breakout we've been looking for after all this time. Basically though we need the price triggers to confirm. The first one comes in at 229, then 234. If these mini milestones can be achieved via moves that stick, then price action will start looking towards the 240 - 250 resistance where any move above puts things back in bullish mode. Very early days only so we are certainly not going to get ahead of ourselves just yet. 

Trading Strategy

'The thing we like about triangle patterns is that they generally do offer up nice low risk / high reward setups, so this is something we would certainly like to be a part of from a trading perspective.' The pattern doesn't breakout officially until 229 can be tagged yet for aggressive traders we are going to offer up a recommendation right here to trade long at 215 with stops below 206. We are running off the backing of our discussion in our technical section tonight, and on the basis that the recommendation is about as low risk as you can get basis our entry position and how tightly we have our stop. So if we do get stopped out, there will be limited damage inflicted. If price does move forward from here, we will look to offer up another opportunity for more conservative traders over the coming weeks. 
 

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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article 3 months old

The Overnight Report: Bonds On The Move

By Greg Peel

The Dow closed down 29 points or 0.2% while the S&P lost 0.3% to 2133 and the Nasdaq fell 0.7%.

Sell Australia

It seemed as if we had found a bottom in the ASX200 at 5350 technical support yesterday as the index spent the morning holding its ground, following Wednesday’s surprisingly severe sell-off. But 5350 prove only a pivot point as there seemed no great desire to drive a rebound.

And sure enough, another wave of selling hit at midday, and down we went again. Reports suggest the selling has been futures-led, implying a large fund manager or fund managers have decided to “Sell Australia”. It only takes a small reallocation of a giant global portfolio to send little old Australia spiralling.

The quickest way to achieve a wholesale “Sell Australia” is to first sell the SPI futures on the ASX200. This locks in the exit, and fund managers can at a later date, when the dust settles, sell actual stock positions and buy back the futures at a lower level. When the futures are sold, those on the buy-side have the unenviable task of trying to cover by selling stocks into a falling market.

And it is unenviable at present because the local market is in a panicky mood anyway, sparked by a run of bad news coming out of AGMs and other matters. We can see the market-wide confirmation in the fact all sectors, bar one, fell in unison yesterday and the hardest hit were those where the large caps mostly reside. The top 20 will give you about an 80% or more replication of the whole 200 in market cap terms. Only info tech finished in the green, dominated by Computershare ((CPU)) which is being supported by rising US rates.

There were only a couple of notable up-movers bucking the trend otherwise – one being Ardent Leisure ((AAD)), which saw some bargain hunting despite a rather poor AGM performance. Challenger ((CGF)) has gone from strength to strength lately on the popularity of annuities, and it jumped another 4% after its AGM.

On the other side of the ledger, the biggest percentage moves down were reserved for resource sector stocks. Outside of an 11% drop for APN News & Media ((APN)) on capital raising dilution, eight of the other nine top ten down-movers were miners – the same miners who have been enjoying stellar runs lately on improved commodity prices (eg South32, Whitehaven) or futuristic over-exuberance (eg Orocobre, Syrah).

Clearly those investors having dined out lately on the outperformance of their mining-weighted portfolios were in a desperate race to lock in profits yesterday before the sky fell in.

The other big news was of course National Bank’s ((NAB)) decision not to cut its dividend, yet. NAB thus managed to fight back against solid bank selling.

Ticking Up

US monthly data flow of late has been fair to reasonable, positive but not shooting the lights out. Either way, not bad enough for the market to assume the Fed won’t hike in December. Tonight sees the more substantive first estimate of September quarter GDP, so any shock there might change the mood. But these days both the Atlanta and NY Feds publish continuous GDP run rates, thus expectations of around 2.5% growth have fairly solid evidence behind them.

As we move closer to December, the US ten-year yield is again starting to tick up. Last night it rose 5 basis points to 1.84%. We recall that 1.85% was the pre-Brexit vote high, hence traders assume that a break of 1.85% could mean a rush back to 2%. And it’s not just US Treasuries. Bunds, gilts, JGBs and others are all quietly on the move.

