Tag Archives: Bonds/Interest Rates

article 3 months old

Australian Corporate Bond Price Tables

PDF file attached.

Corporate bonds offer an alternative to equity investment in providing a fixed “coupon”, or interest payment, unlike equities which pay (or not) non-fixed dividend payments, and a maturity date, unlike equities which are open-ended.

Listed corporate bonds can be traded just as listed shares can be traded. Bonds bought at issue and held to maturity do not offer capital appreciation as an equity can, but assuming no default do not offer downside capital risk either. Pricing is based on market perception of default risk, or “credit risk”, throughout the life of the bond.

Bonds do offer capital risk/reward if traded on the secondary market within the bounds of issue and maturity. Coupon rates are fixed but bond prices fluctuate on perceived changes in credit risk and on changes in prevailing market interest rates.

Note that the attached tables offer three “yield” figures for each issue, being “coupon”, “yield” and “running yield”.

If a bond is purchased at $100 face value and a 5% coupon, and face value is returned at maturity, the running yield is 5% and the yield, or “yield to maturity” is 5%.

If a bond is purchased in the secondary market at greater than $100, the running yield, which is the per annum yield for each year the bond is held, is less than 5% because the coupon is paid on face value. The yield to maturity is also less than the coupon as more than $100 is paid to receive $100 back at maturity.

If a bond is purchased in the secondary market at less than $100, the running yield, which is the per annum yield for each year the bond is held, is more than 5% because the coupon is paid on face value. The yield to maturity is also more than the coupon as less than $100 is paid to receive $100 back at maturity.

Note that if a bond is trading on the secondary market at a price greater than face value the implication is the market believes the bond is less risky than at issue, and if at a lesser price it has become more risky. Bonds trading on yields substantially higher than their coupons thus do not offer a bargain per se, just a higher risk/reward investment. In all cases, bond supply and demand balances will also impact on secondary pricing.

Note also that while most coupons are fixed, the attached table also provides prices for capital indexed bonds (CIB) and indexed annuity bonds (IAB).

This service is provided for informative purposes only. It is not, and should not be treated as, a solicitation or recommendation to buy corporate bonds. Investors should always consult their financial adviser before acting on any information gleaned from this service. FNArena does not guarantee the accuracy of information provided. Note that while FNArena publishes this table weekly, prices are fluid and potentially changing throughout each trading day. Hence prices tabled may not reflect actual market prices at the time of reading.

FNArena disclaimer

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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.
 

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)

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.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

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.
 

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)

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.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

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.
 

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)

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.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

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.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

article 3 months old

The Overnight Report: Bungling Along

By Greg Peel

The Dow closed down 40 points or 0.2% while the S&P fell 0.1% to 2141 and the Nasdaq fell 0.1%.

Job Shock

The net number of jobs in Australia declined by 9,800 in September and the August number was revised down to a loss of 8,600 jobs from a previously reported 3,900. That’s not great news in itself, but the real shock came on the breakdown of the September numbers.

Full-time jobs fell by a whopping 53,000 – the biggest drop since 2009 – offset by a 43,200 rise in part-time jobs. The increasingly misleading unemployment rate fell to 5.6% from 5.7% but only because participation fell. Underemployment stands at a record 8.7%.

Now, the ABS did warn that the rotation of new group into the survey has distorted the numbers somewhat, given that group had a lower labour intensity than the group rotated out. This group rotation is intended to provide for a more complete picture but only leads to volatility in the results. There is no getting past the fact full-time jobs are on the wane and part-time jobs are rising.

That’s why wage growth is almost non-existent. Earlier this week the RBA governor suggested there would be no change to monetary policy unless one or more of three risks eventuated – the housing bubble burst, the labour market deteriorated and/or inflation remained lower than expected. Well, surely the labour market is deteriorating if more and more workers are forced to take fewer hours than they’d like.

And that plays into low inflation, given the impact on wage growth.

