The Monday Report

Daily Market Reports | Feb 04 2019

By Greg Peel

Friday Fade

The ASX200 opened enthusiastically on Friday morning, trading up 18 points in the first hour. But thereafter sentiment faded away to lunchtime, ahead of a flat close.

The banks were sold down aggressively over the week, with hedge funds allegedly setting themselves short ahead of today’s aftermarket release of the RC report. Friday saw a bit of consolidation, with financials closing down only -0.1%.

Let’s see what tomorrow brings.

The resource sectors had been the big winners over the week to counter financials, on iron ore and oil price strength. The oil price dipped on Thursday night, apparently sparking some profit-taking. The energy sector fell -0.9% to be the worst performer on the day.

Materials (+0.3%) hung in there alongside the iron ore price, which will likely stand still now for a week during the Chinese New Year shutdown. Pure-play miner Fortescue Metals ((FMG)) was the greatest beneficiary of the Brazilian dam tragedy, gaining 20% for the week.

As a counter, graphite miner Syrah Resources ((SYR)), the most shorted stock in the market, fell -27% over the week post production report, including another -8% on Friday.

Telcos (-0.7%) continued to drift back on Friday while utilities (+0.9%) remain popular in the current climate.

News came through from Washington during the Asian session that Donald Trump had received a letter from Xi Jinping suggesting he was keen to “meet halfway” on trade negotiations ahead of the March 1 tariff increase deadline. There has been talk of possibly another trade meeting before then, and also of possibly an extension of that deadline, but a press statement issued by the White House stated “While progress has been made, much work remains to be done,” while reiterating the March 1 deadline.

So nothing to get excited about there, at this stage.

Meanwhile, China’s manufacturing industry continues to suffer, with Caixin’s independent measure of China’s PMI showing a drop to 48.3 in January from 49.7 in December, suggesting accelerating contraction.

It was US-China news that appeared to take the wind out of the ASX200’s sails late morning, that and the fact it was Friday.

And we so look ahead with trepidation to the release of the Hayne report after the share market's close.

Fed got it wrong?

The US added 304,000 new jobs in January, when 172,000 was forecast. The US manufacturing PMI rose to 56.6 when 54.3 was expected. The University of Michigan’s fortnightly consumer sentiment index rose to 91.2 from 90.7 prior. Construction spending rose 0.8% in November.

And the Fed’s on hold?

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