The Overnight Report: Much To Absorb

Daily Market Reports | Sep 08 2017

By Greg Peel

The Dow closed down -22 points or -0/1% while the S&P was flat at 2465 and the Nasdaq rose 0.1%.

Data Drop

On Tuesday and Wednesday, we saw the ASX200 plunge on the open before grafting its way back throughout the session. Yesterday the index shot up almost 30 points on the open and ultimately closed flat.

As to why sentiment swung is unclear, although the afternoon saw most of the selling following two important data releases.

Retail sales were flat in July when 0.2% growth was expected. This follows on from 1.4% growth in the June quarter. Economists point to a falling savings rate, suggesting Australians have lately been dipping into savings to fund consumption while wage growth remains absent. That can only last so long.

The trade surplus shrank to $460m in July from $888m in June as exports fell -2.2% and imports fell -0.9%. Falls in iron ore and coal volumes impacted on exports, as did a fall in gold exports. Volumes notwithstanding, exports should improve in August on higher iron ore prices.

Consumer staples was the worst performer on the day with a -0.8% fall, for which we can point to the weak retail sales number, but Woolworths ((WOW)) went ex yesterday and consumer discretionary closed flat.

Materials only fell -0.1% despite BHP ((BHP)) going ex and despite the weaker than expected trade numbers.

The Aussie hitting US80c is always a trigger to sell the large, offshore-exposed healthcare names, and yesterday saw that sector fall -0.7%. Having been sold down on Wednesday, Telstra ((TLS)) suddenly bounced hard on an upgrade from Credit Suisse and took telcos up 2.5%. Indecisive utilities rose 1.2%.

Everything else was relatively flat.

Earlier in the week the index kept wanting to return to 5700, but yesterday, having broken away from 5700, the index ran scared back down to 5690. The futures are up 16 points this morning for no particular reason. This market is a hard one to pick at present.

Bear in mind earnings season is now over and major economic data releases are behind us. The index is being handicapped by ex-dividends, and there’s plenty more of those to come. By next month we’ll be into AGM season, which may provide the next catalyst, notwithstanding what happens elsewhere in the world.

Happy to sit tight

You can’t get a flight out of Florida now. You can’t hire a car and even if you could, many gas stations are empty thanks to strong demand meeting constrained supply due to Harvey, and traffic is at a standstill. Irma is thundering towards the Bahamas, en route to Florida.

Hot on Irma’s heels is Jose, which is set to demolish the Leeward Islands that have just been demolished by Irma, before heading towards Bermuda. Over in the Gulf, Katia is brewing. September is the peak of hurricane season, in case you didn’t know.

Wall Street is still contemplating the record cost of Harvey, and now this.

News has emerged that in negotiating the deal with the Democrats to extend the debt ceiling deadline, Donald Trump proposed the scrapping of the debt ceiling altogether. He is not without supporters on that front, given the problems the ceiling constantly causes, the inability to break Congressional gridlock, the threat of government shutdown and the fact that invariably, the ceiling is raised. What’s the point?

The Fed vice chair Stanley Fischer has announced his retirement, meaning both chair and vice chair positions are now open for new Trump appointees to be put in place for next year. No one has much of a clue who will fill these positions given a number of names being suggested. Former Goldman Sachs executive and Wall Street favourite Gary Cohn is seen fading in the odds. Yellen is yet a chance of reappointment.

Each month there’s much anticipation that given the revival of the EU economy, ECB president Mario Draghi will announce the beginning of QE tapering. Last night prove yet another disappointment. The (negative) cash rate remains unchanged and E60bn a month of QE will continue to be pumped into the market until it is decided otherwise.

That decision, said Draghi, will come in October.

Gold thus found another reason to pop last night, rising US$15.10 to US$1348.60/oz as the US dollar index crashed -0.8% to 91.52, as the euro surged. European bond rates fell and the US ten-year yield was dragged down -5 basis points to 2.06% to mark another new low for the year.

The Bank of Japan meets next week. The Fed meets later this month.

North Korea has gone eerily quiet.

And it’s September – historically the worst month of the year. Taking into consideration all of the above, there’s little incentive to do anything on the US stock market other than hunker down.

Commodities

Base metals all went to sleep in London last night except for zinc, which rose 1%.

Iron ore fell -US$1.30 to US$75.90/t.

West Texas crude is steady at US$49.12/bbl.

The big fall in the greenback has the Aussie up 0.6% at US$0.8046.

Today

Yet the SPI Overnight closed up 16 points or 0.3%. As to why is unclear. Goldminers can’t carry the market and US banks were trashed again last night.

Locally we’ll see housing finance data today ahead of Beijing releasing August trade numbers.

Qantas ((QAN)) is on today’s list of stocks going ex.

Rudi will 
 

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