The Overnight Report: All Quiet

This story features BRAMBLES LIMITED, and other companies. For more info SHARE ANALYSIS: BXB

By Greg Peel

Wall Street was closed last night for the Presidents’ Day holiday.

Bad to Worse

With Wall Street providing little in the way of a lead, the ASX200 made a brief attempt to open higher yesterday before dropping -27 points to lunchtime. The afternoon featured a graft back to less of a fall, but this time the index did close beneath the 5800 resistance level.

We may need to see a pullback before 5800 can be challenged again, but it will all come down to corporate earnings results, as it did yesterday.

If there is one mortal sin amongst listed companies, it is downgrading guidance only few weeks before results season and then failing to achieve even that guidance. Investors tend to sin bin such a company on lost confidence in management. Brambles ((BXB)) fell -10% yesterday.

It was a different story for energy services company WorleyParsons ((WOR)). This stock and its peers have been bought up in recent months from very low depths when the oil price was at its nadir, on the expectation the oil price rebound would translate into new business. It hasn’t, materially, and indeed energy sector investment in this country remains in decline as the big LNG projects reach or near completion and everyone is loaded to the eyeballs with debt.

Thus for Worley, it was just a matter of not being able to cut costs fast enough to offset lost revenues. The market had made the wrong call in expecting better things, and thus sold the stock down -13%.

The opposite of Brambles’ mortal sin is to announce a guidance upgrade weeks before result season and then beat it, which is what BlueScope Steel ((BSL)) did yesterday. But BlueScope managed only a 4% gain, given the stock has run very hard in recent months from having at one point looking like it might go out the back door.

The bottom line is that the two big sector moves yesterday were industrials, down -1.8%, and energy, down -1.2%.

The consumer sectors both saw -0.5% dips with Myer ((MYR)), in the case of discretionary, dropping -2.7% despite being the most shorted stock on the market. Wesfarmers ((WES)), in the case of staples, finished slightly higher on the day but reminds us that as the busy back end of the earnings season plays out, earlier reporting stocks are now starting to go ex-dividend in increasing numbers. This creates a natural drag on the index.

No other sectors much troubled the scorer yesterday.

With Wall Street closed overnight, today will likely be another session of micro over macro, as earnings reports hit the wires. The biggie today is BHP Billiton ((BHP)).

Commodities

An industry body reported last night that the global zinc market was in deficit for eleven months of last year. At the same time, Citi released a note suggesting copper will move into deficit this year for the first time in six years.

Last night on the LME zinc rose 2.5% and copper 2%, while aluminium gained 1% and lead and nickel 0.5%.

Iron ore added US$2.40 to US$92.70/t.

The US dollar index is relatively flat at 100.92 and so is gold at US$1237.00/oz.

West Texas crude will roll into the April delivery front month which is up US20c at US$53.98/bbl.

The Aussie is 0.2% stronger at US$0.7684.

Today

The SPI Overnight closed up one point.

The US will tonight see a flash estimate of its February manufacturing PMI. This series has been trending higher of late and in theory should be Trump supercharged by now, being largely a sentiment index.

The minutes of the February RBA meeting will be released today to little surprise.

Alongside BHP, earnings reporters today include nickel twins Independence Group ((IGO)) and Western Areas ((WSA)), gas giant Oil Search ((OSH)) and Worley lookalike Monadelphous ((MND)).

Westpac ((WBC)) will deliver a quarterly update.

And as noted, there are several stocks going ex today.

Rudi will link-up with Sky Business, through Skype, around 11.15am to discuss broker calls.
 

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