Bingo Industries fell 43.3 per cent to $1.31 this week after the waste management company cut its profit forecasts by up to 20 per cent, just thee months after reassuring investors a construction downturn wouldn’t hurt its outlook. The company cited the faster-than-expected softening in multi-dwelling residential construction activity across Sydney and Melbourne as key factors behind the downgrade.
Morgan Stanley maintained its underweight rating on Wesfarmers despite the company saying on Thursday it would return $1.1 billion to shareholders via a special dividend on the back of numerous asset sales. Analyst Thomas Kierath said while the special dividend was positive, growth was slowing the fundamentals couldn’t justify buying the stock. «Bunnings and Kmart performance is waning, which is concerning given the relatively high existing margin structures,» he said. «While investors should reward Wesfarmers’ disciplined capital management approach, we argue that with fundamentals deteriorating and no earnings growth the 20 times price to earnings [multiple] is too rich.» Morgan Stanley downgraded its price target on Wesfarmers from $30 to $29.
What moved the market
Australian coal will not be allowed to be imported to China’s Dalian port according to a report from Reuters, quoting a port official. While the port represents just 2 per cent of Australia’s coal exports there is concern the ban could widen. «Markets are justifiably worried that a coal import ban at Dalian customs could spread and become a China-wide rule,» said CBA mining and energy commodities analyst Vivek Dhar in a note on Friday. «[However] we don’t think a Dalian Customs ban or a China-wide ban on Australia coal would be sustainable beyond a few week or months.»
US wheat futures made strong gains on Thursday, alleviating some big falls in the prior four sessions when the price fell almost 8 per cent. Reports that China was offering to spend an additional $US30 billion on US agriculture produce were the major driving factor behind the advance. «The wheat market would be most grateful if China were able to take a large lick of US hard red winter inventories,» said CBA agri commodities strategist Tobin Gorey in a note on Friday. «Whether China’s proposal is any more than just a short-term fillip for a market that was due a bounce anyway is another thing.»
The euro was mixed on Thursday following a similarly mixed Eurozone February Purchasing Managers’ Index (PMI). The manufacturing PMI fell to 49.2 for the month, below expectations of 50.3, hitting its lowest level since 2013 led largely by a slump in Germany. Services and composite PMIs were more positive, rising to 52.3 and 51.4 per cent respectively, and both came in above market expectations. «Bottom line: The prospect of a more dovish ECB monetary policy stance will limit euro upside in the near-term,» said CBA senior currency strategist Elias Haddad.
The Australian dollar was volatile on Thursday night and Friday morning after a report from Reuters said China’s Dalian port would ban Australian coal imports to the end of 2019. While senior Chinese government figures are yet to confirm the report, the reaction from the Aussie was sharp, falling as much as 1.8 per cent from its Thursday high. «A Chinese commerce ministry spokesman said he knew nothing of the news but nevertheless, the Aussie dropped from being comfortably above US71¢ back to below US71¢ now,» said NAB senior economist David De Garis. «Is this the canary in the coal mine or is the market just jumping at shadows?»
William is a UTS journalism graduate and has worked at The Sydney Morning Herald. He now covers markets at The Australian Financial Review and keeps a close eye on IPOs.