Morning Market Update - 10 August 2018

Pre-Open Data

 International Market vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – US – Initial Jobless Claims fell 6,000 to 213,000 for the week ended August 4.
  • Thursday – US – Producer Price Index was unchanged in July for the first time in seven months, as a modest increase in the cost of goods was offset by a drop in services.
  • Friday – UK – Gross Domestic Product
  • Friday – US – Consumer Price Index

Australian Market

S&P ASX 200 Last 12 Months

The ASX 200 gained 0.47% yesterday, led by gains in the Consumer Discretionary sector, in a busy day of company reporting.

AGL Energy (AGL) released FY18 results yesterday, reporting a 1.8% increase in revenue to $12.8bn and a 28% increase in underlying NPAT to $1,023m, as strong Wholesale Markets growth offset weakness in Customer Markets. AGL announced a full year dividend $1.17, up 28% from last year. AGL guided for FY19 underlying NPAT of $970-1,070m, expecting Wholesale Markets growth to peak as electricity market prices begin to decline. AGL declined 4.1% to close at $21.11.

Suncorp (SUN) also released its FY18 earnings, reporting a 5.0% decline in cash EPS, but a strong 2H18 earnings uplift of 34%. SUN announced the sale of its Life business to TAL Dai-ichi for $725m and stated that ~$600m will be returned to shareholders in FY19. A final dividend of $0.40 was announced, along with a special dividend of $0.08, taking the total annual dividend to $0.81. SUN gained 4.7% to close at $15.70.

Magellan Financial Group (MFG), reported a 29% increase in average funds under management to $59.0bn and a 36% increase in underlying EPS to $1.55. The company announced a full year dividend of $1.35. MFG gained 14.3% to close at $27.60.

The Australian futures market points to a 0.16% rise today.

Overseas Market 

US share markets were mixed overnight; the Dow Jones lost 0.29% and the S&P 500 gave up 0.14%, but the NASDAQ bucked the trend eking out a 0.04% gain.

European share markets were also mixed. The UK’s FTSE 100 lost 0.45%, while the German DAX rallied 0.34% and the broad based STOXX Europe 600 ended the session 0.09% higher.

CNIS Perspective 

We have noticed of late the significant fall in the level of home loans extended to investors, which is the result of regulatory changes imposed on lenders by Australian Prudential Regulation Authority.

This should ensure investors aren’t borrowing excessively under the lower repayment obligations of interest only loans, often favoured by investors. With a cap on the level of more affordable interest only loans advanced, the balance of loans extended are therefore made on the more expensive principal and interest (P&I) basis.

What will be interesting to monitor over coming years is the impact the move to the higher repayment P&I loans has on the rate of delinquent loans and on the broader economy, as less cash will be available to be spent elsewhere.

The graph offset shows the Interest Only mortgages outstanding at December 2017, and how they fall off over coming years.

Interest only period expiry - as at December 2017

Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.


The material contained in this publication is in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter.  Persons should not act or rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances.  Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication. Cutcher & Neale Investment Services Pty Limited ABN 38 107 536 783 is a Corporate Authorised Representative of Cutcher & Neale Financial Services Pty Ltd ABN 22 160 682 879 AFSL 433814


Topics: CNIS, ASX, Dow Jones, Australian Market, international markets

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