Daily Market Reports | May 15 2019
|SPI Overnight (Jun)||6251.00||+ 25.00||0.40%|
|S&P ASX 200||6239.90||– 57.70||– 0.92%|
|Nasdaq Comp||7734.49||+ 87.47||1.14%|
|S&P500 VIX||18.06||– 2.49||– 12.12%|
|US 10-year yield||2.42||+ 0.01||0.58%|
|USD Index||97.53||+ 0.16||0.16%|
By Greg Peel
With Wall Street down -2.4% overnight the scene was set yesterday morning for a local market whitewash and indeed the ASX200 dropped to be down over -90 points in the first 45 minutes, almost to 6200. But there lies solid technical support.
Thereafter the index spent all day slowly recovering a lot of that loss, and even fended off last minute selling to close on a high for the day of down -57, or less than -1%. Not a bad effort.
The financials sector was the worst performer on the day, falling -1.8%. Part of that was National Bank ((NAB)) going ex but weakness lingered across the Big Four in the wake of Commonwealth Bank’s ((CBA)) update on Monday. IOOF ((IFL)) also came in for a -6% hit as brokers pointed out they simply do not believe the fund manager’s own RC-related remediation forecasts.
Consumer staples (+0.2%) offered a small island of safety on a day when international issues were the prime driver, but across all other sectors bar one, falls were relatively uniform and of the market-wide variety.
The exception was materials, which rallied 0.2% seemingly at odds with the day’s theme. The gold miners were always going to offer some resistance on the flight to safety move up for the gold price and indeed three of the top five ASX200 winners on the day were gold miners. But the star of the day was Fortescue Metals ((FMG)).
Fortescue picked a good day to pull a 60c special dividend out of its hat and that was worth an index topping 7.4% rally.
On the downside, it was déjà vu all over again as Mayne Pharma ((MYX)) issued another profit warning, which for the drug maker is becoming somewhat “generic”. It fell -15%. Reliance Worldwide ((RWC)) continued to leak after its own profit warning on Monday and dropped -6.9%. IOOF took the bronze.
Yesterday morning the futures suggested a -54 point drop and got it pretty right, other than the fact we were down -90 early on. With Wall Street enjoying somewhat of a bounce last night, our futures are up 25 points this morning.
Wall Street’s bounce last night after Monday night’s trashing came with as no surprise to most. Monday night saw widespread selling across sectors, suggesting investors took the opportunity to take money off the table and reduce risk at this time. The worst hit sectors and stocks were of course those most exposed to China.
That latter group was considered “oversold” on Monday night. And indeed it was that group that led the rally back last night, with a little help from the president.
US trade delegates will be off to Beijing, again, and Trump last night suggested it should be clear in “three or four weeks” if the trip was successful. “I have a feeling it’s going to be very successful,” he said, without the slightest hint of irony. Not like we haven’t heard that before.
Trump was also railing at the Fed again, tweeting “China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a “match,” it would be game over, we win! In any event, China wants a deal!”
The case for the Fed to cut rates, trade war notwithstanding, did strengthen slightly last night when the US April PPI came out at a mere 0.2% increase when 0.7% was forecast.
But three elements of last night’s bounce signal to commentators that it was more of an automatic response than a clear reversal of sentiment.
Firstly, China-facing stocks were considered very oversold, so a bounce there was not a shock. Secondly, Wall Street fell on heavy volume on Monday night and bounced on very light volume last night. Thirdly, The Dow was up 360 points earlier in the session and faded to close up 207 – a trend matched by the other indices.
Conclusion? No fat lady.
It’s become yet another waiting game. One thing can be considered a given, and that is volatility will continue to run rife at the touch of a few presidential keys. Wall Street is beholden to “headline risk”.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1296.30||– 3.30||– 0.25%|
|Silver (oz)||14.76||+ 0.01||0.07%|
|Copper (lb)||2.75||+ 0.01||0.46%|
|Aluminium (lb)||0.80||+ 0.00||0.59%|
|Lead (lb)||0.81||+ 0.00||0.25%|
|Nickel (lb)||5.32||+ 0.00||0.01%|
|Zinc (lb)||1.23||+ 0.01||0.55%|
|West Texas Crude||61.34||+ 0.50||0.82%|
|Brent Crude||70.86||+ 0.95||1.36%|
|Iron Ore (t) futures||93.45||– 0.95||– 1.01%|
The table above is almost a mirror image of yesterday’s table, other than that iron ore slipped again having fallen on Monday night.
Otherwise, base metals and the oils all rebounded having all fallen the night before, albeit by lesser percentages, while gold slipped back a tad after having been the star in the commodity sell-off.
The greenback ticked up 0.16% but the Aussie went nowhere, steady at US$0.6942 as the swinging sixties appear here to stay for the time being.
The SPI Overnight closed up 25 points or 0.4%.
China will release April industrial production, retail sales and fixed asset investment data today. We’re now far enough away from the New Year holiday impact for the numbers to be more meaningful, if indeed Chinese numbers ever are.
The US will match with industrial production and retail sales numbers tonight, albeit for March.
Westpac will publish its consumer confidence survey today. How are we all feeling going into Saturday, with promises reigning from the heavens?
The first element of March quarter GDP – the wage price index – is due today. Someone will be hoping for a good number, and praying that tomorrow’s jobs data do not show an increase in unemployment.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ABC||ADELAIDE BRIGHTON||Upgrade to Hold from Sell||Deutsche Bank|
|Downgrade to Sell from Neutral||Citi|
|Downgrade to Neutral from Outperform||Credit Suisse|
|AGL||AGL ENERGY||Downgrade to Sell from Neutral||Citi|
|ANN||ANSELL||Downgrade to Hold from Buy||Deutsche Bank|
|CBA||COMMBANK||Downgrade to Hold from Add||Morgans|
|COH||COCHLEAR||Downgrade to Neutral from Buy||Citi|
|EVN||EVOLUTION MINING||Upgrade to Add from Hold||Morgans|
|Upgrade to Accumulate from Hold||Ord Minnett|
|FXL||FLEXIGROUP||Upgrade to Outperform from Neutral||Macquarie|
|GNC||GRAINCORP||Upgrade to Hold from Reduce||Morgans|
|IDX||INTEGRAL DIAGNOSTICS||Upgrade to Buy from Accumulate||Ord Minnett|
|ORI||ORICA||Upgrade to Neutral from Sell||Citi|
|Downgrade to Neutral from Outperform||Credit Suisse|
|OSH||OIL SEARCH||Downgrade to Hold from Buy||Deutsche Bank|
|QAN||QANTAS AIRWAYS||Downgrade to Neutral from Outperform||Macquarie|
|QBE||QBE INSURANCE||Downgrade to Sell from Hold||Deutsche Bank|
|RWC||RELIANCE WORLDWIDE||Downgrade to Hold from Add||Morgans|
|SGM||SIMS METAL MANAGEMENT||Downgrade to Equal-weight from Overweight||Morgan Stanley|
|SXY||SENEX ENERGY||Downgrade to Neutral from Outperform||Credit Suisse|
|SYD||SYDNEY AIRPORT||Downgrade to Sell from Neutral||UBS|
|TPM||TPG TELECOM||Upgrade to Accumulate from Hold||Ord Minnett|
|URW||UNIBAIL-RODAMCO-WESTFIELD||Downgrade to Sell from Neutral||Citi|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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