The Overnight Report: All Looks Rosy

Daily Market Reports | Sep 14 2018

World Overnight
SPI Overnight (Sep) 6158.00 + 27.00 0.44%
S&P ASX 200 6128.70 – 47.20 – 0.76%
S&P500 2904.18 + 15.26 0.53%
Nasdaq Comp 8013.71 + 59.48 0.75%
DJIA 26145.99 + 147.07 0.57%
S&P500 VIX 12.37 – 0.77 – 5.86%
US 10-year yield 2.96 0.00 0.00%
USD Index 94.54 – 0.30 – 0.32%
FTSE100 7281.57 – 31.79 – 0.43%
DAX30 12055.55 + 23.25 0.19%

By Greg Peel

Royally Thumped

A long list of sizeable ex-dividends across many sectors ensured the ASX200 was off to an apparently weak start yesterday morning but weakness continued as the sellers moved in. An attempt was made to recover around lunchtime but then the afternoon just saw more of the same as the buyers gave it away.

The one ray of light was materials, which with +0.7% was the only sector to post a gain on the day. Base metals prices had enjoyed a welcome bounce in London overnight thanks to a glimmer of hope on US-China trade and it was thus of little surprise every one of the stocks on the ASX200 top five leaders’ board yesterday were miners or mining servicers. Copper, nickel and graphite miners won the day.

An interesting point to note is that the quantum of gains for the top five stocks – a range from 3% to 5% — was exactly matched on the top five losers’ board, and three of those losers went ex-div. In other words, this was market-wide selling.

Most sectors saw a fall of around -1% but the standouts were healthcare, down -2.1%, with CSL ((CSL)) and friends acting more and more as simple currency proxies, and utilities, down -2.2% thanks to a -2.7% fall for AGL Energy ((AGL)).

Energy (-0.3%) held up on another gain for the oil price and telcos (-0.4%) similarly outperformed. Woolworths went, ex, helping staples down -0.9%, but trying to find a buyer was like trying to find a needle in a strawberry.

For the real damage was done in the financials sector, which fell a middling -1.1% by percentage but provided the greatest negative impact on the index. More shocking tales of woe coming out of the RC, this time with regard insurance, again left the market, and the country, in disbelief.

AMP ((AMP)) snuck onto the bottom of the losers’ board. Would the last one to leave…

Amidst the carnage came the release of the August jobs numbers, and lo, we saw that they were good.

The ABS dart board had 44,000 jobs added in August when 18,000 were expected, following a surprise -4,300 dip in July. The unemployment rate remained steady at 5.3% with participation ticking up one basis point, while underemployment fell to 8.1% from 8.5% to mark a four-year low.

It is the underemployment rate – adding together unemployment and those who would like to work more hours – which is keeping wage growth stagnant.

It was this data release that provided the brief attempt at recovery for the index yesterday, late morning, that ultimately failed.

The market will enjoy a reprieve from the initial ex-div hit on the index this morning as today’s list is small with no big names. The futures are up 27 points this morning which is interesting, as it’s hard to tell what’s different today than yesterday.

Most base metal prices are again stronger. Oil has come off but iron ore is up. The Aussie is up again, but not by as much as Wednesday night, and Wall Street had a positive session.

Looks like there may have been a big offshore sell order in there yesterday.

Good Apple

Well it seems that after a day of reflection, Apple analysts have decided that the company’s new suite of phones and Dick Tracey gadgets is actually quite positive. Traders initially saw nothing mind-blowing and sold Apple shares on Wednesday night.

The focus for Apple analysts is no longer the gadgets themselves – we’ve had the iPod, iPhone, iPad and iWatch and nothing new since – but rather the price points. When last year the iPhoneX was released with a four-figure ticket it was assumed this was a step too far for the average phone buyer. But Apple fans are rusted on, and that assumption was proven to be misguided.

Now that there is a suite of offerings ranging from cheap to expensive, analysts are assuming this will prove positive for sales. Apple share thus bounced back 2.4% last night, lifting all of the Dow, S&P and Nasdaq.

The US CPI numbers for August were released before the open last night and, while I know she hates being dragged into these things every time, it was a Goldilocks result. Consumer price inflation rose 0.2% in the month when 0.3% was expected. It was the fifth straight month of gains, but the annual rate fell to 2.7% from 2.9%.

The more important core rate fell to 2.2% from 2.4%. The booming US June quarter GDP result reignited fear the Fed might move too quickly on raising rates, and the emerging market currency crisis that has since precipitated has added to that fear. But this CPI result suggests the Fed need not be in any hurry.

A rate hike is expected this month but right now December is up in the air.

On the subject of EMs, last night President Erdogan – a man elected on a platform of not raising interest rates – gave the nod to the Turkish central bank to raise interest rates. By 625 basis points, to 24%.

And we get all a-flutter when Westpac hikes its SVR by 14 basis points.

The ECB last night left its policy unchanged, with Draghi suggesting not to expect a rate hike from the negative until at least late 2019. The BoE kept its rate on hold at 0.75%.

Meanwhile, over on the fiscal side of the equation, last night the Wall Street Journal suggested the reason why the White House has suddenly decided to invite China back to the trade table, other than the approaching mid-terms, is that US officials sense “a new vulnerability – and possibly more flexibility – among Chinese officials”.

So add up all of the above and it was a good session on Wall Street for all major indices bar the Russell small cap, which sat still.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1200.90 – 5.20 – 0.43%
Silver (oz) 14.14 – 0.09 – 0.63%
Copper (lb) 2.71 + 0.00 0.13%
Aluminium (lb) 0.92 + 0.01 0.68%
Lead (lb) 0.92 + 0.01 1.12%
Nickel (lb) 5.72 + 0.12 2.18%
Zinc (lb) 1.07 – 0.01 – 0.94%
Iron Ore (t) futures 68.31 + 0.59 0.87%

Hurricane Florence was last night downgraded to a category 2, meaning not quite so breezy but still a few feet of rain. And last night the International Energy Agency noted OPEC crude production rose to a record in August.

Hence WTI fell -2%.

Zinc dipped back in London but nickel went on with it. So another positive day ahead for our two big nickel pure-plays.

The US dollar index dipped -0.3% on the lower CPI and the Aussie matched it, rising to US$0.7192.

Today

The SPI Overnight closed up 27 points or 0.4%.

China will release August industrial production, retail sales and fixed asset investment numbers today while the US will release July industrial production and retail sales numbers tonight.

Locally, the promotion and relegation of stocks into and out of the S&P/ASX indices announced a week ago come into effect today.

Gold Road ((GOR)) is set to release an earnings report.

Today’ ex-div list will not move the index dial.

Rudi might appear on Sky News Business at around 11.15am this morning, but there is nothing much in today’s Broker Call Report so it may well be scrapped.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BHP BHP BILLITON Downgrade to Hold from Buy Deutsche Bank
BSL BLUESCOPE STEEL Downgrade to Sell from Buy Citi
CBA COMMBANK Upgrade to Neutral from Sell Citi
EVN EVOLUTION MINING Upgrade to Accumulate from Hold Ord Minnett
FMG FORTESCUE Downgrade to Sell from Buy Deutsche Bank
MYR MYER Upgrade to Hold from Lighten Ord Minnett
Upgrade to Neutral from Sell UBS
ORG ORIGIN ENERGY Upgrade to Accumulate from Hold Ord Minnett
S32 SOUTH32 Upgrade to Buy from Hold Deutsche Bank
WHC WHITEHAVEN COAL Upgrade to Buy from Hold Deutsche Bank

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

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