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The Overnight Report: Jittery

Daily Market Reports | Sep 20 2016

By Greg Peel

The Dow closed down 3 points while the S&P closed flat and the Nasdaq lost 0.2%.

No Hack

Futures traders had called for a flat opening on the local market yesterday and they were bang on – the market didn’t open at all. When it did eventually open at 11.30 the ASX200 immediately fell 23 points, probably driven by sellers who still haven’t been able to fill out the census and feared something sinister.

Just a technical glitch, the ASX declared, and quickly the index was back to flat again, before once again the exchange crashed at 2pm. No amount of scrambling from the geeks could prevent the umpires eventually abandoning play for the day.

The futures are showing down 5 points this morning, but the focus will be not on whether this proves accurate but on whether the exchange opens at all. The ASX has insisted this was not a hack, so presumably the geeks have put in an all-nighter and things should be up and running as normal.

Yesterday was not normal nonetheless, and there were likely a lot of players who elected to stand aside. There was a weakish lead from Wall Street to contend with but just as well this didn’t occur on a day promising elevated volatility. In the wash-up, the flat close was made up of a gain for materials balancing out a fall for energy, and falls in the consumer sectors of discretionary, staples and healthcare balanced by a small gain for the banks.

Beyond that, we can pretty much write yesterday off. We can assume a lack of volatility in the lead-up to the BoJ and Fed meetings on Wednesday and with Wall Street dead flat last night, not a great deal is expected today.

The Great Unknown

The flat close on Wall Street gave the impression the market did absolutely nothing last night as it awaits the central bank meetings but in fact the Dow was up a hundred points early, then down 50 and up 50 before finally going nowhere.

The initial rally was linked to the oil price. Venezuela declared last night a deal among OPEC members to freeze production is imminent, with OPEC set to hold an extraordinary meeting in Algiers this weekend. Those who are prepared to believe, or who just don’t want to be caught out, sent oil prices higher early in the session and the stocks indices followed.

Those who don’t believe there will be a wolf this time either then sent oil prices back down again, to flat, and dutifully the stock indices followed suit.

The only other news of influence on Wall Street last night was the monthly housing sentiment index, which showed a jump to 65 from 59 when assumptions were for no change. This 50-neutral index now suggests home builders are feeling more confident than they have so far this year.

Otherwise, it’s all about central bank speculation. Commentators agree that while the Fed’s decision is of vital importance, perhaps more important is what the Bank of Japan decides several hours earlier. The BoJ is known to be split down the middle on policy direction, leading to speculation it could either cut further into the negative or, given easing simply has not worked for Japan to date, surprise by going completely the other way, perhaps winding back QE.

It’s a great unknown, as is what the Fed might do. While few believe the Fed will hike based on the data, there are those who believe the FOMC will hike anyway just to save face and restore some credibility. What is agreed is that Wall Street has not priced in a September rate hike, and if there is one, the initial response could be ugly.

But then it may come down to what the BoJ does first.


West Texas crude is up a cent at US$43.18/bbl.

There was suddenly a bit of action on the LME last night, with nickel jumping 4%. Zinc and lead rose 1% while copper slipped a little.

With China back on board, iron ore fell US20c to US$55.30/t.

Gold is relatively steady at US$1312.80/oz.

The US dollar index has dropped 0.2% to 95.86 but the Aussie has shot up 0.6% to US$0.7535, probably on vision of Malcom Turnbull strutting around the NYSE last night chatting to all and sundry.


The SPI Overnight closed down 5 points.

It is hoped that at 10am, the ASX will open.

The minutes of the September RBA meeting will be released today, chronicling Glenn Stevens’ last meeting in the chair, with nothing of any great consequence expected.

TPG Telecom ((TPM)) will release its earnings results today.

Rudi will skype-link up with Sky Business today at 11.15am to discuss broker calls.

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