Markets Live: ASX poised to gain

Transurban's interim net profit almost quadrupled to $331 million as the tollroad company benefited from higher revenues in its road development and tolling businesses.

Net profits for the six months to June rose 280 per cent from $88 million a year earlier, aided by favourable movements in net finance costs and non-cash income tax benefits.

Transurban's proportionate earnings before interest, taxation, depreciation and amortisation (EBITDA) - which measure income relative to its ownership stakes in its toll road assets - rose 11.6 per cent to $911 million.

Group proportional EBITDA margins rose to 75.4 per cent from 74.7 per cent a year earlier.

Transurban makes its highest profit margins in Melbourne, where margins run at 88.5 per cent, and Sydney, where margins run at 81.2 per cent.

Group toll revenues rose 9.6 per cent to $1.13 billion, while construction revenues jumped 69 per cent to $462 million.

Toll revenue increases were driven by both traffic growth and higher toll fares.

Average daily traffic growth across all of Transurban's roads in Australia and the US rose 1.4 per cent, although some roads disrupted by construction works.

Jenny Wiggins reports

Australia's central bank on Tuesday cautioned that any pick up in wage growth was likely to be slow and protracted, weighing on household incomes and spending power amid high levels of debt.

Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis said policy makers were a little more confident that wages and inflation would eventually turn higher.

However, Australia still had more spare capacity than other developed countries, meaning it would take longer for wages and inflation to accelerate, Ellis told an economics conference.

"Our forecasts are for wage growth to pick up from here, but not immediately and then only gradually," said Ellis.

The central bank last week forecast underlying inflation would not reach the floor of its 2-3 percent target band until mid-2019, and only quicken to 2.2 percent by the middle of 2020.

That benign outlook reinforced market expectations that any rise in interest rates was also distant, with a first hike not fully priced in until early next year.

Ellis said liaison with firms found many were reluctant to raise prices in the face of fierce competition, so were also reluctant to grant larger wage rises.

Instead many were using other perks to attract and retain staff, including hiring bonuses, extra hours and improved workplace conditions.

The effect was so broad that growth in household incomes in Australia had been much weaker than in many other developed nations.

"If households start to see this weakness in income growth as permanent, they are likely to change their spending patterns in response," said Ellis.

There were already signs consumers were spending less on discretionary items, like travel and eating out. This trend was a particular risk given very high levels of consumer debt, added Ellis.

"Indebtedness households carrying the most debt might feel they have to rein in their spending quite a bit."

- Reuters

Building materials maker Boral said half-yearly net profit rose 13 per cent as it received the first earnings contribution of newly-bought US concrete ingredients maker Headwaters Inc.

Net profit came in at $173 million for the six months to Dec. 31, the company said on Tuesday, compared with $153.4 million last year, slightly missing a Deutsche Bank estimate of $187.4 million.

The company said Headwaters acquisition resulted in savings of $18 million in the first half, adding that the company now expects to exceed the expected $30-35 million savings from the deal to be accrued in full-year results.

Boral doubled its US presence last year with the $1.8 billion purchase of Headwaters, maker of concrete ingredient fly ash, at a time when building and engineering firms jostle for a spot in a vast capital works program promised by President Donald Trump.

On a proforma basis, Boral's North America segment core earnings grew 4.0 per cent to $144 million, including a full period contribution from Headwaters, amid a recovery in the US housing market.

Boral expects continued growth across all businesses in fiscal 2018, including a significant lift in earnings from Boral North America, Chief Executive Officer Mike Kane said.

The company said Boral Australia, the company's biggest segment, is expected to report a high single-digit growth in core earnings for the full-year, on increased infrastructure and non-residential activity.

Boral declared an interim dividend of 12.5 cent per share, up from 12 cents per share declared in the year-ago period.

Total revenue rose to A$2.94 billion from A$2.09 billion last year, Boral said.

- Reuters

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Here's IG Markets' Chris Weston on key market developments:

Aussie SPI futures are sitting up 22 points from 16:10pm yesterday so this should support the ASX 200 for a gain of 0.4% on the open this morning.

Based purely on their respective ADRs (American Depository Receipts) BHP should open +0.9% higher, while CBA should lift by some 0.3%.

The headlines overnight have centred on Donald Trump's budget and infrastructure plans, although there is also talk that Theresa May could signal an agreement around Northern Ireland and the customs border this week.

Certainly, the economic forecasts disclosed as part of the Trump budget have been a talking point, where we won't actually see a balanced budget for 10 years.

The fact the 10-year Treasury sits unchanged on the day at 2.85% shows a market that is unnerved by these numbers and one questions if the plan here actually eventuates as proposed.

That said, the deficit is only going to be headwind for the US bond market.

It is a growing concern and on current projections clearly something has to change, especially if the future costs to roll the maturing debt over is becoming ever more costly.

It is a worry for the USD too in the years ahead and while FX traders are not selling USD's on deficit concerns today, it will be an ever-growing headwind in the years ahead.

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Wall Street shares found some upward momentum with investors buying after last week's correction.

The S&P 500 Index extended gains in late trading in New York as the 10-year yield fell back from the four-year high hit earlier on Monday. The Nasdaq Composite Index and Dow Jones Industrial Average turned positive for the year.

"There is a 'macro floor' - in that the run of macro data is still strong," said Inigo Fraser-Jenkins, who leads Sanford C. Bernstein's global quantitative strategy team. "What we do not have is a valuation floor."

Currently, the S&P 500's earnings yield is around 6 per cent, 3.1 percentage points more than the 10-year note. The post-crisis average has been 4 points.

The S&P 500 retook its 100-day moving average, a technical indicator that it crashed through last week. Morgan Stanley chief US equity strategist Michael Wilson is telling clients to buy the dip, as peers at Goldman Sachs and JPMorgan recently have advised.

The yield on the US 10-year Treasury note was little changed at 2.85 per cent after rising to a four-year high and then reversing.

All the overnight market action in numbers: