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The Overnight Report: High Hopes

Daily Market Reports | Feb 14 2019

World Overnight
SPI Overnight (Mar) 6008.00 – 10.00 – 0.17%
S&P ASX 200 6063.60 – 15.50 – 0.25%
S&P500 2753.03 + 8.30 0.30%
Nasdaq Comp 7420.38 + 5.76 0.08%
DJIA 25543.27 + 117.51 0.46%
S&P500 VIX 15.65 + 0.22 1.43%
US 10-year yield 2.71 + 0.02 0.89%
USD Index 97.14 + 0.43 0.44%
FTSE100 7190.84 + 57.70 0.81%
DAX30 11167.22 + 41.14 0.37%

By Greg Peel

As a Result

The ASX200 closed down -15 points yesterday, but -13 of those points was Commonwealth Bank ((CBA)) going ex-dividend, so really the market was flat.

But it was by no means flat on a sector basis.

The index opened higher from the bell in sympathy with the rally on Wall Street but never quite managed to emulate the enthusiasm of the overnight futures (+29). At midday, the wheels fell off. The macro of Wall Street influence gave way to the micro of local earnings results, which sparked some big moves.

On the positive side, Northern Star Resources ((NST)) gained 7.5%, Computershare ((CPU)) 5.9% and Beach Energy ((BPT)) 5.3%. On the negative, Bapcor ((BAP)) fell -7.9%, Carsales ((CAR)) -5.4%, Tabcorp ((TAH)) -4.0% and Pact Group ((PGH)) which reported on Tuesday, another -8.7%. CSL ((CSL)) fell -3.9% when it did not upgrade guidance.

CSL’s fall was incidentally worth -9 index points.

Outside of the ASX200, GBST ((GBT)) surged 17% and Virgin Australia ((VAH)) flew 7.7%.

The collection of sizeable moves had a clear impact on ASX200 sectors.

Healthcare (-2.5%) was the biggest drag. Telcos (-0.5%) were next worst, ahead of Telstra’s ((TLS)) result today.

IT’s 2.0% gain provided a small counter but notably it’s the sector in which Carsales resides. Bapcor and Tabcorp are in consumer discretionary, but that sector was flat, probably due to a rebound in Westpac’s consumer confidence index.

Energy (+1.1%) provided a solid counter on the back of a strong oil price while industrials (0.6%) is the sector full of stocks that don’t obviously fall into any other sector.

The biggest offset to CSL were actually the banks, when you consider the sector closed down only -0.3% on CBA’s dividend. All of the Big Four “rose” on the day (CBA closed down -12c after going ex -200c).

Materials closed flat, despite a fall in the iron ore price.

As Karen Carpenter would say, we’ve only just begun. The number of reporting stocks per day only grows from here. There are quite a few biggies today. If yesterday is anything to go by, we’re in for a wild ride.

Year to date high

The S&P500 rose above its 200-day moving average last night but it was not the stuff of confirmed breakthroughs. The market fell back from earlier highs – the Dow was up 200 at its peak – but the major indices still managed to close again at new 2019 highs, having first achieved that on Tuesday night.

Tuesday night’s solid rally was driven by another US government shutdown being averted, and trade deal optimism. Last night both were still supporting upside.

Except a shutdown has not yet been averted. The two parties are still haggling over the final details of a deal, and the president still has to sign off on it, which is simply not a given at this stage, although Trump has suggested a second shutdown is “unlikely”.

On the trade side, Wall Street is relieved that Trump is considering a possible extension to the March 1 deadline, but that’s only if a deal appears close. President Xi confirmed last night he would talk to the US delegation, reciprocating Trump’s chat with the vice premier when he was in Washington earlier.

Tonight the big guns of Mnuchin and Lighthizer join the table.

We recall that in reaching a new year to date high, the Fed’s policy shift back to a “patient” stance was a primary driver. Last night data showed the US headline CPI was flat in January but was actually up 0.2% on the core rate. This was enough to send the greenback running once again.

