The Overnight Report: Buying Opportunity

This story features TRANSURBAN GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TCL

By Greg Peel

The Dow closed up 56 points or 0.3% while the S&P rose 0.4% to 2365 as the Nasdaq bounced 0.7%.

Yield Saves the Day

At around 11.30am yesterday it wasn’t looking pretty in the local market when the ASX200 broke 5700, down -88 points at the time. But at some point it had to be noted that the Australian market had already shed over a percent on Wednesday in anticipation of a Wall Street rout on Wednesday night.

The big figure of 5700 also provided a concept of technical support, but perhaps it’s interesting to note the bounce, which ultimately led to the index closing only -47 points down, coincided with the release of the April jobs numbers.

Economists were bracing themselves for a data correction from the hard-to-believe 60,000 jobs added in March. Instead, they found another 37,400 jobs were added. And the unemployment rate fell to 5.7% from 5.9%. Having risen a questionable 73,900 in March, full-time jobs fell -11,600 in April while part-time rose 49,000. Hours worked fell -0.3%.

Hours worked is down a net -0.1% over two months, on the addition of 97,400 jobs. Whether mostly part-time jobs or not, CBA economists, for one, just can’t quite figure out how these numbers work. That 97,400 figure equates to around 1.2m additional jobs if we were America. With fewer hours worked.

Whatever the case, either the jobs number triggered some buying yesterday or technical support did, or both. But it wasn’t a turnaround in the true sense but rather a déjà vu experience as the buyers poured into the defensive stocks that have been rather maligned during Trump’s so far brief and tenuous reign.

Telcos closed the day up 0.3%. Industrials should be a high beta, cyclical sector, but in Australia’s case it includes, for some reason, the likes of Transurban ((TCL)), Macquarie Atlas Roads ((MQA)) and Sydney Airport ((SYD)), all of which offer utility sector yields and all of which were sought after yesterday. The utilities sector itself was down less than -0.1%. And yes, while hardly defensive these days, the banks were an obvious target. Financials closed down -1.1% but most of that was Westpac ((WBC)) going ex-div.

As the rebound played out, gold stocks that were so highly sought after on Wednesday saw profit-taking. Materials closed down -0.9%, yet Rio Tinto ((RIO)) was up 0.3%. BHP Billiton, or BHP, or Broken Hill Proprietary, or whatever they call themselves these days ((BHP)) fell only -0.5%.

It was a sea of red but it could have been worse. The problem is the Australian stock market is currently being held ransom to an idiot. I did suggest not so long ago that given the number of commentators, chartists and others who were convinced 6000 was just around the corner, the warning bells should be ringing. But not because of a bank tax. And not because of a presidential impeachment.

Seeking Counsel

Which if it were to happen, will certainly not happen quickly. The US Justice Department has appointed former FBI director Robert Mueller as special counsel to oversee investigations into any collusion between Trump and Russia during the election campaign. Don’t hold your breath.

Meanwhile, on Wall Street it was FANG & Co that saved the day. Having fallen -2.6% on Wednesday night, last night the Nasdaq rallied back 0.7%. There is a queue of investors out there who didn’t get on the tech rally that has seen New World names such as Amazon, Facebook and Apple rally to ever higher highs. They have been praying for a pullback.

The Dow, on the other hand, managed to limp to only 56 points up at the close having been up 150 points an hour and a half earlier. Not too convincing, but then again there has been much talk of Wall Street needing to come off the boil a bit to more realistic levels. Not a crash, just a common sense adjustment.

As to where we go from here is unclear. I raised the question yesterday as to whether the policies Wall Street have been so looking forward to would actually go out the window with Trump, or remain in place with a Republican administration ex of idiot-risk. I was interested to read this quote from one US equity strategist courtesy of Dow Jones last night:

“Investors wanted a pullback and they got one. We’re still looking forward to pro-growth policies and no matter who is in the White House, we’re still looking for pro-growth policies.”

Wall Street might just have to look forward for a bit longer.

Commodities

As the knee-jerk panic subsided last night, gold fell back -US$14.10 to US$1246.80/oz, with the US dollar index rebounding 0.5% to 97.90.

Back to business as usual in London. Copper fell -0.5%, zinc -1% and lead -2%.

Iron ore fell -US50c to US$61.00/t. One belt, one pair of pants.

Oil seems little fazed by all the brouhaha, seemingly intent on regaining the 50 mark. West Texas crude is up US38c at US$49.34/bbl.

The Aussie has come back -0.2% to US$0.7418. So much for the jobs numbers.

Today

The SPI closed down -3 points. It looks like the rebound from the depths yesterday on the local market will do for now. And it’s Friday.

It’s also the first time I can remember that there are actually no economic data releases, globally, over the next 24 hours worthy of making the FNArena calendar.

InvoCare ((IVC)) and Oil Search ((OSH)) hold AGMs today.

Rudi will connect with Sky Business today, through Skype, to talk 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

Click to view our Glossary of Financial Terms