Daily Market Reports | Mar 01 2018
|SPI Overnight (Mar)||5956.00||– 45.00||– 0.75%|
|S&P ASX 200||6016.00||– 40.90||– 0.68%|
|S&P500||2713.83||– 30.45||– 1.11%|
|Nasdaq Comp||7273.01||– 57.35||– 0.78%|
|DJIA||25029.20||– 380.83||– 1.50%|
|S&P500 VIX||19.85||+ 1.26||6.78%|
|US 10-year yield||2.87||– 0.04||– 1.38%|
|USD Index||90.65||+ 0.29||0.32%|
|FTSE100||7231.91||– 50.54||– 0.69%|
|DAX30||12435.85||– 54.88||– 0.44%|
By Greg Peel
There were largely three reasons why the ASX200 lost -0.7% yesterday. The lead from Wall Street was weak, after new Fed chair Jerome Powell sparked renewed four-hike fears, the Chinese PMIs for February were weaker than forecast, and the last day of the results season was, quite frankly, a bit of a shocker.
It must also be noted that there were some sizeable dividends subtracted yesterday as a handful of big names went ex. This provided the index with a handicap to begin with. It was also the last day of the month, so some squaring up may have been in play late in the session.
Let’s start with results. The scorecard from yesterday reads as follows.
The biggest loser in the index on the day was Harvey Norman ((HVN)), down -12.4%, followed by Bega Cheese ((BGA)), down -6.4%, followed by Adelaide Brighton ((ABC)), down -5.9%, followed by Ramsay Health Care ((RHC)), down -5.8%. The top five loser board was rounded out by Super Retail ((SUL)), but that one went ex.
Also reporting yesterday were Vita Group ((VTG)), down -8.0%, and Virgin Australia ((VAH)), down -3.9%. Granted, everyone was swimming against the macro tide of Wall Street influence yesterday, but it was not a great wrap party.
Special mention thus goes to Macquarie Atlas Roads ((MQA)), up 1.8%, and Noni B ((NBL)), up 5.6%, following their reports.
The ASX200 top five winners board provided us with a rare case of not one company reporting on the day making the podium. Best on ground yesterday was Pilbara Minerals ((PLS)), which rose 10.8% after announcing a lithium supply deal with Korea’s POSCO. Pilbara dragged peer Galaxy Resources ((GXY)) into second, while Speedcast International ((SDA)) rebounded after its initial result-based sell-off on Tuesday, Costa Group ((CGC)) kicked on following its strong result on Tuesday, and IPH ltd ((IPH)) finally found some love.
Sector-wise, telcos was the biggest loser on the day, down -2.6%. Telstra ((TLS)) went ex. Harvey Norman’s result and Super Retail’s dividend helped consumer discretionary down -1.0%.
Ramsay’s result dragged healthcare down -0.8%. The banks (-0.6%) were simply sold.
Materials fell -1.3% on a combination of lower overnight commodity prices, driven by a strong US dollar, driven by Jerome Powell, and the Chinese PMIs.
China’s February manufacturing PMI came in at 50.3, down from 51.3 in January and below 51.2 expectations. The services PMI fell to 54.4 from 55.3. And now that you know the numbers, feel free to completely ignore them.
Chinese data before, during and after Chinese New Year are always meaningless and misleading given the disruption the holiday causes and the fact Chinese numbers are not seasonally adjusted. We go through this every year. A true reading can only be assessed by averaging out numbers for all of January, February and March.
The ASX200 opened to the downside yesterday, attempted to claw back mid-morning but then slid away steadily throughout the afternoon. This took us back towards support at 6000, but given Wall Street has thrown another late tantrum (very late – the Dow was down -170 when I started writing and it’s closed down -380) that support is looking vulnerable this morning.
The local futures are down -45.
Incidentally, the ASX200 closed at 6037 at the end of January and 6016 at the end of February. One would be forgiven for thinking not much happened.
That Was Fast
The S&P500 closed January at 2823 and February at 2713 for a net -4% loss, having been down -10% early in the month. Last night’s close of down -1.1% didn’t help.
The day had started okay on Wall Street – the indices opened higher. It was the weekly US crude inventory report that triggered the initial selling. They showed a bigger than expect build and this sent the WTI price tumbling -2%.
Which in turn sent the heavyweight US energy sector tumbling, which dragged down the S&P and Dow. As I noted, at around 3.30pm New York the Dow was down around -170 and oil was taking most of the blame. The Nasdaq was actually square, being unencumbered with oil names.
Why, then, the late panic? I would hazard a guess and say the S&P closed down -1.1% on the last day of the month because it fell -10% early in the month.
Aside from traders booking profits from their gains on the sharp rebound, I’m seeing hedge funds with month-end-only redemption windows, selling that has been held off but had to be squared by month’s end, maybe some margin call impact – I’m thinking the sharpness of the late fall is what makes it less scary than it might otherwise be. There was no new news.
Maybe we saw the last of the selling related to that insidious short volatility product.
Still, we’ll have to wait to tonight to find out. But there are a couple of clues to point to. Firstly, the VIX closed at 20, up from 19. No panic there. Secondly, the US ten-year bond yield, which has (inversely) driven US equities all month, is down -4 basis points at 2.87%.
On any other day, that would be cause for a rally.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1317.50||– 0.40||– 0.03%|
|Silver (oz)||16.36||– 0.02||– 0.12%|
|Copper (lb)||3.13||– 0.04||– 1.36%|
|Aluminium (lb)||0.98||– 0.01||– 1.19%|
|Lead (lb)||1.14||– 0.03||– 2.87%|
|Nickel (lb)||6.27||– 0.03||– 0.44%|
|Zinc (lb)||1.58||– 0.02||– 1.32%|
|West Texas Crude (Apr)||61.58||– 1.32||– 2.10%|
|Brent Crude (Apr)||65.78||– 0.74||– 1.11%|
|Iron Ore (t)||78.90||– 0.65||– 0.82%|
The combination of another 0.3% gain in the US dollar index and the (supposedly) weak Chinese data weighed on base metal prices in London, and iron ore is also weaker.
Gold held its own against the greenback, but oil took a hit as noted.
The Aussie is down another -0.3% at US$0.7769.
The SPI Overnight closed down -45 points or -0.5%. No earnings reports to save us today.
And worse, although it’s zero sum in value terms, all of Fortescue Metals ((FMG)), Healthscope ((HSO)), nib Holdings ((NHF)), Platinum Asset Management ((PTM)), REA Group ((REA)), Rio Tinto ((RIO)) and Woolworths ((WOW)) go ex, along with plenty of others.
That’s a big opening handicap.
Otherwise, that December quarter private sector capex release I noted yesterday has been shifted to today for some reason.
It’s the first of the month, which means manufacturing PMIs from around the globe, including Caixin’s take on China.
The US will see January personal income & spending data tonight which includes the Fed ‘s preferred PCE measure of inflation. It may well be that number that determines where Wall Street opens on the first of March.
Rudi will travel to News Ltd's headquarters in Surry Hills this morning to appear on Sky News Business, midday-2pm.
The Australian share market over the past thirty days…
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