Daily Market Reports | Feb 20 2017
This story features LINK ADMINISTRATION HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: LNK
By Greg Peel
Hitting the Wall
In terms of time, the local results season is now some three-quarters of the way through. In terms of number of companies reporting however, we’re only around a third of the way through. This last full week of February will be by far the busiest of the season.
To date, the eight major stockbrokers in the FNArena database have reported on 88 results. Beats are running at a ratio of 1.4 to misses, which is pretty standard stuff, while a total of 19 broker downgrades to 11 upgrades reflects the fact this season has been conducted in a period of market strength, which we can largely attribute to Trump.
What we have seen is some very strong positive responses to upside surprises, with downside surprises in most cases not being too dramatic. But in the downside case, most of the major damage in individual names occurred pre-season thanks to profit warnings. The overall impression of the season to date has been “good”.
Looking at the macro picture, we find the 5800 level for the ASX200 continues to provide solid resistance. This is the level chartists had been tipping for some time as an upside target, thus it is not surprising the market is consolidating around the level and not, as yet, definitively breaking higher. Profits are being taken. Last week saw the index gain 1.5%.
Fridays are also always good days to take profits, and in this case the US is closed tonight for a long weekend which is another good reason to square up.
Results on Friday brought another round of ups and downs. In the winners’ circle was Link Administration ((LNK)) with a 4.2% pipped only by Seek ((SEK)) on 5.7% after that company announced the possible privatisation of Zhaopin. ANZ Bank ((ANZ)) posted a 1.9% gain after providing a well-received quarterly update.
We this saw healthcare post the biggest sector loss on Friday of -1.6% while profits were taken in materials (-1.0%). Utilities (+0.7%) found some support, while other sector moves were mixed and less consequential.
Aside from the micro deluge of earnings reports this week, the local market will also be focused on the macro of December quarter data, leading in to next week’s GDP release. This week sees numbers for wages, construction and capital expenditure.
Once again it looked like Wall Street would break its winning streak in Friday’s session and once again it was not to be. The Dow opened down -87 points and then bungled its way higher all session, finally scraping over the line to mark seven consecutive days of gains. The S&P500 notched up a 1.5% rally for the week.
The Dow closed up 4 points while the S&P gained 0.2% to 2351 and the Nasdaq rose 0.4%. Any advance for any index is a new all-time high.
While there was a bit of news about in the M&A space to excite the punters – in particular a swing at Unilever from Kraft Heinz – it appeared more a case of not wanting to go into the long weekend short. There are too many buyers lurking around at only slightly lower levels hoping for an opportunity.
As for how long this can go on is anyone’s guess, as strength is inexorably linked to whatever comes out of Donald Trump’s mouth. And that could be anything.
The US earnings season is now past and while economic data releases roll on, their impact is lost to a great extent because they represent numbers cum Trump policy implementation. Fiscal is the big driver in 2017, while monetary takes a back seat. That may yet change if it looks like the Fed will raise next month, but Wall Street doesn’t seem that concerned.
Wall Street will take a break tonight and then we’ll see what comes next.
For once, base metal prices all went the same way in London on Friday night, likely spooked by a 0.5% rally in the US dollar index to 100.92. All prices fell -0.5% to -1.5%.
Iron ore rose US80c to US$90.30/t.
Gold fell -US$3.90 to US$1236.00/oz.
Oil prices were little changed.
The Aussie is down -0.3% at US$0.7667.
The SPI Overnight closed up 5 points on Saturday morning.
The Week Ahead
US data this week include a flash estimate of February manufacturing PMI tomorrow, existing home sales on Wednesday, house prices, the Chicago Fed national index and a flash services PMI on Thursday, and new home sales and consumer sentiment on Friday.
The minutes of the last Fed meeting are out on Wednesday.
The minutes of the February RBA meeting are out tomorrow. The RBA governor will speak on Wednesday, after numbers for December quarter wages and construction work done are released. Thursday it’s private sector capex.
Rudi will appear on Sky Business on Tuesday, via Skype-link, around 11.15am. He's scheduled in for an interview on Switzer TV, between 7-8pm on Thursday and on Friday's he'll repeat the Skype-link around 11.05am.
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For more info SHARE ANALYSIS: ANZ - ANZ GROUP HOLDINGS LIMITED
For more info SHARE ANALYSIS: BSL - BLUESCOPE STEEL LIMITED
For more info SHARE ANALYSIS: BXB - BRAMBLES LIMITED
For more info SHARE ANALYSIS: EHE - ESTIA HEALTH LIMITED
For more info SHARE ANALYSIS: LNK - LINK ADMINISTRATION HOLDINGS LIMITED
For more info SHARE ANALYSIS: MPL - MEDIBANK PRIVATE LIMITED
For more info SHARE ANALYSIS: MTR - STRATA INVESTMENT HOLDINGS PLC
For more info SHARE ANALYSIS: SEK - SEEK LIMITED
For more info SHARE ANALYSIS: WOR - WORLEY LIMITED