Macquarie, A2 lead shares higher

The n sharemarket rose on Monday, lifted by Macquarie Group’s upbeat trading update and the performance of commodity producers.
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The S&P/ASX 200 Index advanced 40 points to 5713.1, up 0.7 per cent led by gains for Galaxy Resources, up 6.8 per cent, and Orocobre, up 4.2 per cent.

Futures indicated that Wall Street would lift at the opening bell after US stocks were sold-off on Friday in the grip of Hurricane Irma, whose economic toll is now thought to be less than feared.

The n dollar was trading at US80.55??, falling slightly as the US dollar recovered.

Macquarie, which rose 3 per cent to $85.15, expects stronger performance fees to support its guidance for its first-half result to be “up” year-on-year and “broadly in line” with the second-half of 2016-17. The investment bank reiterated that full-year earnings would be “in line”.

The A2 Milk Company was the other stock to provide a more bullish outlook, telling the market that it has been evaluating capital management alternatives in relation to its promised on-market buyback, and “open to a special dividend” if conditions stay favourable. The dairy business, which rallied 4.3 per cent to $5.53, will aim to provide a trading update in November.

Bank stocks were untroubled by research from UBS which finds that the amount of “liar loans”, where borrowers purposely underestimate their living expenses, has escalated to $500 billion.

Mortgage applicants also over-stated income and assets and understated loans, the report found, suggesting prudential regulation has not helped underwriting standards. Commonwealth Bank of rose 1.4 per cent to $74.26; Westpac Banking Corp 1.7 per cent to $31.33; ANZ Banking Group 2.2 per cent to $29.48; and National Bank 1.7 per cent to $30.52.

A number of stocks, including Retail Food Group and Sandfire Resources, traded without the right to their final dividends on Monday. Oil supply trends

US onshore production is almost back to July 2015’s record level of 9.6 million barrels of oil per day, according to Shaw and Partners, which finds that the rig count may be levelling off and some producers have lowered production guidance in their latest results.

But that is only aspect of the supply side. Compliance with OPEC’s cuts has been slackening having been “unusually high”, and Saudi export volumes are anticipated to reduce ahead of the state-backed Aramco float. Further, production in China, West Africa, Mexico and the North Sea is flat or in decline. PBOC relaxes macropru

The People’s Bank of China is reducing the reserve requirement for trading yuan forwards to zero from 20 per cent, according to ANZ’s currency strategists. The old 20 per cent requirement was a hangover from 2015, when authorities were trying to contain currency depreciation. It was a fairly effective means of weeding out speculative shorts in onshore traded yuan. The rally in renminbi means there is no need for such disincentives, and ANZ questions whether “the authorities may now be seeking to slow down yuan strength”. It should also encourage the adoption of currency hedges. Pumped up

The destruction left behind by Harvey and now Irma will inject volatility into US economic data. Following Harvey, RBC’s near-term consumer price inflation is rising “significantly” because of the jump in gasoline prices, which are more than 14 per cent above their August lows. RBC’s US economists factor in “robust” but transitory rises for the September CPI prints. That volatility will also show up in the jobless claims data but much of the spike should be reversed in the following weeks. TPG downgraded

UBS has questioned whether TPG Telecom’s ability to continually win market share has run its course as the NBN rollout evolves and following its completion of the iiNet acquisition. It could be that TPG has maintained its metropolitan market share but the extension of the NBN to regional areas, where TPG is not dominant, has skewed the broader picture at TPG’s expense. The broker downgrades its earnings per share estimates ahead of TPG’s 2016-17 results, lowering 2017-18 and 2018-19 by 5 per cent to 9 per cent. Stockwatch: Vocus Group

JPMorgan has upgraded its recommendation to “overweight” and finds Vocus is now its preferred stock in the telco sector on prospects for low-to-mid single digit earnings growth medium-term, ahead of Telstra and TPG. The broker’s bullish view comes only after it was able to mount confidence in the company’s forecasts after accounting revisions and “reset” expectations. On 2017-18 earnings estimates and using peer multiples for the consumer and corporate aspects of the business, its sum-of-the-parts valuation estimates on Vocus range from $2.78 a share to $3.73 a share with a mid-point of $3.26. Risks to its view include lower margins, increased competition, and further accounting “anomalies”. JPMorgan’s Vocus price target is $3.

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