The Overnight Report: Comeback Again

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World Overnight
SPI Overnight (Dec)	5761.00	+ 14.00	0.24%
S&P ASX 200	5736.00	+ 3.20	0.06%
S&P500	2730.20	+ 28.62	1.06%
Nasdaq Comp	7259.03	+ 122.64	1.72%
DJIA	25289.27	+ 208.77	0.83%
S&P500 VIX	19.98	– 1.27	– 5.98%
US 10-year yield	3.12	– 0.00	– 0.06%
USD Index	96.99	+ 0.20	0.21%
FTSE100	7038.01	+ 4.22	0.06%
DAX30	11353.67	– 58.86	– 0.52%

By Greg Peel

11.30 Curse

The ASX200 opened up 20 points yesterday following the bounce-back on Wall Street but as it had done the day before, struggled at that level. Then around 11.30am, the bottom fell out of the market, exactly as it had done on Wednesday. At 3pm the index was down around -45 points – a -65 point swing.

Is it someone in Perth who just got to work?

Unlike Wednesday, however, from that point the index rallied straight back to close square. The question was obviously asked, why do we need to be down here?

As was the case on Wednesday, the big intraday drop followed the release of economic data. As to whether the data were a trigger is unclear.

Australia added 32,800 jobs in October, ahead of a 20,000 forecast. Forget the forecast – it never gets close. The 32,800 was net of 42,300 full-time jobs being added, as 2018 continues to see a trend of full-time jobs gaining traction when 2017 was all about part-time jobs. The unemployment rate remained steady at 5.0% on an increase in participation.

In short, a very solid report, and one which goes some way to explaining why, in the face of falling house prices, consumer confidence has risen this month. The report certainly caught out forex traders who continue to play the Aussie to the short side. On the release, the currency shot up to almost US73c. It is still up 0.5% at US$0.7281 this morning, despite the US dollar index rising 0.2%.

Was that yesterday’s 11.30 trigger? A too-strong Aussie?

Looking among the sector moves by the close yesterday, we see a lot of basically flat numbers, belying intraday volatility. The main movers were energy, up 1.0% after the oil price broke its losing streak, IT, up 0.7% because the Nasdaq closed to the upside on Wall Street and AI company Appen ((APX)) jumped 11.6% on a trading update, and consumer discretionary, up 11.6% with some help from child care operator G8 Education ((GEM)), which announced the offload of loss-making centres amidst rising occupancy rates.

The only notable loser on the day was consumer staples, which fell -0.8% on a -1.8% fall in Wesfarmers ((WES)). Wesfarmers’ MD could not refute claims the company would be unable to pay franked dividends after the Coles demerger.

There are no Australian or anyone else’s data releases today of note due today at 11.30am, and the futures are up 14 points this morning. Will the 11.30 curse nevertheless hit again?

Strong Finish

If trade in Australia yesterday looked a bit similar to the day before, trade on Wall Street last night was almost a repeat performance of Wednesday night. Except that the actors changed roles.

On Wednesday night the Dow was down -350 points on bank regulation concerns and a rather hot CPI number but closed down only -100 after Theresa May announced her Brexit deal had been agreed upon in cabinet.

Last night the Dow fell -300 points after it became abundantly clear that while the UK cabinet might have voted to approve the deal, it wasn’t unanimous. Four more ministers subsequently resigned, including the Brexit Secretary. May is holding fast, but it appears increasingly likely a vote of no confidence may be on the cards, and to that end a no-deal Brexit is also increasing in the odds.

The pound fell -1.6%.

Not helping the mood was a revenue miss from Walmart in its result, blamed on US dollar strength, which only became stronger as the pound fell.

But just when it looked like Wall Street might again be heading down to retest prior lows, out came an article from the UK Financial Times, coincidentaly, suggesting US tariffs on China set to come into force on January first might be postponed to allow key negotiators to try and hash out a deal. Trump and Xi meet at the end of this month, meaning there would only have been one month before the next round hit.

US indices shot back up on the news but again looked they might falter late in the session. Unlike Wednesday night nonetheless, there was a late kick up rather than down.

Also serving to buoy the mood somewhat were comments from Fed chair Jay Powell. He remains committed to the Fed’s gradual path of raising rates back to neutral based on the strength of the US economy, but he is finding it “concerning” that growth is clearly slowing elsewhere on the globe.

This week has seen both Japan and Germany report GDP contraction in the September quarter.

While there is no change to expectations of a December rate hike, a “concerned” Fed may not be quite so gung ho in 2019.

The US ten-year yield is steady at 3.12%, but down from its highs of 3.23% which helped to tip stocks over in October.

Wall Street is not yet out of the woods, given sentiment is swinging on a dime, and so far Santa appears to be MIA. Next week is punctuated by Thanksgiving, which means a messy trading week of lower volumes on the one hand but a strong focus on consumer spending on the other, given the infamous Black Friday is really a week-long saga these days.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1213.60	+ 2.80	0.23%
Silver (oz)	14.29	+ 0.14	0.99%
Copper (lb)	2.81	+ 0.05	1.65%
Aluminium (lb)	0.87	– 0.01	– 0.80%
Lead (lb)	0.87	– 0.00	– 0.22%
Nickel (lb)	5.10	+ 0.03	0.53%
Zinc (lb)	1.19	+ 0.04	3.16%
West Texas Crude (Dec)	56.46	+ 0.25	0.44%
Brent Crude (Jan)	66.58	+ 0.43	0.65%
Iron Ore (t) futures	74.99	+ 0.19	0.25%

Copper and zinc were the beneficiaries of positive (albeit unconfirmed at this time) trade news, with zinc’s 3% gain aided by a drop in inventories.

The dip in iron ore lasted only one session.

The oils are up for a second day, very slightly, and not yet convincingly.

The Aussie, as noted, is up 0.5% at US$0.7281 on the jobs numbers.

Today

The SPI Overnight closed up 14 points or 0.2%.

US industrial production numbers are out tonight.

Locally, today’s list of AGMs include a couple that should be a hoot – Lend Lease ((LLC)) and Kogan ((KGN)). Collect your tomatoes at the door.

Also on the list are Link Administration ((LNK)), Mirvac Group ((MGR)) and News Corp ((NWS)), among others.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AOG	AVEO	Downgrade to Underperform from Neutral	Macquarie
		Downgrade to Hold from Add	Morgans
AST	AUSNET SERVICES	Upgrade to Equal-weight from Underweight	Morgan Stanley
		Downgrade to Neutral from Outperform	Macquarie
CTX	CALTEX AUSTRALIA	Upgrade to Outperform from Neutral	Credit Suisse
ELD	ELDERS	Downgrade to Reduce from Hold	Morgans
LLC	LEND LEASE CORP	Upgrade to Outperform from Neutral	Credit Suisse
		Upgrade to Accumulate from Hold	Ord Minnett
		Downgrade to Neutral from Outperform	Credit Suisse
NST	NORTHERN STAR	Upgrade to Outperform from Neutral	Macquarie
SEK	SEEK	Upgrade to Neutral from Sell	UBS
SWM	SEVEN WEST MEDIA	Upgrade to Neutral from Sell	UBS
WOR	WORLEYPARSONS	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.)

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