No surprise therefore that the Aussie tanked on yesterday’s numbers. It continued to fall overnight as the US dollar rallied and is down 1.1% over 24 hours to US$0.7631.

The jobs numbers had no notable effect on the Australian stock market yesterday which, after a bizarre spike and drop on the open probably related to the expiry of October futures, meandered slightly higher and then back down again to the close. As markets around the world await the big global events coming up, the local market is currently trading in alpha mode on individual corporate AGMs and quarterly reports and not going anywhere much index-wise, just as was the case for most of the August result season.

Looking at yesterday’s sector moves there is no discernible macro pattern. The leader on the day was energy (+1.1%) thanks to the stronger oil price, which will probably lead to the downside today on oil’s pullback.

Sideways

The ECB left rates unchanged at its policy meeting last night as expected, but at the subsequent press conference Mario Draghi suggested there was no talk of either extending QE or tapering QE. The central bank will do whatever is deemed necessary as events unfold.

Recently the ECB has chosen its December meeting as the time to make changes which likely relates to the Fed doing the same. Like everyone else, Draghi is no doubt waiting to see what happens with the US election (and the Italian referendum), OPEC and the Fed.

It looks like the forex market was backing a more hawkish outcome because the euro took a dive after the press conference, sending the US dollar index up 0.4% to 98.30.

The S&P500 has now racked up 79 consecutive days of no move greater and 1% in either direction, since the Brexit plunge-and-bounce. It’s the longest stretch in 21 years. True to form, having risen 40 points on Wednesday night, last night the Dow fell 40 points.

One reason is oil. Having shot up on Wednesday night on inventory data, the WTI price shot back down again last night for no apparent reason. But this can easily be explained by last night’s expiry of the November delivery front month contract.

On the corporate earnings front, the results came thick and fast last night and for the most part they represented beats, with some notable exceptions. Among the Dow components, American Express held onto its 5% aftermarket gain of the night before but insurance company Travelers copped a 6% drop and telco Verizon a 2.5% drop, leading the Dow to underperform the S&P.

This morning’s major aftermarket reporter was Microsoft (Dow), the shares of which are up 6%.

Barring anything unforeseen, there is currently no reason to believe the S&P won’t extend its run of negligible volatility, at least until aforementioned pivotal events play out.

To that end, the general feeling is no one won yesterday’s presidential debate, but then no one lost either. Wall Street continues to assume a Clinton victory, while at the same time citing the Brexit vote as reason not to be completely confident, and fearing the unlikely result of the Democrats taking the House. To do so would require a landslide swing.

Commodities

West Texas crude closed down US95c at US$50.43/bbl. If true to form, it may bounce back tonight in the new December delivery front month contract.

The stronger US dollar appeared to weigh on base metal prices last night, given copper fell 0.5%, aluminium and zinc fell 1% and nickel 2%, while lead rose 1%.

Iron ore rose US40c to US$58.40/t.

The stronger greenback has gold down US$6.60 at US$1262.20/oz.

Today

The SPI Overnight closed down one point.

It’s a quiet 24 hours around the globe data-wise, although Chinese property prices might be interesting.

It’s another busy day for local AGMs, with Insurance Australia Group ((IAG)) and Qantas ((QAN)) the stand-outs while Japara Healthcare ((JHC)) might draw some attention.

Santos ((STO)) will release its quarterly production report.

Rudi will link up with Sky Business today, via Skype, to discuss broker calls at around 11.05am.
 

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article 3 months old

Australian Corporate Bond Price Tables

PDF file attached.

Corporate bonds offer an alternative to equity investment in providing a fixed “coupon”, or interest payment, unlike equities which pay (or not) non-fixed dividend payments, and a maturity date, unlike equities which are open-ended.

Listed corporate bonds can be traded just as listed shares can be traded. Bonds bought at issue and held to maturity do not offer capital appreciation as an equity can, but assuming no default do not offer downside capital risk either. Pricing is based on market perception of default risk, or “credit risk”, throughout the life of the bond.

