article 3 months old

The Overnight Report: For How Long Can We Drift?

Daily Market Reports | Mar 21 2017

By Greg Peel

The Dow closed down -8 points while the S&P lost -0.2% to 2373 and the Nasdaq was flat.

Running Scared

Amazon is coming, so we’re continually being told. A company that has revolutionised retailing in the US and gradually sucked the oxygen out of traditional retailing over a period of decades. Amazon is one of few survivors of the original dotcom boom and bust and is now a global tour de force, while never having made a profit.

It’s never made a profit because earnings are continually reinvested into new ways to redefine the retail landscape and into new categories to plunder. Many an Australian has already shopped at Amazon, happy to pay the extra for freight given the ticket price is so much cheaper.

We’ve known about Amazon’s planned invasion for some time, but it took a research note from Credit Suisse yesterday to put the frighteners through the market. The end result? JB Hi-Fi ((JBH)), Myer ((MYR)) and Super Retail ((SUL)) all down around -3%, and Harvey Norman ((HVN)) down -8%. Harvey Norman’s fall was exacerbated by a big chunk of stock being offloaded by an “insider” on what proved to be a poor choice of day to do so.

Even Shopping Centres Australasia ((SCP)) made the top ten ASX200 losers list yesterday in falling -1.4%, given it owns the malls in which the above are tenants.

Nor was it a good day yesterday for Fletcher Building ((FBU)), which made the cardinal error of downgrading guidance a mere month after reporting earnings and fell -10%. Telstra ((TLS)) also copped some selling and dropped -2%.

Telcos subsequently led the index down yesterday with a -2% sector fall while consumer discretionary backed up with -0.9%. Where did the money go? Healthcare. It rose 0.9% as traders moved into the likes of Japara ((JHC)), Primary ((PRY)) and Virtus ((VRT)).

Otherwise, it was a quiet session on the ASX yesterday. Having failed yet again at 5800 last week, the market has drifted off as it wonders what it is that might finally provide the impetus to break through.

It certainly won’t be Wall Street’s efforts at present.

Dull

The last thing an overnight reporter wants to hear of in the morning are words like “dull” and “boring” being used to describe the session upon which one is to overnight report, but unfortunately that’s the case this morning and pretty much the theme of March to date. There is very little to say.

Wall Street remains in a holding pattern, torn between those who believe US stock markets simply have to correct after such a euphoric run that is yet to be backed up by policy promises being converted into policy action, and unlikely to be for some time, and those who believe upside remains assured, it just needs time. Never short a boring market, they say.

Last night Wall Street drifted as the focus of attention was on FBI investigations into Russia and Trump and into wire-tapping. There is no evidence of the latter, apparently, but in the case of the former there is more digging to be done. Bit of a lose-lose for Trump.

US banks have continued to come under pressure since last week’s Fed statement suggested three rate hikes in 2017 is more likely than four. The banks led the Trump rally from day one, on a promise of higher interest rates and a roll-back of stifling regulations. There has since been no news on the latter. Fedheads were out and about last night reiterating the three hike call, or it could be four, or it could be two.

That decision requires economic data signals that are yet to come, and this week is a fairly quiet one on the US data front. Later in the week sees home sales numbers and durable goods orders.

We can also look forward to the first quarter earnings season to possibly shake Wall Street out of its slumber, but quarter-end is still two weeks away and reports don’t begin to flow for another two weeks after that.

So for the time being, it’s just dull.

Commodities

One thing that did come out of Fedspeak last night was a reiteration of the intention to run the US economy “hot”, meaning to let inflation creep above the target rate for a while before acting to keep it at bay. In other words, don’t put rates up too quickly. Despite the US dollar index being dead flat at 100.34, the inflation hedge, gold, is up another US$4.80 at US$1233.80/oz.

Copper fell a percent in a session in London in which only aluminium managed a slight gain, with the others all falling by less than a percent.

Iron ore fell -US$1.60 to US$90.70/t.

West Texas crude is down a percent, falling -US53c to US$48.19/bbl.

The Aussie is 0.4% higher at US$0.7733.

Today

The SPI Overnight closed down -11 points or -0.2%.

The ABS quarterly house price index is out today locally and the minutes of the March RBA meeting will be released.

We have a mini-burst of a result season today with numbers due from Kathmandu ((KMD)), New Hope Corp ((NHC)), Premier Investments ((PMV)) and TPG Telecom ((TPM)).

Rudi will connect with Sky Business today, via Skype, to discuss broker calls at around 11.15am.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

FBU HVN JBH JHC KMD MYR NHC PMV PRY SCP SUL TLS TPM VRT