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The Monday Report

Daily Market Reports | Mar 20 2017

By Greg Peel

Not Quite

Friday’s trade on the local market smacked of a determination to push the ASX200 above the 5800 resistance level. The index reached the mark mid-morning before retreating, but broke through once more at lunch time. The sellers moved in, but on each sortie 5800 now became support.

When the index hit 5815 mid-afternoon, it looked for all the world as if the market had broken through, ready to set its sights on the 6000 level chartists ensure us the index will reach as soon as 5800 is overcome. But it was not to be. The sellers won out at the death and we closed at 5799.

Will today be the day? Unlikely. Wall Street closed slightly weaker and the futures closed down -13 points on Saturday morning.

Financials provided the upside for the market on Friday in rising half a percent, aided by bank mortgage repricing. Industrials also chimed in, while utilities and consumer staples fell half a percent to provide the balance. Energy eased off a little but for once, materials had a flat session.

If we are to finally break on through to the other side, materials would need to be a driving force. Can commodity prices rise further? No one much seems to think so.

Squirm

It was a quadruple witching equity derivatives expiry on Wall Street on Friday night but one wouldn’t have noticed. The volatility that often accompanies such quarterly occasions was lacking and the market was generally quiet. It was a Friday after a week in which the Fed took the spotlight and after some frantic trading during the week, sights were clearly set on a relaxing weekend.

Relaxed is not how one might describe German chancellor Angela Merkel on Friday night, either in the ubiquitous armchair next to Donald Trump or later at the press conference podium. Awkward is about the only way one might describe the encounter, in the wake of Trump’s campaign ravings in which Germany was one of many countries to come under fire.

In the same position, Shinzo Abe had been clearly relieved to be released from Trump’s crushing handshake but in Merkel’s case, the usually mandatory lengthy handshake didn’t even happen. Merkel squirmed, Trump looked uncomfortable. He looked uncomfortable again at the podium, while Merkel looked as if she couldn’t believe what an idiot she was standing next to.

But US-German relations are all fine, apparently, although Trump still insists Germany owes the US a fortune in backdated military protection costs. Good luck with that one. Trump seems to believe the US military is some sort of service for hire. Ever the businessman, never the diplomat.

Wall Street saw nothing in the encounter that was market moving, and nor did traders in Germany. The Dow closed down -15 points or -0.1%, the S&P lost -0.2% to 2381 and the Nasdaq was flat. The DAX rose 0.1%.

I suggested last week that with the Fed out of the way for now and fiscal policy tied up in healthcare, probably for some time, Wall Street would have to now look simply at fundamentals and data for direction. It was not a good start.

Industrial production was flat in February when 0.3% growth had been forecast. The miss was nevertheless attributed to unseasonably warm weather reducing demand for utilities. Consumer sentiment rose over the past fortnight, but not by as much as forecast. The only positive was the Conference Board’s monthly index of leading indicators, which rose 0.6% for the third consecutive month to its highest level in over a decade.

It don’t personally rate a leading indicator index that includes the stock market in its calculation. What is a stock market if not a leading indicator? If the stock market responds positively to a leading index that has risen because the stock market has risen, it’s no more than double-counting.

Commodities

Base metal prices were all firmer in London on Friday night, with lead and zinc managing 2% gains.

Iron ore fell -US30c to US$92.30/t.

The oils were little moved.

Gold is US$3.00 higher at US$1229.00/oz despite the US dollar index rising 0.1% to 100.34.

The Aussie has snuck back over 77 again, having dipped below on last week’s soft jobs data. It’s up 0.4% at US$0.7704.

The SPI Overnight closed down -13 points or -0.2%.

The Week Ahead

There’s not a lot going on in markets post-Fed and this week’s calendar is a bit thin on the ground as well.

The US will see the Chicago Fed national activity index tonight, existing home sales and FHFA house prices on Wednesday, new home sales on Thursday and durable goods on Friday. Friday also brings a flash estimate of March manufacturing PMI, as is the case for Japan and the eurozone.

Janet Yellen will speak on Thursday but will not say anything new, one presumes.

Japanese markets are closed today.

The RBNZ holds a policy meeting on Thursday.

In Australia the week is virtually devoid of data. Tomorrow sees December quarter house prices, which were probably -10% below where they are now. The minutes of the March RBA meeting will also be released, but there’ll be nothing much to search for.

There are still quite a few ex-divs to work through this week, and this week also brings a round of out-of-cycle earnings reports. Kathmandu ((KMD)), Premier Investments ((PMV)) and TPG Telecom ((TPM)) will report tomorrow and Brickworks ((BKW)) on Thursday.

Rudi will appear on Sky Business on Tuesday morning, around 11.15am, via Skype to discuss broker calls. On Thursday he'll appear in the studio, noon-2pm and later that day again on Switzer TV, between 7-8pm. He'll repeat the Skype-experience on Friday morning, around 11.15am, probably.
 

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