The Monday Report (On Tuesday)

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World Overnight
SPI Overnight (Jun)	6270.00	+ 26.00	0.42%
S&P ASX 200	6259.80	+ 3.40	0.05%
S&P500	2907.97	+ 2.94	0.10%
Nasdaq Comp	8015.27	+ 17.21	0.22%
DJIA	26511.05	– 48.49	– 0.18%
S&P500 VIX	12.42	+ 0.33	2.73%
US 10-year yield	2.59	+ 0.03	1.17%
USD Index	97.30	– 0.08	– 0.08%
FTSE100	7459.88	– 11.44	– 0.15%
DAX30	12222.39	+ 69.32	0.57%

By Greg Peel

Thursday

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, Kogan.com ((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.

Commodities Thursday

There's been a lot of see-sawing in oil prices recently as the market tries to balance out the impact of rising US production and the possibility of Russia returning to full production with sanctions on Iran and Venezuela. Yet Thursday marked the seventh week in a row of oil price gains, which has not happened for five years.

Oil rose on Thursday night due to a fall in the US rig count. WTI gained 1.3% to US$64.57/bbl.

The US dollar index rose 0.4% as the euro fell. While Markit's US composite PMI estimate suggested a sharp decline, more worrying was a fall for its eurozone equivalent to 51.3 from 51.6, suggesting contraction is not that far away.

To that end base metal prices largely had a weak session, with copper falling -1.2% and nickel and zinc -1.6%.

The gold price was up a tad, while the Aussie dropped -0.4% to match the greenback's rally, to US$0.7148.

Monday Night

This week is the biggest on the US earnings calendar, with around a third of S&P500 companies reporting. The week starts slowly nonetheless, so last night's session was more one of idling ahead of a barrage of releases.

One company reporting last night was Kimberly Clark. It rose 5.4%.

FactSet noted last night that of the 15% S&P companies so far reporting, 78% have beaten earnings estimates, which is above the five-year average, but only 53% have beaten on revenues, which is below average.

Energy was the strongest sector last night as oil prices jumped 2%. The White House surprised with an announcement the waivers offered to several countries with regard US sanctions on Iranian oil imports would cease next month. Those countries which would have suffered due to lost imports had been granted an exemption, but now the White House is clamping down.

This means any country defying US sanctions on Iranian oil would find themselves the target of US sanctions. And this includes China.

Hence the surprise, at this critical time in US-China trade negotiations. Beijing is apparently not happy.

Washington is withdrawing the waivers on a promise from both Saudi Arabia and the UAE that they would increase oil production to fill the gap left by lost Iranian barrels. OPEC meets in June to discuss production quotas. The intention is oil prices will not be net impacted. Last night's moves suggest otherwise.

The Dow was down -100 points mid-session last night but overall it appears Wall Street is not in any mood to sell, while waiting for the signal to buy. This week may provide that trigger if earnings results go to plan.

Commodities Monday

Spot Metals,Minerals & Energy Futures
Gold (oz)	1274.40	– 1.30	– 0.10%
Silver (oz)	15.00	0.00	0.00%
Copper (lb)	2.91	– 0.04	– 1.23%
Aluminium (lb)	0.84	+ 0.01	0.73%
Lead (lb)	0.87	– 0.00	– 0.56%
Nickel (lb)	5.75	– 0.10	– 1.63%
Zinc (lb)	1.31	– 0.02	– 1.63%
West Texas Crude	65.70	+ 1.13	1.75%
Brent Crude	74.12	+ 1.56	2.15%
Iron Ore (t) futures	93.60	+ 1.10	1.19%

Note that the table above shows base metal price moves from Thursday night. The LME was closed last night.

The iron ore price is a net of both Thursday night's and last night's sessions.

Outside of oil there is not much more to highlight.

The Aussie is weaker, down another -0.2% at US$0.7136.

The SPI Overnight closed up 26 points, or 0.4%, on Friday morning and was closed last night.

The Week Ahead

It will presumably be a deathly quiet "week" in Australia given only three trading sessions and a lot of the country taking holidays. We will however see the all-important March quarter CPI numbers released tomorrow.

That will be followed by the PPI and import/export price numbers on Friday.

As US earnings season ramps up, data releases this week include house prices and new home sales tomorrow, durable goods orders on Thursday and consumer sentiment on Friday. Friday also brings the first estimate of March quarter GDP.

Forecasts have that result as high as 2.8% growth, which is a far cry from the sub-2% numbers being bandied around at the beginning of the year.

The Bank of Japan holds a policy meeting on Thursday.

On the local stock front, Northern Star Resources ((NST)) releases its production report tomorrow and Atlas Arteria ((ALX)) a quarterly update.

UR Westfield ((URW)) posts quarterly earnings on Thursday.

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
DLX	DULUXGROUP	Upgrade to Hold from Sell	Deutsche Bank
		Upgrade to Neutral from Sell	UBS
		Downgrade to Hold from Add	Morgans
ORE	OROCOBRE	Downgrade to Underperform from Neutral	Macquarie
PPC	PEET & COMPANY	Upgrade to Outperform from Neutral	Macquarie

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