The Overnight Report: Trading Blows

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World Overnight
SPI Overnight (Mar)	6198.00	+ 10.00	0.16%
S&P ASX 200	6184.80	– 5.70	– 0.09%
S&P500	2832.57	– 0.37	– 0.01%
Nasdaq Comp	7723.95	+ 9.47	0.12%
DJIA	25887.38	– 26.72	– 0.10%
S&P500 VIX	13.56	+ 0.46	3.51%
US 10-year yield	2.61	+ 0.01	0.46%
USD Index	96.38	– 0.11	– 0.11%
FTSE100	7324.00	+ 24.81	0.34%
DAX30	11788.41	+ 131.35	1.13%

By Greg Peel

Still Choppy

At their March policy meeting, members of the RBA board decided, yet again, that there was not a “strong case” for changing rates but “Rather, they assessed that it would be appropriate to hold the cash rate steady while new information became available that could help resolve the current tensions in the domestic economic data”.

This is a new addition to what has otherwise been a largely consistent last paragraph in RBA minutes for some time.

The “tensions” to which the minutes refer are the conundrum of strong labour market and an “apparent” slowing in the momentum of output growth (lower GDP growth) in the second half of 2018. The board noted that such a trend was also evident in “a number of economies”.

To that end, “members agreed to assess the outlook carefully”.

It appears the RBA is suffering from vu deja – that eerie feeling that this has never happened before. Hence the board still believes the next policy move could go either way – they just don’t know which – despite economists across the country having decided the next move in rates will have to be down, and perhaps not before too long.

The main reason why economists are dovish is summed up by this headline from ABC News yesterday: “Australia’s $133bn property price slide rapidly becoming the worst in modern history”. The headline refers to yesterday’s ABS house price data for the December quarter, which saw Sydney prices falling -3.7%, Melbourne -2.4%, and across Australia, a loss equating to $133bn in value.

The numbers were actually a little weaker than economists had forecast, which perhaps is why yesterday’s performance by the ASX200 failed to live up to the morning futures call of up 20 points. It was another choppy session, which saw the index down -16 points around eleven, up 16 points at lunchtime, and little moved by the close.

Any sense of direction is currently lacking.

Sector moves were mixed, with further gains for materials (+0.9%) helping to offset weakness in healthcare (-1.4%) and the banks (-0.4%), while the coin came up heads for telcos (+0.6%).

Among individual stocks, coal miner New Hope Corp ((NHC)) disappointed with its earnings result and fell -11.8%, while TPG Telecom ((TPM)) went the other way with its report and rose 4.4%.

Outside of the index, it was not a good day for recently listed cement producer Wagners Holding ((WGN)), who received a demand from major customer Boral ((BLD)) to lower cement prices in line with market trends or suspend sales for six months. Wagners chose the latter option and its shares fell -25%.

Wall Street turned a solid opening gain into a minor loss last night but our futures are up 10 points this morning. Over three days, that’s up 25, up 20 and up 10, all of which have proven pie in the sky. But still optimism reigns.

Conflicting News

A Wall Street Journal article reporting that the US and China are in the final stages of trade negotiations had US stocks off to a positive start last night, sending the Dow up close to 200 points by mid-session. Chief trade representative Robert Lighthizer and Treasury Secretary Tim Mnuchin will fly to Beijing next week.

But a subsequent report from Bloomberg suggested Chinese officials believe the US has not made sufficient assurances with regard the lifting of tariffs in response to China’s agreeing to changes in intellectual property legislation.

The Dow closed slightly in the red.

Whether or not trade confusion was the main order of the day, or whether after a four and a half day run-up, Wall Street decided to take some profits ahead of the Fed statement tonight, is unclear.

Probably a combination of both.

In economic news, US factory orders, which refer to orders for US-made goods, rose only 0.1% in January when economists had forecast 0.4%, matching December’s 0.1% gain.

Is it just me or is each successive US data release these days suggesting signs of slowing?

The US dollar index is down again, for the seventh session out of eight.

Bring on the Fed.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1306.10	+ 2.80	0.21%
Silver (oz)	15.34	+ 0.02	0.13%
Copper (lb)	2.94	+ 0.00	0.02%
Aluminium (lb)	0.86	+ 0.01	1.21%
Lead (lb)	0.91	– 0.01	– 0.80%
Nickel (lb)	5.93	+ 0.08	1.30%
Zinc (lb)	1.29	+ 0.00	0.25%
West Texas Crude	58.88	– 0.07	– 0.12%
Brent Crude	67.52	+ 0.10	0.15%
Iron Ore (t)	86.95	– 0.85	– 0.97%

Not a lot of excitement in the table above. We might note that the reason for aluminium’s jump last night was news major Norwegian producer Norsk Hydro was hit with a cyber attack last night, which switched the company’s giant smelters to manual.

Aluminium is currently the most shorted of the base metals.

Iron ore continues its ups and downs, but is not moving anywhere away from the mid-eighties at this stage.

Despite a slightly lower greenback, the Aussie is down -0.2% at US$0.7088 after yesterday’s data.

Today

The SPI Overnight closed up 10 points.

Fed policy statement and press conference tonight.

Locally, Fonterra ((FSF)) and Nufarm ((NUF)) post earnings results today while Ofx.com ((OFX)) hosts an investor day, Wesfarmers ((WES)) hosts a Bunnings strategy day (sausage sandwiches available at the entrance) and Sydney Airport ((SYD)) releases monthly traffic stats.

Crown Resorts ((CWN)) and Webjet ((WEB)) are among those stocks going ex today.

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
CBA	COMMBANK	Downgrade to Underperform from Neutral	Macquarie
ELD	ELDERS	Upgrade to Hold from Reduce	Morgans
HPI	HOTEL PROPERTY INVESTMENTS	Downgrade to Hold from Accumulate	Ord Minnett
MPL	MEDIBANK PRIVATE	Downgrade to Underperform from Neutral	Credit Suisse
NVX	NOVONIX	Upgrade to Speculative Buy from Add	Morgans
ORG	ORIGIN ENERGY	Downgrade to Equal-weight from Overweight	Morgan Stanley
RHL	RURALCO	Downgrade to Hold from Add	Morgans
SYD	SYDNEY AIRPORT	Downgrade to Hold from Buy	Deutsche Bank

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

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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