The US December quarter earnings season is now 70% complete, and to date around 70% of that number of reporting companies have beaten on earnings, with just over 60% beating on revenue. Mind you, there was a mad scramble in December as analysts downgraded their forecasts.

And they continue to do so. Back in October, analysts were forecasting 8% net earnings growth in the March quarter for the S&P500. That number has since been revised down to slightly negative. Bear in mind that these are year on year numbers, and that US companies are, as they say, “cycling tough comps”.

2018 saw S&P earnings growth above 20%, which was a lot to do with Trump’s tax cuts. Those tax cuts are now accounted so have no further upside impact, so were earnings growth to be slightly negative in 2019, that’s still a pretty good result on top of last year’s 20% plus growth.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1305.80 – 4.40 – 0.34%
Silver (oz) 15.53 – 0.14 – 0.89%
Copper (lb) 2.78 + 0.02 0.69%
Aluminium (lb) 0.84 – 0.00 – 0.30%
Lead (lb) 0.92 – 0.00 – 0.49%
Nickel (lb) 5.62 + 0.05 0.88%
Zinc (lb) 1.19 – 0.00 – 0.20%
West Texas Crude (Feb) 53.94 + 0.85 1.60%
Brent Crude (Apr) 63.65 + 1.20 1.92%
Iron Ore (t) futures 86.45 – 1.00 – 1.14%

Last night Saudi Arabia pledged to cut another -500,000 barrels per day to 9.8mbpd of oil production in March. WTI rose another 1.5%.

Base metals prices posted small moves but iron ore fell another dollar. The jury is out on whether Vale’s woes will continue to underscore prices towards the US$100/t mark or whether things will soon settle back down.

The US dollar index jumped 0.4% last night to be back above resistance at 97. Gold is slipping away.

The Aussie is down -0.1% at US$0.7090.


The SPI Overnight closed down -10 points.

Japan releases its December quarter GDP result today, China provides January trade numbers, and in the US it’s December retail sales, which is a catch-up.

Today’s earnings reports include those of AMP ((AMP)), Goodman Group ((GMG)), Newcrest Mining ((NCM)), South32 ((S32)), Telstra ((TLS)) and Woodside Petroleum ((WPL)), to name a mere few.

The Australian share market over the past thirty days…

AMC AMCOR Downgrade to Neutral from Outperform Credit Suisse
AZJ AURIZON HOLDINGS Upgrade to Neutral from Sell Citi
Upgrade to Equal-weight from Underweight Morgan Stanley
Downgrade to Neutral from Outperform Macquarie
BEN BENDIGO AND ADELAIDE BANK Downgrade to Sell from Neutral Citi
Downgrade to Underperform from Neutral Credit Suisse
Downgrade to Sell from Neutral UBS
CGF CHALLENGER Downgrade to Sell from Hold Deutsche Bank
CLW CHARTER HALL LONG WALE REIT Upgrade to Hold from Lighten Ord Minnett
COH COCHLEAR Downgrade to Equal-weight from Overweight Morgan Stanley
DOW DOWNER EDI Downgrade to Neutral from Outperform Credit Suisse
FLT FLIGHT CENTRE Downgrade to Hold from Add Morgans
GPT GPT Downgrade to Neutral from Outperform Macquarie
LLC LENDLEASE Upgrade to Buy from Neutral UBS
NST NORTHERN STAR Upgrade to Accumulate from Hold Ord Minnett
PGH PACT GROUP Downgrade to Underperform from Neutral Macquarie
Downgrade to Reduce from Hold Morgans
SGP STOCKLAND Downgrade to Sell from Neutral UBS
SKI SPARK INFRASTRUCTURE Downgrade to Hold from Accumulate Ord Minnett
SUL SUPER RETAIL Downgrade to Hold from Add Morgans
VOC VOCUS GROUP Upgrade to Overweight from Equal-weight Morgan Stanley

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

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