It’s not good news for bond-proxy stocks, hence an early one hundred point fall in the Dow last night was largely driven by telcos, utilities, REITs and the like. Yet as we have seen so often in past sessions, the early drop was met by a choppy recovery.

Choppiness can be put down to individual earnings results, which continue to be mixed but net positive, while fourth quarter guidance remains an area of concern. Among the Dow stocks, last night saw a miss from Ford and a 1% drop and a miss from Colgate-Palmolive and a 1% drop, while outside the Dow, ConocoPhillips was a winner and jumped 5%.

This morning’s major after-the-bell reports see Amazon down 5% and Dow component Alphabet (Google) up 1%.

The other big market influence at present is of course oil, and it found some support last night after Saudi Arabia actually came out with a number – a 4% production cut from those who can cop it. While the official meeting is not until the end of November, this weekend sees another gathering to further nut out possibilities.

Could it be that this time there really is a wolf?

Commodities

West Texas crude is up US49c at US$49.60/bbl.

Base metal prices all rose around about 1%, except lead, which rose modestly.

Iron ore finally retreated, down US40c to US$62.30/oz.

The US dollar index is up 0.3% at 98.91 and gold is relatively steady at US$1269.00/oz.

The Aussie is down 0.7% at US$0.7588. This may give weight to the assumption stock market selling is coming from offshore.

Today

The SPI Overnight is rather boldly up 28 points or 0.5%. This would suggest that maybe the selling has now been completed, or at least the market hopes it has. There should be some bargains on offer.

Locally we see the September quarter PPI and September new homes sales numbers today. Tonight the US GDP will be in focus.

Woolworths ((WOW)) will report September quarter sales today. Having seen what happened to its rival, they would want to be good.

Macquarie Group ((MQG)) releases first half earnings.

And there’s another handful of AGMs.

Rudi will connect with Sky Business today, via Skype, to discuss broker calls for about ten minutes, starting around 11.05am.
 

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article 3 months old

The Overnight Report: Wild Ups And Downs

By Greg Peel

The Dow closed up 30 points or 0.2% while the S&P fell 0.2% to 2139 as the Nasdaq fell 0.6%.

Pent Up

For a month the ASX200 has been up and down in a range of 5400-5500, meeting bargain hunters at the bottom and profit-takers at the top. The topside has looked the least likely to be penetrated given uncertainty surrounding upcoming, very influential global events.

Which leaves us with the downside. We saw a bit of a hint of it on Monday, but on Tuesday the bargain hunters reappeared. They also reappeared yesterday when the index dropped immediately to 5400 on the open. They hung on for almost an hour but it was to no avail. There was just too much bad news about.

Yesterday’s bellwether trigger was Wesfarmers ((WES)), or more specifically Coles. Looks like the honeymoon’s finally over. Stoic investors have continued to back the big supermarkets because...well…of tradition mostly. Wesfarmers does not traditionally fall 6% but it did yesterday.

Then there’s the tragedy of Ardent Leisure ((AAD)), down another 15%, an ongoing exit from stocks reliant on the Chinese consumer, following Tuesday’s Bega Cheese ((BGA)) scare, and the other China story – Crown Resorts ((CWN)). And we have Healthscope ((HSO)). Having been sucked down in the vortex, peer Ramsay Health Care ((RHC)) issued the briefest of statements yesterday to allay fears of any similar problems. Ramsay shares managed only a very modest bounce after a solid fall.

When the levy broke at 5400 it was on for young and old – market-wide. Tuesday night saw a big jump in the iron ore price, solid moves up in base metals and a bit of a rebound for gold, yet the materials sector closed down 0.7% yesterday. It was at least an “outperformance”. The banks that had been bought up this week on the dividend play were dumped, down 1.3%, ahead of National Bank’s ((NAB)) earnings report today.

The big loser on the day was consumer staples, down 3.3% thanks to Wesfarmers, but consumer discretionary wasn’t far behind with a 2.5% fall. This sector is very much influenced by monetary policy, but it appears yesterday’s CPI release had little impact on a market already hell bent on heading south.

