The Overnight Report: Happy Anniversary

This story features ANSELL LIMITED, and other companies. For more info SHARE ANALYSIS: ANN

By Greg Peel

The Dow closed up 5 points while the S&P rose less than a point to 2562 and the Nasdaq fell -0.3%.

Well that was a bit of anticlimax. We were supposed to see the Dow fall around -6000 points.

Second Attempt

The ASX200 again tried valiantly to push on through 5900 yesterday, reaching as high as 5910 by late morning, but again the troops were forced back down the hill by the sellers. It was a repeat performance of Wednesday’s trading, in which sector moves were mixed rather than uniform.

Having hung in there on Wednesday, materials finally capitulated and fell -1.2%. Healthcare fell -0.2% and energy dipped slightly.

IT gained 1.3% and industrials ticked up 0.2% while all other sectors posted gains around the 0.5% mark, including the banks, which just goes to show there’s still plenty of market cap clout in the big miners.

The index peaked just ahead of the release of the September jobs numbers, but traded sideways on the result. The Aussie shot up initially before drifting back.

Australia added 19,800 jobs in September, ahead of expectations, with 6,100 full-time jobs meeting 13,700 part-time. It was the twelfth consecutive month of additions. The unemployment rate fell to 5.5% from 5.6% on a slight tick-down in participation.

The past twelve months have seen the (net) addition of 372,000 jobs, the most since April 2008.

The spanner in the works is wage growth, which remains muted. Household income growth is closer to 3% per annum, CBA’s economists calculate, rather than the 5%-plus seen in prior strong cycles. Hence there is no need for retailers to be excited by the numbers, and the RBA will likely continue to sit on its hands.

There was a mixed reaction to China’s data release, around half an hour after the jobs numbers. The index initially dropped but recovered again, before continuing its afternoon drift-off.

Beijing decided that China’s GDP grew by 6.8% year on year in the September quarter, down from 6.9% in June but meeting forecasts. While lower, the number remains comfortably above the government’s target of “around” 6.5%.

To achieve the result, Beijing and China’s banks nevertheless had to make another massive credit injection in the quarter. Credit and money supply both grew faster than GDP in the period.

In the month of September, China’s industrial production grew by 6.6% year on year, up from 6.0% in August and ahead of expectations. Retail sales rose 10.3%, beating expectations, to mark two years of growth in the 10-11% range. The laggard was private fixed asset investment, which missed forecasts in rising 7.5% year to date to mark its slowest pace in 18 years. Beijing is doing all the heavy lifting on the infrastructure front.

While China’s economic growth slowed in the quarter, it met expectations, remains above Beijing’s target and is realistically a much better result than markets were fearing two or three months ago.

As for the ASX200, the futures have closed down -19 points this morning despite Wall Street being flat. Anniversary jitters? More likely a reflection of a -3% drop in the iron ore price and -1% for oil.

Usually the market allows three attempts to conquer a resistance level before deciding it’s not going to happen this time, but we’ve only seen two. We must acknowledge nonetheless that the futures have not been a great indicator of late.

Brief Scare

There may well have been a bit of nervousness when the Dow opened down a hundred points last night. It’s all a bit superstitious to believe that we could see another crash just because it’s an anniversary, but we recall that ’87 and ’29 both occurred at about the same time, there’s been a lot of talk of Wall Street being well overdue a correction, and even the Treasury Secretary has weighed in.

In a thinly veiled attempt at political blackmail, Tim Mnuchin has warned that the given Wall Street’s record breaking run is all about expectations of tax reform, disaster would befall the markets were tax reform not achieved. In other words, “Be it on your heads, oh exalted members of Congress”.

Less superstitious suggestions for the opening drop were the weaker Chinese GDP result and more trouble in Spain. The Catalonian president has failed to give up on his push for independence, hence Madrid is planning to suspend the region’s autonomy and seize control.

A Catalexit thus seems a tough assignment at this point, and even tougher when it is recognised a majority of Catalonians want to remain united with Spain anyway. They just didn’t bother voting.

The Basques have been awfully quiet.

Among last night’s US earnings reporters were Dow stocks Verizon and American Express, ex-Dow name Alcoa and internet veteran eBay. Verizon and Amex posted beats and Alcoa and eBay misses, with only Verizon enjoying a rally in response.

Apple fell -2.4%, impacting on the Nasdaq, after news came through the new Apple Watch’s cellular connection feature was abruptly cut off in China, without explanation. Presumably a Chinese company is set to launch a knock-off.

All in all an unremarkable session in the end, albeit featuring another record for both the Dow and S&P. But that’s rather unremarkable these days.

Commodities

Iron ore fell -US$2.10 to US$59.60/t.

Lead fell -2% in London and aluminium rose 1.5%, with the others mixed on smaller moves.

West Texas crude is down -US59c at US$51.40/bbl.

Gold has enjoyed a rebound, up US$9.20 at US$1289.60/oz, with the US dollar index down -0.3% at 93.11.

The Aussie is up 0.2% at US$0.7847.

Today

The SPI Overnight closed down -19 points or -0.3%.

Ansell ((ANN)) and Insurance Australia Group ((IAG)) hold AGMs today.

There are going to be a few lunches on around town today.

Rudi will not make his weekly connection with Sky Business this morning due to a change in programming for the day.

****

The Australian share market over the past thirty days…

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