ASX 200 fell 188 points to 6407 as selling rolled through the day. US futures up 106 points. Wholesale selling from the off this morning, escalated after the jobs data came in as expected. Miners and banks bore the brunt of the sell off with high PE stocks under the pump too. CBA dropped 3%, MFG fell another 8.2% having timed its placement to perfection. CSL bled 3.2% and MQG dropped 3.3%. BHP and the other miners stumbled with the big Aussie down 2.7% and FMG down 0.8%. Gold miners were better but not remarkably so. Caution there as well. In corporate news, TLS was ok and only fell 1.8%, QBE surprised to the upside, not a phrase you hear often and fell 1.1%. SUL also did well up 4.1% and TWE popped corks up 2.2%. ORA was canned down 15.9%, BKL underwhelmed citing ‘challenges’ down 14.8% and CWY fell 13.9% as it looks like costs are rising as countries close recycling depots. IVC slipped 7.9% as you couldn’t count on death today. In economic news, the unemployment rate was steady at 5.2% with 41,100 jobs created in July. 34500 were full time. The AUD was steady with action confined to equities and bonds. The US ten -year yield has broken below 2% and the Aussie ten year is now yielding 0.89% down 5bps. Asian markets were hit although HK managed to eke out a small gain. Japan fell % and China down %.

Todays Highlights

• ASX 200 falls 188 points to 6407. Strong volume.
• High 6568 Low 6406.
• Jobs data fails to inspire.
• Across the board losses.
• Gold miners bright spot.
• Results a side show today.
• US 30-year bond breaks 2% for first time ever.
• AUD steady at 67.80c
• Aussie gold jumps to $2242
• Bitcoin slips to $9721
• US futures up 96.
• Asian markets weaker with Japan down 1.40% and China down 0.80%

STOCKS

• SUL +4.15% good set of numbers.
• ADT +4.55% typical. One of the few to rally.
• GOR +4.52% Gruyere update.
• EVN +1.55% ups dividend by 50%.
• ORA -15.94% canned on results
• TWE +2.17% results cheer
• PLS -8.74% profit taking after bounce yesterday.
• IVC -7.89% results
• MFG -8.23% placement weighs.
• BIN -8.08% costs of disposal rising ask CWY -13.87%
• BBN +6.58% pregnant with results.
• MCP +6.70% knives sharpened.
• IPH +2.25% takeover complete.
• Speculative stock of the day: Hardly surprising. No stand outs.
• Biggest Risers: GOR, SUL, GMA, TWE, SLR and SGF.
• Biggest Falls: ORA, BKL, CWY, PLS, MFG, BIN and IVC.