The media will always focus on the headline inflation rate, and it was up 0.7% in the September quarter for an annual rate of 1.3% when 0.5% and 1.1% were forecast. There goes your RBA rate hike, is the conclusion. But the core rate rose only 0.3% when 0.4% was expected for an annual 1.5% against 1.7% expectation.

The RBA focuses on the core rate, ex food & energy. Thus we can say inflation was actually weaker than expected. But not as weak as it was back in the March quarter, which prompted the last rate cut. So will we see a Cup Day cut next week?

CBA’s economists say yes, but with less conviction. St George says yes, but it’s a “line ball call”. ANZ believes the data increases the odds of a cut – next year. Others say no cut on Tuesday. Place your bets.

The immediate reaction in forex markets was no cut, given the Aussie jumped straight to 77, but then traders read further down the document, past the headline result, and by late evening the Aussie was back where it started. It is this morning unchanged over 24 hours at US$0.7643.

Did we see the shake-out in the stock market yesterday that we needed to see? The index held 5350, which is also an important technical level. Certainly some of the high-flying names for which analysts have been calling valuations overstretched have come back to earth somewhat. Buying opportunity?

Well we’ll probably have to get past Trump, OPEC and the Fed first. Santa is watching closely.

Motion Sickness

The Dow was down a hundred points from the open last night and then up 70 points before midday. The major underlying driver was oil.

US oil forecasting is a JOKE. Yesterday I noted weekly inventory forecasts are never right and in the past I’ve pointed out how numbers from the American Petroleum Institute and numbers from the Energy Information Agency are so often wildly different. Before the open on Wall Street last night, the API had predicted a weekly crude inventory build. The market was expecting a build, but not by as much.

Already looking nervous under US$50, particularly with the whole production freeze issue looking decidedly shaky, WTI plunged to below US$49/bbl from the open on Nymex. Then the EIA report came out indicating a small drawdown, and WTI shot back up over US$50. Hence we saw the Dow down a hundred and then up 70.

The oil price drifted back towards the close to be down US67c over 24 hours at US$49.15/bbl. The Dow closed up 30.

Outside of oil, we saw a weak result from Apple in Tuesday night’s aftermarket, mostly guidance related, send apple shares down over 2%. On the other hand, Boeing posted a very strong result which saw its shares up almost 5%. Both are Dow stocks, but only Apple is a Nasdaq stock. That’s why the Dow closed up 0.2% last night and the Nasdaq closed down 0.6%.

Some 40% of S&P500 companies have reported to date and the run-rate is 2.5% earnings growth. That should be good news, given a 2% fall had been predicted. And revenues are up 2.8%, which is very positive. Yet Wall Street is failing to respond in a positive fashion. One reason is aforementioned uncertainty with regard upcoming events. The other is disappointing December quarter guidance, despite strong September earnings results. But then a lot of that has been put down to uncertainty in the quarter, given upcoming events.

Commodities

Oil has been noted.

After their strong session on Tuesday night, last night saw base metals moves return to being mixed and minimal. Zinc fell 1%.

Iron ore has kicked on, rising another US$1.10 to US$62.70/t.

Tuesday night’s gold rally proved fleeting as gold is down US$7.20 at US$1266.70/oz, despite the US dollar index slipping 0.1% to 98.63.

Today

The SPI Overnight closed up 8 points. Not quite the stuff of rebounds after a day of carnage, but then Wall Street has not provided much impetus.

In a case of unfortunate timing, Ardent Leisure ((AAD)) will host is AGM today. Indeed it’s a very busy day on the AGM calendar.

But the greatest focus will be on NAB’s earnings result. And more specifically, its dividend. NAB did not cut, yet (?).

Rudi will appear on Sky Business, 12.20-2.30pm.
 

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All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Overnight Report: Ups And Downs

By Greg Peel

The Dow closed down 53 points or 0.3% while the S&P lost 0.4% to 2143 and the Nasdaq fell 0.5%.

Cheesed Off

The AGM season claimed another victim on the local market yesterday. Bega Cheese ((BGA)) shares fell 17%. Clearly the company was wrong in believing the Chinese market is insatiable.

