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Global Equities Roundup: Market Talk

5 Mar 2017 11:04 pm

2304 GMT [Dow Jones] For most of this year, investors piled into currencies of commodities exporters like Australia or Brazil, as prices rose for everything from copper to wheat. Now, many of those rallies are slowing or reversing on renewed signs of U.S. dollar strength. Many currency investors are shifting to more creative trades. A current favorite: AUD/NZD. Because global growth is likely to be driven by investments in infrastructure, such as those promised by U.S. President Donald Trump, Australia "will be a stronger beneficiary...compared to New Zealand," says Nader Naeimi, a Sydney-based portfolio manager at AMP Capital, which manages more than 165 billion Australian dollars (US$124.95 billion). AUD/USD was last 1.0793. (rachel.pannett@wsj.com; @rachelpannett)

2259 GMT [Dow Jones] It's a well established fact that the Reserve Bank of Australia encourages a glass-half-full view of the economy at all cost. Tuesday will see the RBA's board gather to lunch and debate interest rate settings. To add some cheer to the board's discussion will be the recent news of a GDP surge of 1.1% in 4Q on-quarter. J.P. Morgan says the RBA's February Statement on Monetary Policy revealed an implicit staff forecast for 0.8% on-quarter GDP growth, so "the tone of the remarks on the economy need not deviate from the optimistic note struck in the February statement." Still, J.P. Morgan expects some RBA caution that the recent pace of consumer spending will be sustained, given that the staff assumes that households will be held back by elevated debt levels. (james.glynn@wsj.com; Twitter @JamesGlynnWSJ)

2144 GMT [Dow Jones] Shares in infant-formula company Bellamy's, in the midst of a restructuring amid falling demand from Chinese consumers, are still trading at multiples broadly comparable to its peer group, Bell Potter analysts say. The company recently reported that net profit in the fiscal first half tumbled nearly 50% and both its CEO and chairman recently left their roles. "Progress appears to be made on re-engineering the supply chain, but at current prices we see better value elsewhere," Bell Potter says. Bell Potter has a hold rating on the shares with a target price of A$4.90, compared to Friday's close of A$4.32. (mike.cherney@wsj.com; @Mike_Cherney)

2142 GMT [Dow Jones] Deposits likely remain a headwind to the margins of Australia's big banks, but trends over the last month were positive and continued to show easing pressures, Deutsche Bank says. It notes short-term term deposit spreads improved for the majors, with a 3 basis points decrease on average. In the medium-term space spreads improved marginally, by 1 point on average, while online saver spreads and reward-saver spreads also improved for the banks, it says. (robb.stewart@wsj.com; Twitter: @RobbMStewart)

2241 GMT [Dow Jones] South32 (S32.AU) shares don't appear to be factoring in any upside in prices for its main commodities from current levels, although they stand to benefit from Chinese policy decisions including proposed winter supply cuts on aluminum and alumina output, Macquarie argues. The investment bank notes the shares are trading at a discount to its peers on EV/ebitda multiples, even under a spot-price scenario that factors in iron ore above $90/ton. Last at A$2.70, shares rallied 9.8% last week but remain down 1.8% year-to-date. (robb.stewart@wsj.com; Twitter: @RobbMStewart)

2214 GMT [Dow Jones] New Zealand building consents for new homes have decreased across most of the country, says Statistics New Zealand. Nationally, the trend for the number of new homes consented fell 15% in the five months to January, after reaching a 12-year high in August 2016. "Most regions appear to have contributed to the recent decrease in residential consents, although Canterbury is the most significant contributor, followed by Auckland," business indicators senior manager Neil Kelly said. (james.glynn@wsj.com; Twitter @JamesGlynnWSJ)

2213 GMT [Dow Jones] Shares of New Zealand-based Synlait Milk (SML.NZ), a supplier for infant-formula maker a2 Milk (ATM.NZ), should benefit after a2 purchased a roughly 8% stake in Synlait. The new position "may provide a floor in the share price near term," analysts at Macquarie say, adding the stock is "looking more attractive on balance of risks and rewards." Macquarie says Chinese infant-formula regulations could move toward requiring a "higher level of ownership over supply chain," which could prompt a2 to increase its Synlait position in the future. Synlait shares jumped 4.5% on Friday to NZ$3.24 after the deal was announced. (mike.cherney@wsj.com; @Mike_Cherney)

2207 GMT [Dow Jones] NZD will be undermined by a 6-8% decrease in dairy prices and a firmer USD this week, says CBA. Dairy prices have peaked because good growing conditions in the key dairying regions has prompted a recovery in production. CBA expects NZD to keep trending lower this week and AUD/NZD to continue to increase. NZD now trades at US$0.7021.(james.glynn@wsj.com; Twitter @JamesGlynnWSJ)

2158 GMT [Dow Jones] Australia's competition regulator says in a report Monday that it is encouraging the government won't provide additional subsidies for publicly traded Sydney Airport to build a new airport in western Sydney. The company has the right to build the facility, but would like more financial support from the government. The Australian Competition & Consumer Commission, however, says a new, independent airport would benefit airlines and consumers, while a common owner of the two airports "would have an incentive to restrict investment and delay the new airport in order to maximize returns from its existing assets." If Sydney Airport declines to build the new airport, the government can develop the airport itself. (mike.cherney@wsj.com; @Mike_Cherney)

2155 GMT [Dow Jones] AUD/USD may receive some short term support following the RBA's policy meeting on Tuesday and news over the weekend that China's government is strongly committed to infrastructure investment in railway, road and water conservation, says CBA. High commodity prices have improved the outlook for Australia's economy and reduced AUD's overvaluation in the RBA's model. "But we still expect a firmer USD to undermine AUD this week," CBA adds. (james.glynn@wsj.com; Twitter @JamesGlynnWSJ)

2134 GMT [Dow Jones] Assuming the Fed delivers a hike as expected this month, the question is what comes next? The big post-election rally in USD was driven by rate expectations, says TD Securities. For all the talk of fiscal stimulus, it is monetary policy doing all of the work for now, it adds. That seems unlikely to change in the short-term. On Feb. 9, President Trump said there would be a "phenomenal" announcement on tax "over the next two or three weeks," but three weeks later nothing concrete has been presented. If monetary policy is going to do the heavy lifting, the question is how much further can it run? TD's U.S. economic surprise index, which is heavier on hard data, has been hovering around zero since late January. "Coupled with fiscal policy uncertainty, we see no reason for the Fed to actively talk up 2018 rate expectations," TD Securities said. (james.glynn@wsj.com; Twitter @JamesGlynnWSJ)

2121 GMT [Dow Jones] Australian shares face a positive start to the week after U.S. stocks steadied on Friday, the dollar pulled back from a five-day rally and crude prices recovered. Futures are pointing to an opening gain of 0.4% for the ASX 200 after it ended Friday at 5729.6, down 0.8% for the day and 0.2% for the week. IG notes BHP Billiton's (BHP.AU) American depositary receipts picked up 1.4%, which suggests a strong start locally, while the rise in oil may see better buying in energy stocks such as Santos (STO.AU) that have had a tough year so far. (robb.stewart@wsj.com; Twitter: @RobbMStewart)

(END) Dow Jones Newswires

March 05, 2017 18:04 ET (23:04 GMT)

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