We should see a slightly weaker start in Australia when the cash market opens. BHP will certainly subtract from sentiment after performing poorly in its London and US listings. Also on the billing we have FMG, CGF, CCL, SEK, WES, MGX, WPL and BXB releasing earnings results.
At 09:30 EAST RBA governor Glenn Stevens delivers his semi-annual testimony, with the market keen to look out for any views on the AUD. A close today above 5600 would be positive and, while the banks could hold up, BHP price action could largely dictate the fate of the broader index given its weighting.
USD/JPY has had good flows and is looking to test the 103 area and top Bollinger band. The 50% retracement from the January sell-off (and subsequent July 30 high) comes in at 103.09, so a New York close above here (07:00 AEST) would be positive.
Overnight we saw strong US housing starts and building permits, which would have arrested some of the concern around vulnerabilities in the housing market. However, traders are now fully focused on the Fed minutes at 04:00 AEST. It’s hard to see these being overtly hawkish given all the narrative of late, but it’s worth remembering the minutes allow the non-voters a chance to have their say, which is not the case in the official statement. Many of the non-voters are calling for short-term rates to rise sooner.
The Tech 100 is on fire right now and trading at the highest level since 2000. Apple is above $100 for the first time since the share split, while Google is also looking to retest the all-time high set in February. Technically the Tech 100 is overbought, but there is real momentum behind the move, with the index closing up five days in a row.
BHP was smashed in London and US trade and if we see a move of 2-3% lower today it could really hold the ASX 200 back, given the stock’s 9% weighting on the market. The key issue was valuation and, with the stock trading at a significant premium to its long-term average, the result needed to blow the lights out – which clearly didn’t materialise. The earnings numbers were slightly softer than expected and the fact no buyback was announced would have upset a few investors. The news about the spinoff was widely known, so was already in the price.
FMG should report earnings around midday, with the briefing likely to be held at 13:30 AEST. The Bloomberg consensus is we’ll see NPAT of $2.706 billion with a final dividend of around 10c being disclosed. The focus of the company has been to pay down debt, but management have suggested that they’ll revert to a 30-40% payout ratio at some point. Traders will be keen to look out for clarity on cost guidance and whether there’s any upside to 2015 shipments.