Not content to continuing selling just its well-known cheese products, Bega had decided to hook up with Blackmores ((BKL)), which clearly was not content to only sell dietary supplements. The two took on the Chinese infant formula market, where already there are a crowd of A&NZ milk companies operating, and found it oversupplied.

Go figure.

The other big loser on the day is a tragic story. Ardent Leisure ((AAD)) fell 8% very late in the session so there may be more to come.

Otherwise, having surprised all and sundry by falling so heavily on Monday, the ASX200 again defied overnight futures trading in jumping back up 47 on the open before settling up 34. It was more of a step-jump than a rally, which again prompts the question what on earth was going on on Monday.

The banks clearly led the market up yesterday in what is a traditional seasonal pattern. The 0.8% sector gain reflects the fact there are three juicy dividends on offer (albeit maybe less than in previous years), and you need to get in now if you want a piece of the action. Then you sell in December and switch into CBA on the different cycle.

All sectors finished in the green yesterday bar consumer staples, thanks to Bega and friends, and energy, which dipped slightly on lower oil.

Having reset, the market will now look ahead to today’s September quarter CPI number, which will set the agenda for RBA policy and determine whether the Aussie goes higher or lower. Economists are looking for 0.5% headline growth for 1.1% year on year, and 0.4% core growth for 1.7% year on year.

Guidance Concerns

Russia is now apparently wavering on a production freeze agreement with OPEC. The WTI price thus slipped under US$50/bbl last night which was one source of weakness on Wall Street.

US consumer confidence has fallen to its lowest level since May, according to the Conference Board monthly measure. It’s not great news for retailers with the Thanksgiving shopping spree now only a month away. But it is typical of confidence to dip going into a presidential election, and the bizarre offering this time around is more reason to be cautious.

The main reason Wall Street was lower last night centred around earnings season. It is not third quarter earnings that are the issue, as they continue to point to the first positive result for the S&P500 in six quarters. It is fourth quarter guidance which, given all the uncertainty in the world at this time, has been disappointing in many cases.

Among the Dow stocks, consumer staple stalwart Proctor & Gamble has been a popular stock to hide one’s money in this year and it did not disappoint, rising 3%. But despite posting positive results, all of 3M, DuPont and Home Depot shares fell on underwhelming guidance.

Outside the Dow, Whirlpool went down one, falling 11% on weak, Brexit-impacted UK sales. General Motors suffered the same fate, and fell 4%. High flyer Under Armour fell 13% and had Wall Street wondering whether the “athleisure” bubble has now burst.

Add it all up and the Dow fell 50 points. On Monday night it rallied 70 points. With PEs looking stretched and December quarter earnings guidance failing to provide support, the upside currently appears limited. With funds managers lined up to swoop on any weakness so they can put money to work on a TINA basis, the downside appears limited.

As Gerry Rafferty would put it, here I am, stuck in the middle with you.

Commodities

Forecasts this week are for a build in US crude inventories following a couple of weeks of surprise drawdowns.

Forecasts are never right.

Throw in doubt over Russia and West Texas crude is down US81c at US$49.82/bbl.

Between environmental shutdowns forced by the governments of China and the Philippines, and economy-based restrictions in Indonesia, the supply of bulks and base metals is expected to be constrained going forward. Yet there appears no constraint on Chinese demand, which is on the rise.

Last night lead and nickel rose over 1% and aluminium, copper and zinc rose over 2%.

Iron ore has jumped up US$2.90 or 5% to US$61.60/t.

We are entering one of the two holiday periods in which Indians typically exchange gifts of gold. Outside of monetary policy influences, such demand from India can be a real mover of the dial for the gold price. Last night gold rose US$9.40 to US$1273.40/oz.

The rally in gold, and indeed other commodities, may also lend itself to creeping belief the recent run-up in the US dollar has come to an end for now. The greenback has adjusted to the expectation of a December Fed rate hike and now must wait for confirmation. The dollar index has been flat for a few sessions in a row now, which suggests it might just be ready to tip over. It is little changed this morning at 98.73.

On commodity price strength, the Aussie is up 0.4% at US$0.7641.

Today

The SPI Overnight closed down 12 points or 0.2%. Seems strange in the face of commodity price strength but the SPI’s been no sort of indicator these last few sessions.

