Daily Market Reports | Apr 11 2018
This story features INSURANCE AUSTRALIA GROUP LIMITED. For more info SHARE ANALYSIS: IAG
| World Overnight | |||
| SPI Overnight (Jun) | 5841.00 | + 2.00 | 0.03% |
| S&P ASX 200 | 5857.00 | + 48.30 | 0.83% |
| S&P500 | 2656.87 | + 43.71 | 1.67% |
| Nasdaq Comp | 7094.30 | + 143.96 | 2.07% |
| DJIA | 24408.00 | + 428.90 | 1.79% |
| S&P500 VIX | 20.47 | – 1.30 | – 5.97% |
| US 10-year yield | 2.80 | + 0.01 | 0.39% |
| USD Index | 89.63 | – 0.21 | – 0.23% |
| FTSE100 | 7266.75 | + 72.00 | 1.00% |
| DAX30 | 12397.32 | + 135.57 | 1.11% |
By Greg Peel
A Different Tack
It was an unusual session for the ASX200 yesterday in this day and age, but not unusual in terms of days gone by. From the opening bell, the algos had no idea what to do. The futures had closed unchanged overnight, and that’s exactly where the day’s session kicked off.
These days we’re used to the computers going mad in one direction from the open, before the humans intervene and begin sending the index on a more realistic path. This time we saw no movement initially, before a very steady rally took the market to its highs at lunchtime, which it then held for the afternoon.
The impetus for that rally was President Xi Jinping’s speech to the Boao Forum, a Chinese government sponsored gathering of business and political leaders. In the current context, it would have been of little surprise if Xi came out all guns a-blazing in retaliation to the rants and threats of Twitter’s favourite son, but this was far from the case. Rather than fuel the fire of trade war fears, Xi went some way to extinguishing them. He made no mention of one Donald Trump.
The communist dictator gave the elected capitalist a lesson in diplomacy.
Beijing plans to give foreign companies greater access to the Chinese financial and manufacturing sectors, Xi explained. He flagged cuts in tariffs on car imports and improvements in intellectual property protection, among other measures. Xi countered Trump’s accusations at each step, without ever alluding to them.
The reality is, none of it is new. These are plans Xi has outlined previously. But in the current context, as Trump continues to up the ante and China has to date responded with a “two can play at this game” approach, Xi’s were soothing words to a market on edge. At the very least, global markets have been provided with a glimmer of hope that a resolution to trade conflicts can indeed be reached through negotiation rather than war. It could have all gone the other way.
The materials sector was the biggest gainer (+1.5%) in the ASX200 yesterday on easing trade fears, with energy (+1.0%) chiming in. Industrials (+0.8%) were another beneficiary but it appears investors may have been using their healthcare profits to fund purchases elsewhere. That sector lost -0.7%. Telcos jumped 1.3% because sometimes they just do.
The stand-out sector in yesterday’s trade were nevertheless the banks. The financials sector has been sliding into the depths recently mostly on home grown issues and each time we have seen a bounce amidst recent trade war-related volatility, the banks have missed out. But talk is beginning to filter through from analysts and technicians that despite the threat of tighter regulations and subsequent reduced earnings expectations as a result of the Royal Commission, bank valuations are now looking attractive.
Financials posted its best session in a long time in rising 1.1%. If the ASX200 is ever to retest its all-time high in our lifetime, it cannot be achieved in defiance of the banks.
In the shorter term there remains the small matter of the post-GFC high to reclaim, which is still of couple of hundred points away. Today won’t be the day, despite a 400 point rally for the Dow overnight. That was Wall Street catching up, hence the futures are only up 2 points this morning.
Do easing trade war fears really matter so much to Australia? Yesterday’s NAB business confidence survey for March showed a -30% plunge in the conditions index, to 14 from a February record high of 21.
Zucker Punch
Xi spoke yesterday as Wall Street slept. At the open of US stock markets, all indices step-jumped higher and stayed there for the rest of the session.
Dominating the day’s proceedings, given Xi was baked in from the opening bell, was the grilling Facebook founder Mark Zuckerberg was copping from the joint Senate committee.
From the relatively brief section of the lengthy proceedings this writer watched, my conclusion is most of the debate was going around in circles. One could not help but envisage a headmaster grilling a high school student about a science experiment that had unintentionally gone horribly wrong.
How does one balance America’s first amendment rights against a requirement for Facebook to be the information filter and protector of last resort? How can Facebook, or social media in general, continue to exist if monetisation of voluntarily divulged information is regulated against?
How does Washington prevent social media being a vehicle for passive political influence? In the past we all relied on newspapers, and of course they never…oh wait.
Who let Pandora in?
All but forgotten about last night was the reason Wall Street tanked late on Monday night, being the FBI raid on the offices of Trump’s personal lawyer. Did Trump pay off a porn star? Does anyone really care? We recall that when Kevin Rudd was caught in a strip club, his popularity rating soared, at least temporarily.
Wall Street cares if it somehow leads to Trump’s undoing, but would rather overlook such matters and concentrate on trade and, from the end of this week, earnings. If Trump is to ultimately be undone, the more likely trigger would be the ongoing Russian probe that Wall Street conveniently forgets about, other than periodically.
Last night’s rally on Wall Street was down to Xi. For the record, Facebook shares closed up 4.5%, but they have fallen by as much as -20% and all the big tech stocks enjoyed relief rallies last night.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1339.10 | + 3.40 | 0.25% |
| Silver (oz) | 16.55 | + 0.08 | 0.49% |
| Copper (lb) | 3.13 | + 0.05 | 1.61% |
| Aluminium (lb) | 0.99 | + 0.03 | 2.90% |
| Lead (lb) | 1.09 | + 0.01 | 0.50% |
| Nickel (lb) | 6.18 | + 0.12 | 2.00% |
| Zinc (lb) | 1.47 | + 0.01 | 0.82% |
| West Texas Crude (May) | 65.61 | + 2.32 | 3.67% |
| Brent Crude (Jun) | 70.99 | + 2.44 | 3.56% |
| Iron Ore (t) | 65.85 | + 1.75 | 2.73% |
The price moves above tell the tale. Strong sessions for aluminium, copper, nickel, iron ore and oil reflect easing trade war fears.
Strong commodity prices are behind a 0.8% jump in the Aussie to US$0.7760.
Today
The SPI Overnight closed up 2 points, given the ASX200 responded to Xi yesterday and Wall Street simply caught up last night.
China will release inflation data today and the US also sees its CPI number tonight, along with the minutes of the March Fed meeting.
Locally, the RBA governor will speak today and Westpac will publish its monthly consumer confidence survey.
Insurance Australia Group ((IAG)) will host an investor day today and Westfield ((WFD)) holds its AGM.
The Australian share market over the past thirty days…
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