Markets Live: ASX set to open higher

Australian packaging giant Amcor will sell off three manufacturing plants in the United Kingdom and Ireland under the terms of the European Union’s approval of the company’s $9 billion takeover of a major competitor. Melbourne-based Amcor, a global manufacturer of flexible and rigid packaging for products including food, drinks and cigarettes, is in the final stages of securing approvals from competition regulators across the world for the buyout of US-based Bemis, and, on Tuesday, announced it had received approval from the European Commission.
«A condition of this approval is an agreement to divest three Bemis plants located in the United Kingdom and Ireland,» the company said.
«Combined these plants generate approximately $US170 million of annual revenue from the sale of flexible packaging for certain healthcare products.
The company said the approval preserved Amcor’s European healthcare packaging business, «which is substantially larger and participates in attractive, high-value end markets».
Under the takeover, which is expected to be completed in the second quarter of 2019, Amcor will become the world’s largest manufacturer of plastic packaging. Amcor runs 200 manufacturing plants in 40 countries while the Wisconsin-based Bemis runs more than 50 plants in 12 countries.
The deal remains subject to regulatory approvals in Brazil and the United States, where the recent US government partial shutdown forced delays to the company’s anticipated timeframe. Amcor shares are 7 cents lower at $14.49 this morning.

Half year profit at Australia’s biggest annuities provider Challenger has been all but eradicated because of market volatility, the company said. Net profit in the six months ended December 31 plunged to just $6.1 million, from $195.4 million in the same period a year earlier. Revenue slumped 20.8 per cent to $893.5 million, from $1.13 billion in the second half of 2018.

Shares are down nearly 3 per cent to $7.60 in early trading. A full story will be online soon.

Pact Group is warning shareholders about a non-cash impairment of between $310 million and $340 million, post tax, in the company’s accounts for the six month period to December 2018. It also announced half-year earnings will be about $110 million and full year earnings between $230 million and $245 million. This is lower than the consensus estimate of $248 million.

«The impairment charges reflect challenging trading conditions and a moderate long-term outlook for the Group’s Australian businesses, resulting in the use of more conservative assumptions regarding growth and discount rates,» the company said in a letter to shareholders.

The impairment will see the packaging assets worth between $90 million and $100 million, and Pact’s goodwill at between $220 million and $240 million. Half year results are due next Thursday, 20 February.

Trading has opened on the ASX and the S&P/200 index is down by nearly 2 points to 6059. Will we hold onto the 6000 level today?

Computershare has started the day down 4.5 per cent to $17.55 and GPT Group is down by 2.5 per cent to $5.96, and Challenger is down 5.7 per cent to $7.38 after this morning’s half year results.

If JB Hi-Fi is the canary in the coal mine for investors attempting to gauge the damage a slow Christmas and a cautious consumer have caused retailer profits, the result the company produced on Monday would have provided some comfort – but only at first glance.

It would be premature to conclude many other retailers will increase profits in the December half by more than 5 per cent as JB Hi-Fi did. In addition, while the JB Hi-Fi stock price initially leapt 7 per cent when the earnings were released – this was in large part due to the half-year profit coming in better than expectations. Basically, the analysts that predict performance thought it would be worse. The second reason for the surge in the share price is that 15 per cent of JB Hi-Fi’s register had been short sold – meaning there was a big bet out there on a poor profit outcome and a fall in share price. The scramble by short sellers to cover their positions initially pushed the shares disproportionately higher.

Read the full column from Elizabeth Knight here


SPI futures up 18 points or 0.3% to 6015 about 4.30am AEDT

AUD -0.3% to 70.66 US cents

On Wall St at 12.33pm: Dow flat S&P 500 +0.1% Nasdaq +0.3%

In New York, BHP flat Rio -0.7% Atlassian +0.8%

In Europe: Stoxx 50 +1% FTSE +0.8% CAC +1.1% DAX +1%

Spot gold -0.6% to $US1309.11 an ounce at 12.32pm New York time

Brent crude -0.8% to $US61.58 a barrel

US oil -1.4% to $US51.96 a barrel

Iron ore +5.9% to $US90.58 a tonne

Dalian iron ore -0.8% to 646.50 yuan

LME aluminium flat at $US1880 a tonne

LME copper -1% to $US6150 a tonne

2-year yield: US 2.49% Australia 1.67%

5-year yield: US 2.47% Australia 1.70%

10-year yield: US 2.65% Australia 2.06% Germany 0.12%

US-Australia 10-year yield gap as of 3.53am AEDT: 59 basis points


It was a day of low activity and mixed results generally across global markets in the last 24 hours. Equities were patchy in their performance, on much lower than average volumes, while a retracing in bonds revealed stable risk sentiment. It hasn’t been so for some time, but yesterday market participants behaved in a classic «Monday» way. There was a lack of a unifying theme to drive market activity in a macro sense, leaving traders to trade off the idiosyncratic stories moving prices region-by-region. For traders, fresh leads are being awaited, to add some semblance of volatility to the market.

The data docket is stacked to the end of the week, so perhaps it’ll be another couple of days of listless trade before global markets really start to reshuffle the deck. Of course, a surprise could ignite some excitement; but naturally that’s inherently unpredictable and difficult to position for. Chinese markets returned to the fray yesterday, adding that lost liquidity from markets. Japan was offline instead, creating some choppy trade in the CHF in very early trade.The reintroduction of Chinese markets may well have soothed the bull’s concerns temporarily. After a week away, during which plenty of market moving events occurred, Chinese traders felt it fitting to ignore the noise and jumped back into stocks to deliver a 1.82 per cent gain for the CSI300 yesterday.

Transurban’s toll revenue jumped 9.3 per cent in the first half of the year, boosting its underlying earnings to $1 billion. However, Net profit after tax fell 56 per cent to $145 million, driven down by an extra $163 million in depreciation and amortisation, mainly relating to the consolidation of Sydney’s M5 West and Melbourne’s CityLink Tulla Widening project.

The toll road giant on Tuesday reported that fees received from its roads — which include the Cross City Tunnel and M5 in Sydney, and Melbourne’s CityLink — grew $167 million to $1.29 billion in the six months to December 31. The company said its underlying earnings before interest, tax, depreciation and amortisation for the half rose 9.8 per cent to $1 billion. Including $308 million of significant items from buying new roads, EBITDA fell 24 per cent to $693 million.

Read the full story from Patrick Hatch here.

Good morning and welcome to today’s Markets Live blog. Your editor today is Lucy Battersby.

This blog is not intended as financial advice.




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