The local CPI result is due late morning.

There’s another round of AGMs today and quarterly earnings results are due from Alacer Gold ((AQG)) and ResMed ((RMD)) and quarterly production numbers from Independence Group ((IGO)).

Wesfarmers ((WES)) will report quarterly sales figures. While Coles will be in focus as always, don’t forget Wesfarmers also produces coal.

Rudi will gear up in the afternoon to host Your Money, Your Call on Sky Business tonight, 8-9.30pm.
 

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article 3 months old

Material Matters: Crude, Coal, Iron Ore, Alumina And Nickel

Commodity demand rebound; crude challenges; thermal coal exports; blast furnace efficiencies; alumina price surge; nickel ore exports.

-Zinc market retains strong fundamentals and top pick for RBC Capital Markets
-Atlantic Basin crude loadings recover and oversupply risk persists
-Thermal coal pricing continues to be dictated by Chinese policy
-Iron ore pellet premiums at highest level since 2014
-Nickel ore tightness to emerge, likely spike in prices
 

By Eva Brocklehurst

Strategy

RBC Capital Markets observes Chinese economic stimulus and a rebound in demand for steel production have underpinned a broad recovery in commodity prices. Specifically for zinc, permanent mine closures related to an exhausting of reserves have tightened that market and driven prices higher. A similar situation relates to coal production cuts in China that have caused coal prices to spiral higher.

The analysis suggests the zinc market still has the best fundamentals and remains the top pick. Based on 2016 price forecasts, RBC Capital Markets analysts prefer zinc, coking coal and palladium. Based on five-year forecasts the analysts prefer nickel, zinc, uranium and copper.

The analysts believe, in the absence of further production cuts, stronger economic growth and demand are required to balance most commodity markets and lead to a sustained rally in prices. With the exception of coal and uranium, the analysts make minor changes to forecasts. Average coking (metallurgical) coal price forecasts are increased 37% and thermal coal are increased 17%. The analysts' average uranium price forecast is lowered 24%. The analysts recommend investors increase exposure to non-precious metal mining shares.

Crude

The trend in US inventories is looking better for crude but Morgan Stanley observes signs of physical market stress. The broker contends recent inventory data is backward-looking and exports are more important than production as a signal for physical markets.

The main challenge is that Atlantic Basin loadings are recovering. While the backlog should clear with appropriate price signals an oversupply risk persists. The headline rig count may be understating upcoming US supply and the broker also believes the disruptive nature of US shale oil is underappreciated.

Moreover, while some are becoming excited about the longer-term bullish comments from Saudi Arabia, Morgan Stanley points to a large number of producers that are increasingly finding ways to survive in a US$50-60/bbl world.

Thermal Coal

ANZ analysts suggest exporters of thermal coal are struggling to react to the shifting dynamics in the seaborne market. With China's new-found reliance on the international market, import demand in the Asian region has surged in recent months. Despite efforts to limit the impact of capacity closures on utilities in China, the analysts expect import demand to remain strong. Japanese buyers have also played a part in the current price rally. A move to more spot purchases occurred just as Chinese imports surged and has caught some consumers short.

Prices may be making almost every producer positive in terms of cash flow but the analysts believe an immediate supply response is likely to be muted and prices are likely to continue being dictated by China’s policy measures. If coal output can be temporarily raised heading into the northern hemisphere winter, prices may ease over the next couple of months. Even so, spot prices are expected to remain above US$80/t over the winter.

Iron Ore Pellets

When coking coal prices surge, steelmakers try to adapt, and Macquarie observes a standard tactic is to maximise blast furnace efficiency. This can lead to increased use of iron ore pellets. At US$35/t, pellet premiums are now at the highest level since 2014.  At every time coking coal prices surged in 2005, 2008 and 2011 this was met with gains in pellet premiums. With Samarco still off-line for the foreseeable future and limited growth from other suppliers, further upside to pellet prices seems probable to Macquarie.

At present, the broker considers it unlikely Vale will re-start pellet capacity unless the pellet premium rises a further US$10/t. However, prices above US$45/t are considered unlikely. As the global steel industry settles into a very low, or negative, growth pattern, operational gains will prove a strong differentiator, in the broker's opinion. In developed economies, and perhaps even China, this is likely to be augmented by the stricter environmental constraints placed on sinter plants and, hence, lead to closures of some operations.

Alumina

Alumina's spot price is up over 30% in the year to date, to almost US$280/t CFR China, but Morgan Stanley believes one cannot assume downstream metal production and demand growth is strong. Aluminium's global market is on track to expand just 1.3-1.9% in 2016, the smallest lift since the GFC.

Floods, industry reforms and reactivating of smelters are forcing a lift in China's alumina imports. Morgan Stanley estimates total alumina supply affected in 2016 by these events exceeds 10mt or 8-9% of global supply. Yet upside to the now-buoyant spot price is likely to be limited by the responses by refineries elsewhere. Morgan Stanley believes the recent reactivation of China's smelting capacity is alumina's sole short-term driver of demand. Slower northern winter trade will probably moderate price performance too.

Nickel

The latest decision by the Indonesia government not to allow nickel ore exports to resume puts the attention back on the Philippines. Widespread mine closures are not expected in 2017 but Macquarie suggests extreme tightness is still likely to emerge for nickel ore supply in China and nickel prices could spike early in 2017.

As ore prices rise, the cost of making nickel pig iron (NPI) will also rise, while other NPI cost inputs are also rising strongly (coal and coke). The broker estimates that the break-even level for Chinese NPI producers is already close to US$10,000/t, and in early 2017 could well rise above US$11,000/t as ore and carbon prices rise.

Macquarie expects Indonesian nickel pig iron production to grow from 28kt last year to 98kt this year and then to 170–180kt next year. Demand, meanwhile, has risen strongly, driven by a sharp rise in Chinese stainless steel production, especially for high-grade nickel (8%) 300 series.  Macquarie's latest supply/demand balance estimates shows a deficit of 70,000t this year and 100,000t next year, even with the expected rise in combined nickel pig iron production in Indonesia and China.

Prices could easily move into the US$11,000–12,000/t range in the March quarter as nickel ore stocks fall to extremely low levels, the broker believes. Any major disruption to supplies from the Philippines would add to the higher price outlook. Macquarie would be a buyer into any price dips below US$10,000/t.
 

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article 3 months old

The Overnight Report: Merger Monday

By Greg Peel

The Dow closed up 77 points or 0.4% while the S&P rose 0.5% to 2151 and the Nasdaq gained 1.0%.

What The?

Nobody picked the open on the Australian stock market yesterday, except maybe whoever was placing big sell orders. Wall Street and the SPI futures were little changed on Friday night and it looked for all the world like we were in for a quiet session. But at 11am the index was down 53 points.

Sure, there were some standout movers, specifically Healthscope ((HSO)), which dropped another 6% despite stock analysts suggesting Friday’s 19% plunge was probably an overreaction. They also suggest there is no reason Ramsay Health Care ((RHC)) should suffer the same fate but it was down another 4.5% yesterday.

We saw this recently with Estia Health ((EHE)) and aged care peers. These healthcare stocks have been very popular over the past year as safe havens for investment on undeniable underlying themes. Hospitals fit the same bill. This sector had become fully priced despite known regulatory risk.

So now that guidance has disappointed and regulatory risk looms large, investors have taken a sell first and ask questions later approach.

And then there’s Coca-Cola Amatil ((CCL)). The company held an investor day outlining plans to shift further away from increasingly less popular fizzy drinks. Stock analysts for the most part thought it was a positive update. Investors otherwise decided things don’t go better with Coke. CCL led the market down with a 6.5% fall yesterday.

Since July, the stock had rallied 25%. So once again investors ran in panic that their safe haven may let them down if the fizzy drink is truly dead.

The Healthscopes and Cokes notwithstanding, yesterday morning saw a big market-wide sell-off on the open before a slow grind back to a more respectable, albeit weak, close. The banks led the fightback as investors look to lock in dividends ahead of the cut-off following result releases beginning this week.

This market is sure jumpy, and AGM season has only just begun. What further horrors await?