TODAY

• ASX (ASX) –2.74% report FY underlying NPAT of $492.0m, slightly below expectations of $493.9m. Revenue also came in below expectations at $863.8m (vs $867.1m), as did adjusted EBITDA at $649.0m (vs $653.5m). A final dividend of 114.3c, as well as a 129.1c special dividend was announced.
• Blackmores (BKL) -14.85% report FY underlying NPAT of $55m, below expectations of $59.5m. FY revenue came in at $609.5m, well below expectations of $679.7m. EBITDA also missed expectations at $91.4m (vs $99.2m). A fully franked final dividend of 70c a share has been announced. The company expects challenging trading conditions to continue through H1 FY20 and sees that H1 profit will subsequently be below the prior corresponding period. H1 FY20 is expected to experience an increase in operational efficiencies thanks to the execution of business improvement initiatives.
• Breville Group (BRG) -6.45% report FY NPAT of $67.4m, mildly ahead of $67.2m expectations. Revenue of $760.0m was ahead of the expected $745.0m, as was EBITDA of $114.0m (vs $112.7m). A 60% franked final dividend of 18.5c was announced.
• Cleanaway Waste Management (CWY) -13.87% report FY underlying NPATA of $151.2m, exceeding expectations of $100.8m. Revenue came in slightly below expectations at $2.28bn (vs $2.29bn), as did adjusted EBITDA at $61.6m (vs $465.7m). NPAT of $140.0m beat expectations of $137.0m. A fully franked final dividend of 1.90c was announced. The company expects that all segments will deliver earnings growth in FY20, and that increased costs and pricing variability from China’s national sword policy will be mitigated by ongoing price increases. FY20 EBITDA growth is predicted to moderate slightly from current market expectations, excluding the $35-45m positive impact of AASB 16.
• Evolution Mining (EVN) +1.55% report FY underlying NPAT of $218.2m, short of expectations of $220.9m. Revenue came in as expected at $1.51bn, while EBITDA fell slightly short at $730.3m (vs $732.7m). NPAT of $218.2m beat expectations of $213m. A fully franked final dividend of 6c was announced. Management said the company remains focused on keeping costs low to make the most of the high current gold price.
• InvoCare (IVC) -7.89% report H1 operating earnings after tax of $22.3m, below expectations of $26.1m. Operating sales revenue for the half also came in below expectations at $241.5m, as did operating EBITDA at $62.8m. A fully franked interim dividend of 17.5c was announced. The company did not provide full-year guidance due to fluctuations in the number of deaths in the critical winter trading period.
• QBE Insurance (QBE) –1.08% Report H1 cash NPAT of $520m, up 35% from a year ago. Statutory NPAT of $463m missed expectations of $478.8m. Gross written premium (GWP) of $7.64bn was below last years figure of $7.89bn, while net earned premium of $5.67bn was also lower than last years $5.84bn. The insurance profit margin rose 0.5% up to 8.7%, while the combined operating ratio was as expected at 95.2%. A 60% franked interim dividend of 25c has been announced. The company has maintained its 2019 targets for a combined operating ratio of 94.5-96.5% and an investment return of 3.00-3.50%.
• Super Retail Group (SUL) +4.15% report FY NPAT of $152.5m, slightly ahead of expectations of $149.2m. Revenue for the period came in marginally below expectations at $2.71bn (vs $2.72bn). Segment EBIT was reported at $228.2m and a final dividend of 28.5c has been announced. The company said that trading conditions have been subdued in the first 6 weeks of the financial year. Like for like sales growth has been seen in Supercheap Auto (+3%), Rebel (+2%) and BCF (+5%), while Macpac sales fell 3%. The group sees 2019/20 capital expenditure will be $85-90m and expects implementation of the proposed new enterprise agreement, if approved, will have a one-off incremental EBITDA impact of approximately -$9m in its first year.
• Sydney Airport (SYD) –3.35% report H1 EBITDA of $649.2m, slightly ahead of expectations of $648.1m. Net operating receipts for the period rose 4/8% on year to $431.2m and statutory NPAT came in at $17.3m. The company reaffirmed FY dividend guidance of 39c.
• Treasury Wine Estates (TWE) +2.17% reports FY underlying NPAT of $433.8m vs $438.7m expected. Net sales revenue came in at $2.83bn vs $2.85bn expected. EBITS $662.7m vs $530.2m a year ago. Final dividend of 20cps (fully franked). The results look like a slight miss on the whole, and the guidance of not overly encouraging; the company reiterated guidance of approximately 15-20% reported EBITS growth, with underlying cash conversion to be broadly in line with FY19.
• Telstra (TLS) –1.78% reports FY EBITDA ex-restructuring $9.4bn vs guidance $8.7-9.4bn. Revenue came in at $27.81bn vs guidance of $26.2-28.1bn. Net one-off NBN receipts less NBN net cost to connect $1.6bn vs guidance $1.5-1.7bn. Capex $4.1bn vs guidance $3.9-4.4bn. Final dividend 5cps, plus a 3cps final special.
• Whitehaven Coal (WHC) -3.15% report FY NPAT of $564.9m ex-items, above expectations of $537.4m. Revenue came in as expected at $2.48bn, while adjusted EBITDA was slightly ahead of expectations at $1.04bn (vs $1.00bn). Unit costs averaged out to $67/t for the FY. The board has proposed to pay a 30c dividend made up of a 50% franked ordinary dividend of 13c and an unfranked special dividend of 17c.
• Woodside Petroleum (WPL) –6.73% report H1 NPAT of $419m, down 22.6% from a year ago. Revenue for the period came in slightly above estimates at $2.26bn (vs $2.25bn), while free cash flow (FCF) is up 123% on last year. A fully franked interim dividend of US$0.36 was announced. The company advised they are on track to reach targeted annual production of approximately 100m barrels of oil equivalent in 2020. FY19 investment expenditure guidance has been revised down to $1.45-1.55bn from $1.6-1.7bn.
• Xero (XRO) -3.48% repeats FY20 free cash flow guidance at their AGM. The company expects free cash flow in the financial year to 31 March 2020 to be a similar proportion of total operating revenue to that reported one year prior.

