Daily Market Reports | Jun 13 2019
|SPI Overnight (Jun)||6552.00||+ 2.00||0.03%|
|S&P ASX 200||6543.70||– 2.60||– 0.04%|
|S&P500||2879.84||– 5.88||– 0.20%|
|Nasdaq Comp||7792.72||– 29.85||– 0.38%|
|DJIA||26004.83||– 43.68||– 0.17%|
|S&P500 VIX||15.91||– 0.08||– 0.50%|
|US 10-year yield||2.13||– 0.01||– 0.61%|
|USD Index||96.97||+ 0.24||0.25%|
|FTSE100||7367.62||– 30.83||– 0.42%|
|DAX30||12115.68||– 40.13||– 0.33%|
By Greg Peel
The ASX200 shot out of the blocks once more yesterday, as if driven by some supernatural force, and despite no lead from Wall Street. While it was always going to be another good day for the iron ore miners, initially everyone went along for the ride.
The index gained 40 points into further “blue sky” (post-GFC) but 45 minutes in, someone called time.
Materials remained the standout by the close with a 2.1% gain, thanks to a 5% jump in the iron ore price, but the profit-takers moved in on other sectors that have had a good run of late.
Healthcare jumped over 3% on Tuesday and fell back -1.7% yesterday to be the worst performer. The banks have done little more than run up since the election and everything thereafter so financials fell back -0.7%.
A -0.7% fall for consumer discretionary may have been the result of a disappointing Westpac consumer confidence survey result.
Westpac’s confidence index has fallen -0.6% to 100.7 – 100 being the crossover from pessimism into optimism. Unlike NAB’s business confidence survey the day before, which showed a spike in confidence post-election but was cut off before the RBA rate cut, Westpac’s survey took in the election, rate cut and GDP result.
Expectations were thus for a similar spike. But no. Within the segments of survey, consumers were more confident about their finances (rate cut) but less confident about the economy (weak GDP result). Or if you like, consumers are seeing what stock markets can be blind to, being not the rate cut itself but the reason for it.
Those sectors closing in the green yesterday, outside of materials and IT, suggested a defensive tone at these lofty levels. Staples, telcos and utilities all performed well.
Alongside the profit-taking in cyclicals that is no great surprise after such a swift rally, the local market was looking with concern to the north where the Hang Seng index fell another -1.7%. The protests in Hong Kong are all about trying to maintain what sovereignty the city-state has left under China’s two-system rule, and part of that separation from China is long established, free and open financial markets.
The concern is how far Beijing will go in what appears a first step towards bringing Hong Kong fully under its wing.
The only individual ASX200 stock move of the day worth noting was that of mining contractor Emeco Holdings ((EHL)), which jumped 14.2% on a guidance upgrade.
Coming back to RBA rate cuts, and speculation for further rate cuts, today brings the May jobs numbers. If they are bad, do we rally once more? Or are rate cuts already baked in (possibly even too much) at these new highs? If they are good, do we tank?
Wall Street also saw a mild sell-off last night, but our futures are up a stoic 2 points this morning.
The Fed and Trade
Speaking of tanking, the weekly US crude inventory lottery showed yet another big build last night. Add that in with trade war concerns and WTI fell -3.7%.
On the trade front, Donald Trump is currently hosting his Polish counterpart and the two held a joint press conference at the White House last night. As is typical, reporters were keen to ask all sorts of questions unrelated to why they were there.
Trump reiterated that China wants to do a deal (we’ve been hearing that for two years) and that it is China paying the tariffs (no it’s not – US importers are paying the tariffs) and that he is the one holding things up because he either wants a “great” deal or no deal.
When asked if there were a deadline after which the last tranche of tariffs would be imposed, as is constantly threatened, Trump pointed to his head and said “it’s all up here”.
Well there had to be something in there.
On the subject of the Fed, the US CPI numbers for May showed a mere 0.1% gain at the headline and a drop in the annual rate to 1.8% from 2.0%. A year ago the annual rate was 3%. The core rate also rose 1%, dropping the annual rate to 2.0% from 2.1%.
While these numbers were (a) in line with forecasts and (b) not the Fed’s preferred measure of inflation, there is nothing here to prevent a rate cut. But as to whether there are grounds here for a rate cut is a matter of conjecture. The market is pricing in two rates cuts this year. Many believe that is optimistic at best.
On a relatively quiet day on Wall Street the major indices drifted lower from the open and did little for the rest of the session. No one is surprised at a stall in a rally that’s put on 5% this month. Sentiment once again swung towards the defensive sectors.
The general feeling is that traders, not investors, have driven the June rally. Short-covering has featured heavily, and volumes have been uninspiring as investors sit on the sidelines with their heads spinning.
The next catalyst for investor involvement, other than out of the blue, can only come from the Fed or trade. That is, a rate cut, or at least a hint at one soon, and a trade deal with China, which seems increasingly distant.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1333.10||+ 6.80||0.51%|
|Silver (oz)||14.75||+ 0.03||0.20%|
|Copper (lb)||2.64||– 0.02||– 0.81%|
|Aluminium (lb)||0.79||+ 0.00||0.39%|
|Lead (lb)||0.87||– 0.00||– 0.33%|
|Nickel (lb)||5.36||– 0.00||– 0.01%|
|West Texas Crude||51.08||– 1.97||– 3.71%|
|Brent Crude||59.83||– 2.19||– 3.53%|
|Iron Ore (t) futures||106.50||+ 0.60||0.57%|
Data released yesterday showed the biggest ever monthly fall in vehicle sales in China, which is blamed for sending copper lower.
Iron ore pushed ahead.
The US dollar index rose 0.3% but that did not stop gold reawakening and rising back over the 1300 mark.
The Aussie is down -0.5% at US$0.6929.
The SPI Overnight closed up 2 points.
All eyes on jobs today.
Cimic ((CIM)) is among stocks going ex-dividend.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ALQ||ALS LIMITED||Upgrade to Hold from Sell||Deutsche Bank|
|SGR||STAR ENTERTAINMENT||Downgrade to Hold from Add||Morgans|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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