Wall Street is up overnight, which is nice, but the futures are only suggesting up 3 points for the ASX200 today – not much of a bounce given yesterday’s action. This is likely because Wall Street strength was really US-centric and not macro-reflective.

It’s Time

There was only one topic of conversation on Wall Street last night and that was M&A. Elsewhere, nothing was happening.

For some reason Monday is always the preferred day for merger announcements and last night was no exception. The biggie is AT&T’s (Dow) intention to merge with Time Warner – a deal that will need to jump a few regulatory hurdles.

There were also mergers announced in stock trading and aerospace, among others, while Genworth Financial, major shareholder of Genworth Mortgage Insurance Australia ((GMA)), announced it had sold itself to the Chinese.

Wall Street likes mergers, as they are typically positive for stock valuations. Many a commentator has noted that the long period of corporate stock buybacks seen over the past several years of ultra-low financing costs is coming to an end, to be replaced by actual investment through M&A.

This is a positive, at least to begin with. Typically mega-mergers tend to signal the peak of a bull market.

The Dow was up over a hundred points early on last night but drifted back to a less exciting close. With the oil price and US dollar steady, and nothing overly consequential within data releases, it was a session focused solely upon the alpha of US M&A and earnings reports and not the beta of macro developments.

On the subject of earnings, a flying start has given way to some more mixed results, with revenues amongst some of the biggest reporting companies still tending to disappoint. However, on the earnings line, beats to date are running at 78% compared to the long term average of 64%.

It’s still early. This week is the busiest on the calendar.

Commodities

Iraq has been fighting wars since the 1980s. Iran has only just returned from global export sanctions. Nigeria and Libya have their own problems, and let’s not even start on Venezuela. These are all reasons the Saudis seem to feel are fair enough in granting exemptions from any OPEC production freeze.

But with that many exemptions, is a freeze even possible? Well, apparently Russia is on board. If Saudi Arabia and Russia can agree on a freeze, that’s a big chunk of global production. The oil market is unsure, which is why the WTI price has recovered to US$50 and stopped dead.

West Texas crude is down US24c at US$50.63/bbl.

The US dollar index is steady at 98.69 but LME traders were last night focused on improving US and eurozone manufacturing PMIs, if last night’s flash estimates prove accurate, and a general pick-up in Chinese demand.

Aluminium and copper were flat last night but lead and nickel rose 1.5% and zinc 2.5%.

Iron ore rose US30c to US$58.70/t.

Gold is as good as steady at US$1264.00/oz and the Aussie is steady at US$0.7608, awaiting tomorrow’s local CPI numbers.

Today

The SPI Overnight closed up 3 points.

US data tonight include the Richmond Fed index, house prices and consumer confidence. And it is a huge session for major earnings releases.

It’s a big day for AGMs locally, with the likes of Bendigo & Adelaide Bank ((BEN)), Tabcorp ((TAH)) and WorleyParsons ((WOR)) among that number. Fortescue Metals ((FMG)) is one company hosting an investor day while Mirvac Group ((MGR)) will provide a quarterly update.

Rudi will link up with Sky Business today, around 11.15am through Skype, to discuss broker calls for about 10 minutes.
 

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All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Monday Report

By Greg Peel

Hospital Pass

Friday’s trade on the local market began with a whimper and it looked like a dull old Friday session was upon us. But never underestimate AGM season.

Healthscope ((HSO)) downgraded FY17 guidance at its AGM and set off a market plunge. At one point the stock was down over 20% and hospital peer Ramsay Health Care ((RHC)) was being dragged down in the vortex before at least some support was found. The ASX200 was down 32 points at midday but by 1pm was right back where it started.

Healthscope still finished the session down 19% and Ramsay 6% to provide a 2.9% drop for healthcare, by far the worst sector performer on the day. A dip in the oil price overnight had energy down 1.1% while the banks provided much of the offset in rising 0.4%.

The panic reaction in the hospital stocks just goes to show how much faith had been shown by investors in these sectors as being rare pockets of safety. The story is hard to argue with – ageing population and so forth – but regulatory issues linger and these stocks have been well priced.

