The Monday Report

Daily Market Reports | Mar 11 2019

By Greg Peel

China Syndrome

I suggested on Friday morning that Fridays were good days to take profits and so it came to pass. The local market had a bit of a Paul Keating session.

The ASX200 had run hard up to Friday morning, taking all the ex-divs into account, on a bad-news-is-good-news theme and the expectation of a pending RBA rate cut (or two). Too hard. We cannot look at our own economy in isolation, and no doubt there was a lot of inanimate activity chasing the momentum.

The futures pointed down on Friday morning after the ECB pulled back its 2019 growth forecast to 1.1% from 1.7% and Wall Street responded to the downside. The local index had ignored Wall Street all week. But suddenly the global growth story, or lack thereof, loomed over the exciting prospect of a weak Australian economy.

On Friday, Beijing reported a -20.7% year on year drop in exports, compared to a -5% forecast and a 9.1% rise in January. Don’t mention the tariffs. Imports fell -5.2%. Chinese stockbroker Citic Securities issued a rare Sell recommendation on the Chinese stock market, calling stocks overvalued and warning of a possible -50% drop.

Seems Beijing had become worried about a bubble. The Shanghai index fell -4.4%.

No one was spared in the local market’s -60 point drop and it was the one day in the week ex-divs had little impact. All sectors closed in the red.

Leading the charge were the banks, down -1.6%, along with materials, down -1.1%. Both had enjoyed a nice run-up during the week. Energy’s -1.5% drop was more than the oil price suggested.

The Big Bank CEOs are currently being grilled in Canberra, which doesn’t help.

Not faring quite as badly were healthcare (-0.3%) and industrials (-0.3%), while, good heavens, IT fell only -0.2% to be the best performer on the day. Being the best performer is no surprise. Any move of less than 1% in a session is virtually unheard of.

Individual stocks moves on the day were inconsequential. There were no standout losers in the ASX200 and winners all posted small moves. Most of the action involved the indices themselves.

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