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The benign result of the first round of the French elections has triggered a “risk on” relief rally in global financial markets.
As such, Gold opened the Asian session down $20.00 at $1265.00 and has steadily recovered as the reality of the election result settles into the market.
Technically, Gold is still in an uptrend with the 30-day moving average still below the market at $1256.00. We expect Gold to recover and re-test the April 17th high of $1295.00 in the near-term.
Over the last five trading days, shares of NCM have dropped close to $2.00.
The lower price of Gold combined with the closure of the Cadia mine has pushed the stock down into the buy zone of $23.20; still above the 30-day moving average at $23.00.
We expect both the price of Gold and shares of NCM to rebound and trade higher over the medium-term. Investors looking to profit from higher Gold prices can also look at the QAU BetaShares Gold ETF.
RMD will report their 3QFY17 results on 27th April. Early success of the AirFit 20 series should help to underpin year-on-year underlying earnings growth 15%+ to $US$520m.
FY18 we expect revenue of US$2.3b, EBIT US$580m, (from US$520in FY17), EPS US$3.10 and DPS US$1.45, placing the stock on a forward yeild of 2.1%
We like RMD’s growth outlook and therefore we’re encouraged to buy RMD ahead of the result and to add to the position on price retracements.
To help enhance the yield, we’re selling out-of-money call options, allowing for reasonable capital growth whilst at the same time increasing the cash flow from the dividend and call option income to over 10% p/a.
On 2nd May, ANZ will report their half-year earnings. The market is expecting a net profit of around $3.7b and DPS for the half year of $0.80.
4th May, NAB will report their half-year earnings. Net profit should be around $3.4b and DPS of $1.00.
5th May, Macquarie Bank reports. Net profit is expected to be similar to last year at $2.15b and DPS of $2.52
8th May, WBC report their half-year result. Net profit should be $4b and DPS $0.95
On average, the market is looking for approximately 3% underlying EPS growth among the banks and dividends to remain steady, or the same as the previous 12 months.
CCL downgraded its outlook for 1H17 due to weakness in the Australian beverage performance.
CCL expects underlying NPAT will decline in 1H17 and expects FY17 NPAT to be in line with FY16 at around $420m
If we assume no earnings growth into FY18 and a continuation of the $0.45 cent per year dividend, it places the stock on a forward yield of 4.6%.
FY18 revenue $5.2b, EBIT $680m & EPS $0.54.
The XJO is now in the early stages of a new minor low structure.
The following charts of Dow Jones’ large caps General Electric and JP Morgan, provide an interesting technical perspective of one of the world’s largest industrial conglomerates and one of America’s largest financial institutions.
GE reported late in the week and at first glance the headline number looked okay, but after digging deeper the free cash flow provided a concern and the stock sold off.
In the case of JP Morgan and other US banks, we’ve watched their share prices sell-off from the March highs as the long end of the yield curve flattens. The implication for banks is, a flattening yield curve will reduce their net interest margins.
US banks have now retraced on average 10%+ from their recent highs.
By the time the ASX starts trading on Monday, the results of the first round of the French Presidential election should be confirmed.
At 4pm Sydney time today, French citizens will begin casting their ballots in what has been one of the most contentious elections in its history, and where the future direction of the European Union could be in the balance.
From a market volatility perspective, the most positive result would be a large turnout for centrist Emmanuel Macron against any of the other three leading candidates.
The worst case scenario for the markets would be if Mr Macron doesn’t get enough votes to qualify for the second round of voting scheduled for May 7th.
Current polling shows that the most likely outcome will be Mr Macron running against the anti-EU candidate, Marine Le Pen, in the second round of voting.
In this case, the market reaction will be determined by the size of the margin between these two candidates.
US earnings season will go into full swing next week with several DOW components and high-capitalization S&P 500 companies reporting Q1 earnings.
Thus far, the results have been mixed with IBM missing badly and forward guidance on the major US banks showing concerns for future revenue growth.
The chart below shows that the expectations of S&P earnings, relative to the current pricing of the S&P 500 index, are very much out of line.
If next week’s earnings reports don’t exceed expectations, we could see further downside range extension on the SP 500 index, which could pressure the XJO index lower.
We have been looking at the May 5800 XJO puts as a short-term portfolio hedging instrument for a move lower in the local market.
We have also been buying the BetaShare BBOZ inverse exchange traded fund. Shares in BBOZ gain value as the local market trades lower.
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