ECONOMIC NEWS

• The Deputy Governor, Guy Debelle warned of ‘self-fulfilling downturn’ in a speech today. He also questioned whether the yield inversion offers a strong signal and suggested that Australia will eventually suffer from trade war. CBA now expecting RBA to cut to 0.5% by February 2020.
• Australia’s trend unemployment rate increased in July 2019 to 5.3% from 5.2% in June. The trend participation rate increased further to 66.1%.

TREND ESTIMATES

• Employment increased 24,600 to 12,915,200 persons. Full-time employment increased 15,100 to 8,849,500 persons and part-time employment increased 9,600 to 4,065,700 persons.
• Unemployment increased 6,600 to 715,600 persons.
• Unemployment rate increased by less than 0.1 pts to 5.3%.
• Participation rate increased 0.1 pts to 66.1%.
• Monthly hours worked in all jobs increased 0.5m hours to 1,776.6m hours.

• The average weekly ordinary time earnings for full-time adults in Australia in May 2019 was $1,634 (trend) according to the ABS.

BOND MARKETS

• 2-Year bond yields unchanged at 0.72%
• 5-Year yields down 1bps to 0.66%
• 10-Year yields collapsed 5bps to 0.89%

US 30-year bond breaks the crucial 2% level.

ASIAN NEWS

• In China, New-home prices, excluding government-subsidised housing, gained 0.59% on average in July from June in 70 major cities.
• Tencent profits up 35% on games growth.
• Protests continue in Hong Kong. Trump wants to chat ‘personally’ to sort it out. Easy fix. Just sack Carrie Lam and that will defuse the tension.

EUROPEAN AND US NEWS

• European markets set to open slightly higher. Saw the US losses yesterday and taking the cue from US futures.
• Uber skids lower again.
• Goldman Sachs and JP Morgan have been telling clients to buy call options to take advantage of any rebound. One trader took the advice to heart and bought the S&P SPDR 500 ETF $315 -$320 bull spread. JP Morgan still has a 3200 target for the S&P for years end.
• Some say the central banks are out of bullets. This misses the point. The central banks can make their own bullets. They own the bullet making machine. Will never run out.

And finally…………

His request approved, the news photographer quickly used a cell phone to call the local airport to charter a flight. He was told a twin-engine plane would be waiting for him at the airport. Arriving at the airfield, he spotted a plane warming up outside a hanger. He jumped in with his bag, slammed the door shut, and shouted, ‘Let’s go’. The pilot taxied out, swung the plane into the wind and took off.

Once in the air, the photographer instructed the pilot, ‘Fly over the valley and make low passes so I can take pictures of the fires on the hillsides.’

‘Why?’ asked the pilot.

‘Because I’m a photographer for cable news,’ he responded. ‘And I need to get some close up shots.’

The pilot was strangely silent for a moment, finally he stammered, ‘So, what you’re telling me, is… you’re NOT my flight instructor?’

 

Three guys die together in an accident and go to heaven. When they get there, St. Peter says, “We only have one rule here in heaven: Don’t step on the ducks!”
So they enter heaven, and sure enough, there are ducks all over the place. It is almost impossible not to step on a duck, and although they try their best to avoid them, the first guy accidentally steps on one.

Along comes St. Peter with the ugliest woman he has ever seen. St. Peter chains them together and says, “Your punishment for stepping on a duck is to spend eternity chained to the ugly woman!”
The next day, the second guy steps accidentally on a duck, and along comes St. Peter, who doesn’t miss a thing, and with him is another extemely ugly woman. He chains them together with the same admonishment as for the first guy.
The third guy has observed all this and not wanting to be chained for all eternity to an ugly woman, is very, VERY careful where he steps. He manages to go months without stepping on any ducks, but one day St. Peter comes up to him with the most gorgeous woman he has ever laid eyes on: a very tall, tan, curvaceous, sexy blonde. St. Peter chains them together without saying a word.

The guy remarks, “I wonder what I did to deserve being chained to you for all of eternity?”
She says, “I don’t know about you, but I stepped on a duck!”

 

Clarence

XXX