Bonds do offer capital risk/reward if traded on the secondary market within the bounds of issue and maturity. Coupon rates are fixed but bond prices fluctuate on perceived changes in credit risk and on changes in prevailing market interest rates.

Note that the attached tables offer three “yield” figures for each issue, being “coupon”, “yield” and “running yield”.

If a bond is purchased at $100 face value and a 5% coupon, and face value is returned at maturity, the running yield is 5% and the yield, or “yield to maturity” is 5%.

If a bond is purchased in the secondary market at greater than $100, the running yield, which is the per annum yield for each year the bond is held, is less than 5% because the coupon is paid on face value. The yield to maturity is also less than the coupon as more than $100 is paid to receive $100 back at maturity.

If a bond is purchased in the secondary market at less than $100, the running yield, which is the per annum yield for each year the bond is held, is more than 5% because the coupon is paid on face value. The yield to maturity is also more than the coupon as less than $100 is paid to receive $100 back at maturity.

Note that if a bond is trading on the secondary market at a price greater than face value the implication is the market believes the bond is less risky than at issue, and if at a lesser price it has become more risky. Bonds trading on yields substantially higher than their coupons thus do not offer a bargain per se, just a higher risk/reward investment. In all cases, bond supply and demand balances will also impact on secondary pricing.

Note also that while most coupons are fixed, the attached table also provides prices for capital indexed bonds (CIB) and indexed annuity bonds (IAB).

This service is provided for informative purposes only. It is not, and should not be treated as, a solicitation or recommendation to buy corporate bonds. Investors should always consult their financial adviser before acting on any information gleaned from this service. FNArena does not guarantee the accuracy of information provided. Note that while FNArena publishes this table weekly, prices are fluid and potentially changing throughout each trading day. Hence prices tabled may not reflect actual market prices at the time of reading.

FNArena disclaimer

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article 3 months old

The Overnight Report: Guarded Optimism

By Greg Peel

The Dow closed up 40 points or 0.2% while the S&P rose 0.2% to 2144 and the Nasdaq was flat.

Fun and Games

The local gaming sector has been very much in the spotlight this week. We saw the casino operators tumble earlier in the week on the news of the arrest of Crown Resorts ((CWN)) employees in China and despite a big initial plunge, and calls of oversold from analysts, Crown and its peers have seen ongoing weakness.

On the flipside yesterday, renewed talk of a merger between the old school tote betting agencies had Tatts ((TTS)) shares up 16% and Tabcorp ((TAH)) up 3% to net out to a leading 1.7% gain for consumer discretionary yesterday.

Otherwise most sector moves were fairly muted in a session that saw a bumpy rally from the open before plateauing out in the afternoon.

There was little excitement generated by China. September quarter GDP came in at 6.7% annual growth as expected and the September retail sales and fixed asset investment numbers were largely as forecast. Industrial production was slightly disappointing.

Perhaps of more interest currently is the Aussie dollar, which despite a Fed December rate hike now being widely expected just continues to track north. It’s up another 0.7% this morning at US$0.7717 which puts it around a technical level that suggests a break-up. We could be at 80 very soon.

The new RBA governor hasn’t helped by talking down the chance of another rate cut but this time around the stronger Aussie is not as ominous as it has been – not as much of a “complication” for the central bank. For this time the Aussie’s strength lends itself not to US dollar weakness thanks to a dovish Fed, crimping Australian economic growth, but to recoveries in the prices of oil, iron ore and especially coal.

So we’re seeing the Aussie run up for the right reasons, being expected improvement in the terms of trade as higher commodity prices flow through with their usual delivery lag.

So long as the Aussie doesn’t run so high as to kill off the revival in the local tourism. Tourism has been running second to a now wobbly housing sector in providing the “non-mining” offset to maintain Australia’s net positive growth. Australia now has to battle the UK as a preferred destination, where as long as you’re not a local you no longer need to mortgage your house to catch a Black Cab.

