The Monday Report (On Tuesday)

Daily Market Reports | Apr 23 2019


By Greg Peel


The local market opened with a flurry on Thursday morning, taking the ASX200 up 24 points by 11am. Then at 11.30 it plunged straight back down again to the flat line, after which everyone left for Easter.

It appears the market was not happy with the March jobs numbers. The unemployment rate ticked up to 5.0% from 4.9%. However this in itself was not the trigger. We are currently in a "bad news is good news" phase.

The jobs report was actually very solid, with the tick up in the unemployment rate a result of increased participation. The month saw 48,300 new full-time jobs added and a loss of -22,600 part-time jobs for a net gain of 25,700. The February number was revised up to 10,700 jobs added from a prior 4,600. Full-time jobs are now up 3.4% year on year and part-time up 0.4%.

These are not numbers that would prompt the RBA into cutting rates anytime soon, hence the disappointment.

But despite the market closing flat ahead of the holiday, there was still a lot going on among sectors and stocks.

Healthcare (-1.3%) is currently on the nose, with a little help from what was a strong week for the Aussie but also on "overbought" calls from analysts and sector weakness in the US.

Telcos (+1.1%) are balancing out healthcare, as investors become more confident in Telstra's ((TLS)) dividend and less confident about bank dividends. The banks did rally early on Friday until National Bank ((NAB)) announced another $525m in additional provisions to cover RC-related remediation. The sector closed up 0.2%.

There were several resource sector quarterly reports out on Thursday, good and bad, which led to a flat close for materials and a 1.1% gain for energy.

Woodside Petroleum ((WPL)) reported lower production and sales but a higher realised price for its LNG, leading to a 1.0% share price gain. Fortescue Metals ((FMG)) joined the chorus of iron ore miners lowering production guidance due to the impact of Cyclone Veronica, but surprised no one and the stock rose 0.7%.

Galaxy Resources announced it has not been able to find a buyer for its South American project, which led to an -11.6% fall. Whitehaven Coal ((WHC)) rose 6.5% after Queensland government declared the company's Winchester South operation a "coordinated project" which is code for "significant for the state".

Outside of the index, Australia's Amazon, ((KGN)), jumped 18.6% after providing a positive trading update and announcing a partnership with EclipX ((ECX)) to launch Kogan Cars. Bubs Australia ((BUB)) announced a distribution deal with Chemist Warehouse to sell its products both here and in China. That was good for 10.1%.

So not an uneventful session, but nothing to note on a net basis for the market. A four or even ten-day break beckoned.

Thursday Night

Note that the table above indicates last night's US market movements.

Wall Street did not pay much attention to the release of the Mueller Report on Thursday night, which (sort of) let Donald Trump off the hook. The Democrats are not satisfied nonetheless, so the fat lady hasn't yet sung, but Wall Street lost interest about a year ago.

More interesting were the session's earnings reports, which provided some strong beats and solid share price rises. Among the beaters were Travelers (Dow), American Express (Dow) and Honeywell.

With 15% of the S&P500 now having reported, forecast net earnings growth expectations for the March quarter have been adjusted up to -2.3% from -4.5% at the end of 2018 and June quarter projections to a slight positive from a prior negative. This implies fears of an "earnings recession" (two quarters of negative growth) are unfounded.

US economic data, on the other hand, are continuing their recent trend of "mixed".

Retail sales rose 1.6% in March when 1.1% was expected, boosted by a 3.1% jump in new auto sales after a period of weakness when the Fed was on the hiking rampage. But the excitement of a new car will have been tempered by a full 10% increase in the average petrol price in the month.

New jobless claims fell again, to a 50-year low, while consumer sentiment ticked up after a weak start to the year.

A flash April estimate of a combined manufacturing and services PMI published by Markit showed a drop to a 31-month low 52.9 from 55.3 in March. The equivalent ISM numbers are more closely watched in the US, so we await comparisons.

Put all of the above together and Wall Street's incremental rally back towards the prior all-time high continued on Thursday night. The Dow gained 106 points or 0.4%, the S&P rose 0.2% to 2905 (all-time high 2940) while the Nasdaq was flat.

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