What we also saw on Friday was a willingness in the market to jump in and buy stocks on a dip. We also see a willingness to sell on a spike. The market is presently being dominated by short term traders who are happy to buy at 5400 and sell at 5500 while there’s nothing much else going on in the world.

Yet. It’s all in front of us.

Flat as a Tack

It’s the same story on Wall Street. Friday night saw the Dow close down 16 points, but not before recovering from an initial 100 point drop. The S&P closed flat at 2141 and the Nasdaq gained 0.3%.

The Nasdaq outperformed thanks to old stalwart Microsoft, also a Dow component. Microsoft had posted an earnings beat in the aftermarket on Thursday and closed Friday at a new record high in rising 4%. The stock had only just recently regained its 1999 tech bubble high.

Another Dow winner on the day was McDonalds, which posted its first earnings beat in some time despite the Creepy Clown craze in the US forcing Ronald into temporary hiding. Mickey D’s rose 3%.

The Dow loser on the day was industrial behemoth General Electric which missed on revenue and initially fell 2.5%, providing a lot of the early Dow plunge. GE shares did manage to rally back to a close of only down 0.5% nonetheless.

There were no US economic data releases to speak of on Friday night and despite it being expiry day for October equity derivatives, volume was low and volatility minimal.

This week, by contrast, sees a wealth of US data, culminating on Friday night with the first estimate of September quarter GDP. This will play into Fed thinking.

But we are yet to start ticking off the major events currently impeding market progress – the November Fed meeting, the US election, the OPEC meeting and the December Fed meeting. In the meantime, what is continuing to be a positive US earnings season is having little market impact.

Commodities

West Texas crude had dropped on Thursday night to close under US$50 at expiry of the November delivery contract but on Friday night the new December front month contract rose US24c to US$50.87/bbl.

Commodity prices continue to battle the headwind of a rising US dollar which on Friday night rose another 0.4% to 98.64.

Aluminium was the only base metal to finish in the green while nickel and zinc were the only metals to fall by more than 1%.

Iron ore was unchanged at US$58.40/t.

Gold managed to rise US$4.50 to US$1266.70/oz despite the stronger greenback but the Aussie matched the Greenback’s rise with a 0.4% fall to US$0.7604.

The SPI Overnight closed down one point on Saturday morning.

The Week Ahead

A busy week for US data ahead of next week’s Fed meeting sees the Chicago Fed national activity index and a flash estimate of manufacturing PMI tonight and Case-Shiller and FHFA house prices, Conference Board monthly consumer confidence and Richmond Fed index tomorrow.

Wednesday it’s new home sales, the trade balance and a flash estimate of the services PMI, Thursday it’s durable goods and pending home sales, and Friday brings personal income & spending, along with the Fed’s preferred PCE inflation measure, Michigan Uni fortnightly consumer sentiment and the first estimate of September quarter GDP.

The market is forecasting 2.5% growth, up from a disappointing 1.4% in the June quarter.

The UK will release its GDP result on Thursday.

The influential German IFO business sentiment index is out tomorrow, Japan sees inflation data on Friday and New Zealand markets are closed today.

In Australia the big data event will be September quarter CPI on Wednesday. This will very much determine RBA policy. The PPI is due on Friday along with new homes sales.

It’s a huge week on the local stock front, dominated by the busiest week for this round of AGMs. There are a handful of production report laggards among the resource sectors while Wesfarmers ((WES)) will release quarterly sales numbers on Wednesday and Woolworths ((WOW)) on Friday.

ResMed ((RMD)) will release quarterly earnings on Wednesday ahead of the full-year result from National Bank ((NAB)) on Thursday and half-year from Macquarie Group ((MQG)) on Friday.

There is also a raft of other quarterly updates and investor days.

Rudi will appear on Sky Business on Tuesday, via Skype, to discuss broker calls around 11.15am. He'll re-appear on Wednesday to host Your Money, Your Call, 8-9.30pm. Then on Thursday he'll be in the studio, 12.30-2.30pm. On Friday, he'll close the week with another Skype-cross to discuss broker calls, probably around 11.05am.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

For further global economic release dates and local company events please refer to the FNArena Calendar.

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