More Earnings Surprise

As the reports continue to flow, the surprise continues to be to the upside in this US earnings season.

Last night Morgan Stanley posted the last of the Big Bank reports and as has been the case with all of its peers, posted a beat. Smaller regional US banks have also been trotting out better than expected numbers. And last night was the turn of the first of the big oil services companies to report – companies that have suffered greatly through the oil price plunge just as has been the case for their peers downunder.

They, too, posted earnings beats. And it’s not just earnings. The seemingly entrenched post-GFC trend of lower revenues looks like it might be turning around. Net S&P500 earnings growth has swung to the positive at a 0.2% run-rate when an overall decline of 2% was forecast. Revenues are up a net 2.5%.

The other major driver on Wall Street last night was yet again oil. The Saudis continue to talk up the willingness of OPEC and non-OPEC members to join in a production freeze but in the meantime, the tipsters had expected a small rise in US crude inventories last week but instead there was a large drawdown. Thus WTI is up 2%.

Talk now is of oil trading in a US$50-60/bbl range going forward rather than the US$40-50/bbl range assumed previously. That’s enough to ensure positive cash flow for many a global oil & gas producer.

Yet despite an air of greater confidence creeping in, Wall Street is struggling to get excited. Dow up 40 is really neither here nor there when earnings reports are surprising and oil is looking strong.

Aside from calls of over-stretched valuations, Wall Street is no doubt looking ahead to all the near-term uncertainties – the election, the OPEC meeting, the Fed meeting. Not a great time to be rushing in if things don’t turn out as hoped.

And it is October after all. On that note, Happy Anniversary to those who remember.

This morning’s aftermarket earnings reports included American Express (Dow), the shares of which are currently up 5% and EBay, down 6%, and Barbie’s thrilled with a 5% jump for Mattel.

Commodities

West Texas crude is up US98c at US$51.38/bbl.

The trend (or lack thereof) continues for base metals. Aluminium and nickel are down 1% and lead and zinc are up 1%.

Iron ore was unchanged at US$58.00/t.

The US dollar index was again flat, at 97.88, but gold continues to claw its way back. It’s up US$6.80 at US$1268.80/oz.

Today

The SPI Overnight closed up 7 points.

Today sees the local jobs lottery and just after that release, there’s another one of those debates. The last, thank God.

There hasn’t been much discussion about it but the ECB holds a policy meeting tonight. Taper talk?

It’s a very busy day on the local corporate calendar today.

All of Fortescue Metals ((FMG)), Rio Tinto ((RIO)), South32 ((S32)) and Woodside Petroleum ((WPL)) post quarterly production reports.

Brambles ((BXB)) and Westfield ((WFD)) are among those providing quarterly updates.

Amcor ((AMC)) and, coincidentally, Crown Resorts are among those holding AGMs followed by BHP Billiton ((BHP)) tonight in London.

Ten Network ((TEN)) will release its earnings result.

Rudi will travel to Macquarie Park to appear on Sky Business, 12.30-2.30pm.
 

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)

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: Earnings Revival

By Greg Peel

The Dow closed up 75 points or 0.4% while the S&P gained 0.6% to 2139 as the Nasdaq jumped 0.9%.

5400 Regained

After a choppy start yesterday, the ASX200 ultimately settled into a positive trend to take the index back over the 5400 level. Outside of macro influences, alpha moves were prominent as the AGM season hots up.

To that end we saw a solid update on annuity sales from Challenger ((CGF)) which helped the financials index to a 0.4% gain on the day. A jump in the iron ore price helped materials to a 0.5% gain while bargain hunting continued in the heavily sold off utilities sector, which rose 1.7%.

Ahead of the open yesterday, Philip Lowe made his maiden speech as RBA governor. The upshot is there is not going to be another rate cut if things continue to trend the way they are. But there could be another cut if inflation stays lower for longer, the labour market deteriorates and/or the housing bubble bursts.

