The Monday Report

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World Overnight
SPI Overnight (Mar)	6206.00	+ 35.00	0.57%
S&P ASX 200	6175.20	– 4.40	– 0.07%
S&P500	2822.48	+ 14.00	0.50%
Nasdaq Comp	7688.53	+ 57.62	0.76%
DJIA	25848.87	+ 138.93	0.54%
S&P500 VIX	12.88	– 0.62	– 4.59%
US 10-year yield	2.59	– 0.04	– 1.41%
USD Index	96.60	– 0.19	– 0.20%
FTSE100	7228.28	+ 42.85	0.60%
DAX30	11685.69	+ 98.22	0.85%

By Greg Peel

Missed the Gun

Suppose they gave a market and nobody came. That seemed to be the case on Friday as the ASX200 did basically nothing all day and then everyone went home.

There was apparently no joy provided by Chinese premier Li Keqiang, who pledged on Friday to maintain strong economic stimulus measures such as lowering rates, cutting the bank reserve ratio requirement and slashing taxes for consumers and businesses. The pledge was good for a 2% jump for the Chinese market, and 1% in Japan.

Li also spoke to trade negotiations, expressing optimism that a deal between China and the US can be achieved that suits both parties. A deal on tariffs may yet be weeks away, but China is “very reasonable and responsible,” he ensured.

It’s the sort of talk that might on any other day have sparked a bit of optimism downunder, but not on Friday. The fact everyone went to sleep is perhaps evident in the SPI futures trade on Friday night. Wall Street was modestly higher but our futures closed up 35 points on Saturday morning.

Materials (-1.0%) was the main counterbalance on Friday, against a 0.6% gain for energy and 0.7% for industrials. The iron ore price was up solidly overnight but daily price moves in metals are presently not the clear impetus for moves in mining stocks that have had a very solid 2019 to date. Gold miners nevertheless still bounce around with the gold price.

The banks and healthcare were mildly negative. At the individual stock level, there was not much to speak of either.

Chipping Away

In responding to questions regarding Li Keqiang’s comments, US Treasury Secretary Steve Mnuchin on Friday night echoed the sentiment of a deal being weeks away in saying “there’s still a lot of work to do” and noting no date has yet been set for a meeting between the two presidents.

Still, Wall Street remains optimistic, and the pledge of more Chinese stimulus helped the US indices to a positive session, albeit off intraday highs.

Chip stocks were the big winners last week, rising 5% as a group. Chipmakers had been among the hardest hit stocks in last year’s trade war but have enjoyed a revival in 2019 from oversold levels alongside the general market. The week began with the announcement of a big M&A deal from Nvidia.

It ended with an earnings report from Broadcom that sent that stock up 8%, specifically on upbeat guidance. Broadcom lit a fire under other neglected names in the space and the Nasdaq outperformed with a 0.8% gain.

US economic news was mixed on Friday.

Industrial production rose only 0.1% in February when 0.4% was forecast. December’s -0.6% plunge was revised up to -0.4%, providing at least some relief. On the flipside, Michigan Uni’s fortnightly consumer sentiment index has risen to 97.8 from 93.8 at the end of February when economists assumed 95.

Boeing ceased to be a drag on the Dow on Friday night as news went around a problem-solving software “patch” will be ready within ten days. The stock rallied, despite Boeing itself sticking to an expected timetable of “weeks” before a fix is installed.

Investigators have since found similarities in the black box data of the Ethiopian and Indonesian planes, suggesting the issue can indeed be pinpointed.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1302.30	+ 6.70	0.52%
Silver (oz)	15.26	+ 0.11	0.73%
Copper (lb)	2.93	0.00	0.00%
Aluminium (lb)	0.84	– 0.01	– 0.78%
Lead (lb)	0.93	– 0.02	– 2.14%
Nickel (lb)	5.86	0.00	0.00%
Zinc (lb)	1.29	– 0.01	– 0.82%
West Texas Crude	58.40	– 0.11	– 0.19%
Brent Crude	66.99	– 0.18	– 0.27%
Iron Ore (t) futures	86.20	– 0.90	– 1.03%

I’m not entirely sure the LME base metal price data we have this morning is accurate. For both copper and nickel to be completely unchanged looks suspicious.

Otherwise the only move of note is that of gold regaining the 1300 mark thanks to a -0.2% fall in the US dollar index, which also sees the Aussie up 0.3% at US$0.7085.

The SPI Overnight closed up 35 points or 0.6%.

The Week Ahead

The Fed meets this week, with a statement and press conference due on Wednesday night. Consensus among economists is now forecasting half a rate hike in 2019, meaning half suggest one hike in 2019 and the other half says not until 2020.

Other US data releases this week include housing sentiment tonight, housing starts and factory orders tomorrow, and existing home sales and a flash reading of March manufacturing PMI on Friday.

Australia, Japan and eurozone will also flash.

The Bank of England holds a policy meeting on Thursday night.

New Zealand’s December quarter GDP result is due on Thursday.

Australia will see numbers for December quarter house prices tomorrow and population on Thursday, along with February jobs numbers.

Thursday also brings the quarterly expiry of SPI futures and options and index options, which can often lead to exogenous volatility on the day.

The ex-divs continue to flow this week, albeit not quite at the same pace as last week.

There is also a burst of earnings reports this week, featuring Fonterra ((FSF)), Nufarm and TPG Telecom ((TPM)) on Wednesday and Sigma Healthcare ((SIG)) on Thursday.

Rudi will appear on Your Money today, noon-2pm.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ANZ	ANZ BANKING GROUP	Downgrade to Underweight from Equal-weight	Morgan Stanley
AST	AUSNET SERVICES	Downgrade to Hold from Add	Morgans
HPI	HOTEL PROPERTY INVESTMENTS	Downgrade to Hold from Accumulate	Ord Minnett
MPL	MEDIBANK PRIVATE	Downgrade to Underperform from Neutral	Credit Suisse
ORG	ORIGIN ENERGY	Downgrade to Equal-weight from Overweight	Morgan Stanley
STO	SANTOS	Downgrade to Neutral from Buy	UBS
WPL	WOODSIDE PETROLEUM	Downgrade to Neutral from Buy	UBS

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

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