The Monday Report

Daily Market Reports | Apr 15 2019

By Greg Peel

Bank on it

On Friday morning the local futures were 21 points higher before the open despite a flat session on Wall Street. The iron ore price had risen overnight but otherwise I suggested futures strength likely reflected the fact the ASX200 dipped below the technical level of 6200 on Thursday, but managed to close just above.

That would perhaps trigger another round of technical buying, and indeed it did. By 11am on Friday the index had basically booked in its 52 point gain for the day.

Buying was not, nevertheless, market-wide. While almost all sectors enjoyed comfortable gains, healthcare (-0.4%) and materials (-0.2%) sat it out, the latter despite the iron ore price. Profit-taking in these sectors was evident last week, and Friday saw an apparent rotation into a couple of sectors that had been left behind in the recent rally – consumer staples (+1.8%) and, most notably, financials (+1.6%).

Investors piled back into the banks at a time a new race to the bottom on mortgage pricing threatens margins. And ahead of earnings results on Friday night for US banks JP Morgan and Wells Fargo. For some reason Australian banks like to follow US banks on occasion.

Telcos (+0.9%) and utilities (+1.0%) also had strong sessions, so there was no particular “risk on” theme evident, just selective buying.

China released March trade data on Friday, which were mixed at best but appeared to have no impact on the Australian market.

Chinese exports jumped 14.2% year on year in March when a 7.3% gain was forecast. It looks good, until one takes into account February exports fell -20.8%. Chinese data are not seasonally adjusted, so what we see is the usual noise surrounding the Chinese New Year period of dip (February) and recovery (March). Net them out and the picture is not as rosy.

Moreover, imports fell -7.6% in March after also falling, by -5.2% in February. Forecasts were for only a -1.3% drop.

Last month’s PMI data raised hopes the Chinese economy had bottomed out and was on the road of stimulus-driven recovery. Last month’s trade data do not necessarily give weight to this hope.

With the ASX200 now poised between 6200 support and 6300 resistance ready to see what happens next. Despite a rally on Wall Street on Friday night, our futures closed flat. We head into a short week ahead of Easter and thereafter Anzac Day with school holidays underway across the country. We also head into the thick of US earnings season.

Cheers for the Mouse House

In a strong session on Wall Street on Friday night, the Dow (+1.0%) outperformed the S&P500 (+0.7%) thanks in particular to two stocks.

Disney unveiled its highly anticipated streaming service on Friday night and an 11% pop for the stock suggests it’s a goodun’. It was the best day for Disney shares in a decade and the stock hit a new all-time high.

What do we sell to fund our Disney buying? Streaming rival Netflix lost -5%.

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