The minutes of the September RBA meeting were also out yesterday but the governor rather gazumped those ahead of the release. When it comes to GDP, a big difference between assumptions for the September quarter and forecasts from three to six months ago is that further weakness in oil, iron ore and coal prices that were previously expected have given way to both oil and iron ore stabilising at better levels and coal going through the roof.

The GDP in focus today will be that of China. China’s September quarter result will be released mid-session along with monthly industrial production, retail sales and fixed asset investment numbers. Forecasts are for GDP to remain steady at 6.7%. As for the monthly data, they’ve been all over the shop lately so nothing would surprise.

Change of Heart

Net earnings growth for the S&P500 companies in the US has been negative for the past several quarters despite new highs being hit in the index, which just goes to show what impact central bank policy can have.

The trend has been for analysts to mark down their forecasts heading into result season, suggesting numbers in the order of a 6% decline, before results prove to be a bit better but still negative. This quarter was different in that analysts forecast only a 2% decline.

To date, and it’s still early in the season, results have again been better but this time analysts are now talking the possibility of an actual gain in earnings in the order of 2%. Moreover, while earnings have been disappointing over many quarters, revenues have been even more so, suggesting the only source of any earnings growth has been cost cutting.

This time, and again, it’s still early days, it looks like revenues might just beat as well.

Unfamiliar territory. Last night’s earnings winner was Goldman Sachs, which continued the trend of earnings beats from the banks but in very solid fashion. Among other Dow components, United Health was another big winner, offsetting a weak result from IBM. Johnson & Johnson posted a beat but has had a very solid run this year, hence its shares retreated.

It was those couple of drags that had the Dow only gaining 0.4% last night against the S&P’s 0.6%, while on the other side of the fence the 0.9% jump for the Nasdaq was all about Netflix, which held its 19% share price jump from Monday night’s aftermarket.

In this morning’s aftermarket results, Intel (Dow) has disappointed while Yahoo shares are up.

Outside of earnings, Wall Street’s attention last night was on US inflation.

The headline CPI jumped 0.3% in September to mark its biggest move in five months. It was all about the rebound in the oil price. The net fall in the oil price over a year means headline inflation is running at only 1.5%.

Core inflation, ex food & energy, rose only 0.1% in September but is running at 2.3% annual, above the Fed’s supposed 2% threshold. The Fed nevertheless prefers the PCE inflation measure which in August was still under 2%. There’s nothing in last night’s CPI numbers to prevent the Fed hiking in December.

Commodities

West Texas crude traded lower initially last night which meant a shaky start on Wall Street, but published weekly crude inventory forecasts had WTI turning around to be up US50c at US$50.40/bbl. The 50 level continues to be the inflection point ahead of next month’s OPEC meeting.

The spotlight is on coal and iron ore at the moment and while base metal prices have been jumping up and down a lot, they’re not really going anywhere. Prices were again mixed last night, with leading falling over 1% and nickel rising over 1% to mark the only moves over a percent.

Iron ore rose another US20c to US$58.00/t.

The US dollar index is steady at 97.89 but gold has risen US$7.40 to US$1262.00/oz.

The Aussie rose on the RBA governor’s suggestion of no further rate cuts and is up 0.5% at US$0.7662.

Today

The SPI Overnight closed up 13 points or 0.2%.

If the solid early trend in US earnings results continues it is a positive for the global economy. All eyes will today be on China, nevertheless, and the aforementioned GDP and monthly numbers.

BHP Billiton ((BHP)) will release its quarterly production report today while Ansell ((ANN)), Bellamy's ((BAL)) and Origin Energy ((ORG)) feature among several AGMs today.
 

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)

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: Netflicked

By Greg Peel

The Dow closed down 51 points or 0.3% while the S&P lost 0.3% to 2126 and the Nasdaq fell 0.3%.

Heavy is the Head

The ASX200 was actually in the positive late morning yesterday before it took a sharp turn and then just kept on falling. Maybe a big sell order set things off but in a low volume session, clearly there’s not a lot of faith in the upside at present. It seems the market has grown weary, and wary, and technical forecasts have not been supportive of late either.

