The Overnight Report: On Hold

This story features BENDIGO & ADELAIDE BANK LIMITED, and other companies. For more info SHARE ANALYSIS: BEN

By Greg Peel

Mixed Bag

The ASX200 opened up over 10 points yesterday and fell to be down over -40 mid-session before recovering to close down -10. It appears volatility is in order above 6000, with results season sure to provide plenty of opportunity.

The standout result from yesterday was that of Bendigo & Adelaide Bank ((BEN)), which wasn’t pretty. The stock fell -6.8% and sparked selling across all banks, sending financials down -1.2% to be the worst performing sector on the day.

Countering the banks were resources, particularly iron ore miners, which ran yet again on another jump in the iron ore price. Materials rose 1.5%. With China now back, the iron ore price was down -4% overnight. Could be a different story today.

It was a mixed bag for the index but also a mixed bag within healthcare. CSL and Cochlear were sold down ahead of their results tomorrow but announced new federal funding for the aged care sector had residential aged care providers surging, led by Estia Health ((EHE)) posting a 7.3% gain. Bear in mind they all were trashed when this new RC was announced.

Telstra also copped some selling and reports on Thursday. Telcos were down -0.5%.

Sector moves elsewhere were more modest.

We will note nonetheless that the Townsville floods are now taking their toll. Australian Agricultural Co ((AAC)) disclosed yesterday four of its cattle properties have been severely impacted. That stock fell -12%. Green grocer Costa Group ((CGC)) was also affected, and fell -3.9%. If the drought hadn’t already been enough for Nufarm ((NUF)), the floods were worth -4.0% yesterday. Not a big fan of Dorothea Mackellar.

Bendelaide was the standout reporting company yesterday. There was less drama among the others. Amcor ((AMC)) and JB Hi-Fi ((JBH)) both gained 1.5%, with the latter notable for being the third most shorted stock on the market.

Wall Street is once again pretty flat overnight but our futures are relatively buoyant this morning at up 24. That appears to belie the dip in iron ore.

Adrift

With the Fed now on hold, US earnings season winding down and the latest round of US-China trade talks kicking off last night, Wall Street is currently adrift in the doldrums as it awaits any news on the trade front – the next big catalyst.

There is still talk of a possible extension to the tariff increase deadline, but if nothing is resolved this week it will mark a year since negotiations began. Trump did, from the outset, suggest short term pain for long term gain but from a political perspective, he needs a short term win.

Wall Street may be adrift but is not rudderless, with our former PM popping up on CNBC this morning to relay his pessimistic views on US-China relations.

Meanwhile, hopes that a deal could be reached to avoid another shutdown have been dashed once more. It seems the two sides are just too far apart and concession is impossible. Here, again, Trump must make a politically risky decision – draw the ire of government workers with another shutdown or reinforce his base with an emergency order to build his Wall, thus bypassing Congress.

An emergency order would set a dangerous precedent – up to now intended for times of war or natural disaster when bipartisan support is all but guaranteed – not intended for a president who just can’t get his own way. And it would likely lead to a legal challenge that could take some time to play out.

It is unclear how Wall Street would respond to another shutdown, given the first one was shrugged off, but shrugged off at a time the stock market was surging back from well oversold territory and trade hopes were dominant.

Wall Street remains faintly optimistic on trade, but needs some good news soon.

Commodities

Apologies, but we seem to a have a problem with our LME price feed this morning. The table above shows unchanged prices for the base metals but anecdotal reports suggest mild weakness across most metals.

China is back, and the US dollar is up 0.4%, hence there’s some downside pressure.

Iron ore has finally seen a dip.

Oil markets are still waiting to see whether Libyan production will indeed come back on line, and are also impacted by the greenback.

As is gold.

The Aussie is down -0.2% at US$0.7065.

Today

The SPI Overnight closed up 24 points or 0.4%.

Today brings local housing finance numbers and the NAB business confidence survey.

Earnings reports are due from Challenger ((CGF)), Transurban ((TCL)) and Megaport ((MP1)).

Macquarie Group ((MQG)) will provide an update.

GUD Holdings ((GUD)) and Insurance Australia Group ((IAG)) go ex.

The Australian share market over the past thirty days…

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

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