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JP Morgan put out a note yesterday recommending clients to buy Chinese equities. Their rational was premised on seasonality, with a view that the manufacturing PMIs have been far higher in March and April than any other month. The bank expects a 15-20% bounce in the coming weeks and while they are not focusing directly on the A50 index, clearly if there is a big PE-induced move in the MSCI China index this will have strong ramifications for the A50, Hang Seng or H-shares. Deutsche also reiterated its bullish stance on China yesterday, going as far as stating the ‘market’s perception of China is wrong’ and that they expect above 8% growth this year. With credit, trade and inflation data out this week, this index is clearly one to keep on the radar.
Mark Carney is due to speak at 21:30 AEDT in the Bank of England’s Quarterly Inflation Report and the question traders are asking is whether Governor Carney will push back, or even the current forward guidance the bank currently has with regards to raising interest rates. Given the slack in the economy there are many who feel this is a reality and thus we could see sterling weaken if this plays out. I am not sure this will however and feel there is an above 50% chance they leave the guidance as it is (i.e. to raise rates when unemployment hits 7%), although Mr Carney could offset this with dovish narrative. Either way it will be an interesting day for sterling.
It was a cracking day for holders of banks yesterday, with ANZ hitting the market with a strong trading update. CBA report 1H14 earnings this morning and the market expects cash earnings A$4.17 billion (up from A$3.75 billion in 1H13). The dividend is expected at A$1.81, with the market expecting anywhere between A$1.74 to A$1.84). Net interest margins will be subdued on the year at 2.14%. Traders are keen to look out for cost pressures and a continuation of modest bad debt charges.
UPDATE: CBA results are out:
- Cash profit: $4.268 billion
- EPS: $2.64
- Dividend: $1.83
CSL report earnings this morning and the market expects a 9% increase in sales and EDITDA. NPAT profit is expected to come out at $683 million, while the pharma giant is likely to detail a dividend of 55c. It’s not cheap on 22x forward PE, however it hasn’t been cheap for some time and traders have been happy to pay up for the growth. A good result, backed by guidance that is unchanged from its October update of 10% constant currency NPAT growth, could see the stock look to test the recent high of A$71.20.