The big news was the detention of Crown Resorts ((CWN)) staff in China under laws regarding the promotion of gambling, but this was known on the open. Crown shares fell 14% and dragged down fellow gaming stocks and others with a Crown connection, such as Barangaroo developer Lend Lease ((LLC)). Consumer discretionary was the big sector loser on the day with a 2.5% fall.

Investors also went back to shifting out of yield stocks such as telcos, utilities and the banks, but after a strong run the resource sectors were also weaker and in the wash-up, it was really just a sell-the-market session.

There’s a lot hanging over the market between now and Christmas which is quite simply out of investors’ control. At the macro level we have China’s GDP tomorrow, a Fed meeting on November 2, the US election on November 8, the OPEC meeting in late November and the critical Fed meeting in mid-December. For the next few weeks we have US earnings season to provide general direction from Wall Street.

A lot of those events offer largely binary outcomes, which is not the way investors like to play it. At the micro level locally we are heading into AGM season, in which companies typically set or adjust FY17 guidance. This period is second only to earnings season in the potential for sharp alpha moves. And there’s still the matter of bank capital requirements to be resolved at some point.

Stand aside and wait? Perhaps that’s the current thinking.

Sagging

US industrial production rose 0.1% in September having fallen 0.5% in August. The Empire State index showed manufacturing in the New York Fed district contracted at a steeper pace, falling to minus 6.8 from minus 2.0 last month (zero neutral).

Bank of America joined its peers in reporting a beat on earnings but as was the case on Friday, when all of JP Morgan, Wells Fargo and Citigroup reported, the banks couldn’t catch a bid. The feeling is they had already had a good run on Fed rate hike speculation.

Fed vice chair Stanley Fischer added more confusion to the Fed policy debate by suggesting current low interest rates do not threaten US financial stability, noting a number of factors from weak productivity to an ageing population are holding rates back. Rate hike? No rate hike? Who knows?

Monthly production data showed Saudi Arabia and its OPEC peers are still pumping out oil at record rates. This is possibly a last hurrah ahead of actually capping production or it simply makes a mockery of the market – talk up the potential for an agreement, watch the oil price rise, and then produce and sell as much of the stuff as physically possible before the price tanks once more on no agreement.

Put it altogether and it was a soggy day on Wall Street. Plenty to be worried about, nothing to get excited about. But trading was generally lacklustre and the indices tracked sideways all afternoon.

Things changed after the closing bell. In a clash of Old Tech and New Tech, IBM (Dow) shares are down 3% in the aftermarket after Big Blue posted its earnings report, while shares in Netflix are up 19%. Having disappointed at the prior earnings season by missing on domestic subscriber growth guidance, the video streamer this time around astounded with international subscriber growth.

Netflix may only represent a niche in the market and it remains early days in the earnings season, but results like these, from companies of the future rather than the past, provide some confidence going forward.

Commodities

After running up hard on OPEC production cut talk, oil has been drifting quietly lower these past few sessions. WTI is now trading just under the psychological level of US$50/bbl, down US40c at US$49.90/bbl.

The US dollar index has pulled back 0.2% to 97.87 but this has not provided much of a boost for base metals. Aluminium is down 1% and nickel 2% amongst otherwise smallish moves.

But iron ore jumped US$1.00 to US$57.80/lb.

Gold is up a tad at US$1254.60/oz.

The Aussie is up 0.2% at US$0.7625.

Today

After yesterday’s low volume sell-off, the SPI Overnight closed up 3 points.

The minutes of the September RBA meeting are out today but Philip Lowe will also be speaking, which will be more pertinent.

Tonight sees US data on CPI and housing sentiment.

Amidst today’s local corporate action we’ll see quarterly production reports from Oil Search ((OSH)) and Newcrest Mining ((NCM)) while high-flying Cochlear ((COH)) will hold its AGM.
 

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)

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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