Daily Market Reports | Apr 17 2018
This story features SOUTH32 LIMITED, and other companies. For more info SHARE ANALYSIS: S32
World Overnight | |||
SPI Overnight (Jun) | 5820.00 | 0.00 | 0.00% |
S&P ASX 200 | 5841.30 | + 12.20 | 0.21% |
S&P500 | 2677.84 | + 21.54 | 0.81% |
Nasdaq Comp | 7156.28 | + 49.63 | 0.70% |
DJIA | 24573.04 | + 212.90 | 0.87% |
S&P500 VIX | 16.56 | – 0.85 | – 4.88% |
US 10-year yield | 2.83 | + 0.00 | 0.11% |
USD Index | 89.43 | – 0.35 | – 0.39% |
FTSE100 | 7198.20 | – 66.36 | – 0.91% |
DAX30 | 12391.41 | – 50.99 | – 0.41% |
By Greg Peel
No Support
In February this year the Australian market took a dive in line with Wall Street when it had no realistic right to do so. The ASX200 did not match the S&P500’s run-up to overvalued levels in 2017. In the last couple of months, volatility has remained prevalent on Wall Street, with trade the most influential factor among many sideshow issues, but the local market has become more tempered in its responses rather than simply being a blind follower.
So it was yesterday that the ASX200 shot up 38 points from the open when the Dow had fallen over a hundred points on Friday night. It seems the market is trying to think a bit harder about what’s really going on. While profit-taking post US bank earnings results was one factor in Wall Street’s fall, concern over the airstrikes in Syria was another.
Over the weekend those concerns abated as it was confirmed the airstrikes were measured and specifically targeted, and thus not likely to invoke World War III. Meanwhile, commodity price increases are disproportionately positive for Australia compared to the weighting of resources in the US indices. Yesterday one broker’s upgrade of the sector helped the ASX200 to its initial gains.
But it didn’t last long. The opening spurt failed to engender market support, and on low volume the index drifted back all session. There are just too many moving parts at play at the moment for investors to feel in any way confident, it would seem.
And so it was the ASX200 closed up 12 points, continuing the theme of last week – moves in either direction of 12-13 points which establish no pattern of sentiment.
Energy (+0.9%) was a major driver yesterday, following last week’s 8% gain in the oil price. Oil is off a little overnight, so we may see some profit-taking today. Utilities (+1.5%) won the day, but that’s because AGL Energy is really an energy stock (there’s possibly a clue in the name) and having been unloved for some time, is now attracting value hunters.
Materials (+0.5%) made their mark, with miners Western Areas ((WSA)), South32 ((S32)) and Alumina ltd ((AWC)) all finishing in the ASX200 top five. All sectors finished in the green bar consumer discretionary and the banks.
In the case of the former, the euphoria surrounding Seven West Media’s ((SWM)) cricket coup, which drove the stock price up 12% on Friday, gave way to reality yesterday when brokers expressed their concerns over how much Seven had actually paid. Seven West shares fell -10%.
In the case of the latter, round two of the Royal Commission kicked off yesterday with wealth management under the microscope – a business that is still dominated by the Big Four. We note Perpetual ((PPT)) lost over -5% yesterday post quarterly market update.
The early movers in the market yesterday, even though they were probably just computers, would be pleased to see the Dow up over 200 points overnight, vindicating that call. It was also a very strong night for base metals. But this morning, the futures are “unch”.
Looks like another day on the sidelines ahead.
All is Forgiven
On Friday night, JP Morgan, Citigroup and Wells Fargo all posted earnings beats and were ultimately sold off. Last night Bank of America posted a similar beat, and was bought. Retail broker/advisor Charles Swab beat earnings and enjoyed a solid rally. The share prices of the likes of Goldman Sachs and Morgan Stanley, due to report tonight and tomorrow night respectively, rallied in anticipation.
What changed? Why are earnings beats now a reason to buy rather than a reason to take profits? Perhaps Friday night was more about geopolitical concerns than was apparent.
Transport & logistics was the major reporting sector of the session, and strong results across the board sent share prices soaring. If you are among those who believe hundred year-old Dow Theory still has any relevance in a world in which technology not even contemplated back then represents 25% of the equity market, then you will be pleased.
On that note, Netflix reported after the bell and is up over 5% in the aftermarket as I write. The company posted earnings in line with forecasts, but June quarter guidance greatly exceeded forecasts.
US retail sales popped 0.6% in March when 0.4% was expected. While Easter falling at month’s end provided a boost, the positive result comes after three months of dips, providing relief for US retailers.
Last night the Dow crossed back over its 50-day moving average. Moving averages retain their technical relevance whatever the make-up of the market is. The S&P is still shy, but is now back in positive territory for the year.
The earnings season has only just begun. If news out of the White House, the Middle East and Russia can quieten down for a bit, strong earnings results may just prove the catalyst US investors are relying on.
Commodities
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 1345.50 | + 0.10 | 0.01% |
Silver (oz) | 16.63 | 0.00 | 0.00% |
Copper (lb) | 3.12 | + 0.04 | 1.23% |
Aluminium (lb) | 1.08 | + 0.05 | 5.01% |
Lead (lb) | 1.08 | + 0.03 | 2.85% |
Nickel (lb) | 6.49 | + 0.18 | 2.87% |
Zinc (lb) | 1.42 | + 0.01 | 0.40% |
West Texas Crude (May) | 66.34 | – 1.03 | – 1.53% |
Brent Crude (Jun) | 71.56 | – 0.97 | – 1.34% |
Iron Ore (t) | 64.05 | – 1.20 | – 1.84% |
The rally in aluminium continues a-pace as analysts weigh up the constraint on supply the sanctions against Rusal will imply and Rio Tinto ((RIO)) declares force majeure on certain supply contracts, given Rusal is both a customer and investment partner in bauxite and alumina sales and production.
Base metal price jumps were the order of the day, aided by a weaker US dollar.
Oil prices peaked out on Friday night with an 8% weekly gain as traders entered the weekend not knowing what the ramifications of the airstrikes on Syria might be. Fears had eased last night, hence profit-taking was evident.
Meanwhile, the iron ore price is currently bouncing around in the mid-sixties without any real trend.
Today
The SPI Overnight closed unchanged.
China will release its March quarter GDP result today. Annualised growth of 6.8% is expected.
Monthly numbers for Chinese industrial production, retail sales and fixed asset investment are also due.
Industrial production will also be in the frame in the US tonight.
Locally, the minutes of the April RBA meeting are due.
Bank of Queensland ((BOQ)) will report earnings.
OZ Minerals ((OZL)), Saracen Minerals ((SAR)) and Whitehaven Coal ((WHC)) will publish quarterly production reports.
Rudi will be linking up with Sky News Business via Skype this morning, probably around 11.15am, to discuss share markets and broker calls.
The Australian share market over the past thirty days…
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CHARTS
For more info SHARE ANALYSIS: AWC - ALUMINA LIMITED
For more info SHARE ANALYSIS: BOQ - BANK OF QUEENSLAND LIMITED
For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED
For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED
For more info SHARE ANALYSIS: S32 - SOUTH32 LIMITED
For more info SHARE ANALYSIS: SWM - SEVEN WEST MEDIA LIMITED
For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED