The Overnight Report: Solid And Soft

This story features HARVEY NORMAN HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: HVN

By Greg Peel

The Dow closed up 57 points or 0.3% while the S&P rose 0.1% to 2575 and the Nasdaq gained 0.4%.

With a Bang

It would appear the period of consolidation required by the ASX200 around the 5900 level ended with the end of the month. If we consider September is historically the worst month, and October the scariest, and then November is the turnaround month ahead of the Santa rally, perhaps that’s what the market was waiting for.

The futures had provided the hint pre-open, in rising a seemingly ambitious 24 points. But given the last day of the month saw profit-taking, a catch-up was required.

It was a catch-up and then some, with a peak of up 43 points at midday suggesting buyers that were just waiting for the calendar to tick over. There the index hit 5950 before easing back. We have another resistance level to conquer on that long-awaited path to 6000.

Only consumer discretionary missed out on the spoils, despite Harvey Norman ((HVN)) gaining a reprieve from ASIC and jumping 5.6%, having gone ex-div the day before. No such luck for Myer ((MYR)), or is that Mire?

Otherwise, energy stole the show with a 1.1% gain, materials rose 0.6% with some help from a surging nickel price, and even the defensives had good sessions. Ex-consumer discretionary, it was a return to market-wide buying following a sector rotation period as the index consolidated around 5900.

And this on a day the data began to confirm that the Australian housing boom is over. Capital city dwelling prices were net flat in October, bringing the growth rate back to 7.0% from a peak of 11.4% in May.

Wall Street is up again overnight but this time the local futures are showing only a 4 point gain on the open. If everyone piled in yesterday, we may now have to do some work to get through 5950.

Base metal prices were all positive in London last night, with nickel whacking on yet another 4%. You’d think LME traders had only just heard of EVs.

Lock in December

No one expected any change to Fed policy following last night’s FOMC meeting and in terms of no rate hike and a confirmation of the pace of balance sheet reduction, there were none. But in such cases Wall Street looks for subtle changes in language.

And there was one. For a long time the Fed statement has been describing US economic growth as “moderate”. This was an upgrade from around a year ago when it was “modest” for a very long time. But now, it’s “solid”.

Book in the December rate hike. The market is now suggesting a 95% chance.

The Fed also noted that the impact of the hurricanes seemed negligible, and that inflation remains “soft”. But none of the above might mean much from tonight, when Trump has promised to announce his choice for Fed chair. Jerome Taylor is the new frontrunner, but in reality nobody has any real idea.

Tonight is also when Wall Street expects to see detail on the tax reform package, although it was meant to be last night. It might still be Friday night. Either way, the White House is hoping for a vote in Congress next week.

The Democrats are understandably screaming for a more reasonable time frame, to allow them to assess this important, and no doubt complex, proposal. And many Republicans are of the same view. This bill is not going to float through.

In the meantime the earnings machine rolls on, and to date 75% of reporting S&P500 companies have posted earnings beats. Alas, Facebook was not able to match its FANG partners in delivering a strong upside surprise. Its shares are down -1.5% in the aftermarket.

Apple still to come.

And the jobs numbers still to come tomorrow night. And a bank of England Policy meeting tonight. But still Wall Street rolls relentlessly on.

Commodities.

Nickel was up another 4% in London. Lead rose 3%, aluminium 2% and copper and zinc 1%.

Iron ore rose US10c to US$58.50/t.

West Texas crude is down -US18c at US$54.27/bbl.

The US dollar index is up 0.3% to 94.80 but gold is US$5.20 higher at US$1275.40/oz.

The Aussie is also higher, up 0.2% at US$0.7672 ahead of today’s trade numbers.

Today

The SPI Overnight closed up 4 points.

Along with the local trade balance today we’ll see building approval numbers.

The BoE is an outside chance of hiking tonight.

National Bank ((NAB)) reports earnings today.

The Fairfax Media ((FXJ)) AGM will be well attended as the company outlines its plan for the spin-off of Domain. Boral ((BLD)), Downer EDI ((DOW)) and Perpetual ((PPT)) are among others holding AGMs.

Bank of Queensland ((BOQ)) goes ex.

Rudi will travel to the brand new Sky Business studios twice today. First appearance on the channel is from midday 'til 2pm. He'll return for an interview on Switzer TV between 7-8pm.

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The Australian share market over the past thirty days…

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