Daily Market Reports | Jun 25 2019
This story features METCASH LIMITED, and other companies. For more info SHARE ANALYSIS: MTS
| World Overnight | |||
| SPI Overnight (Sep) | 6642.00 | – 16.00 | – 0.24% |
| S&P ASX 200 | 6665.40 | + 14.60 | 0.22% |
| S&P500 | 2945.35 | – 5.11 | – 0.17% |
| Nasdaq Comp | 8005.70 | – 26.01 | – 0.32% |
| DJIA | 26727.54 | + 8.41 | 0.03% |
| S&P500 VIX | 15.26 | – 0.14 | – 0.91% |
| US 10-year yield | 2.02 | – 0.05 | – 2.27% |
| USD Index | 95.99 | – 0.23 | – 0.24% |
| FTSE100 | 7416.69 | + 9.19 | 0.12% |
| DAX30 | 12274.57 | – 65.35 | – 0.53% |
By Greg Peel
Fighting Back
RBA governor Philip Lowe spoke at a lunch yesterday and said he doesn't understand how investors can call for rate cuts and buy the stock market at the same time, calling it a "strange world".
Clearly Dr Lowe has never met TINA.
When you get nothing for your money in cash and very little in fixed income, indeed nothing in real terms, and the property market has boomed and busted, then there is no alternative but to put your money in stocks. Particularly yield stocks.
And given lower discount rates boost equity valuations, rate cuts are a good thing and bad news becomes good news.
Yep, it might be strange, but welcome to the post-GFC world Phil.
The ASX200 dropped over -30 points to late morning yesterday, likely spurred on by a rally on Wall Street that failed in the afternoon, and by US-Iran tensions which once upon a time could have had stock markets plunging. Perhaps the fact Trump called off his military strike and settled for cyber warfare and further sanctions is a relief rather than a concern.
Either way, TINA then stepped in and the index rallied steadily to close on its high, marking a turnaround of over 40 points.
Telcos (+0.7%), and one in particular, led the comeback while the banks (+0.3%), healthcare (+0.2%) and the miners (+0.2%) offered support. On the downside, consumer staples (-0.7%) countered after Metcash ((MTS)) posted a miss on earnings, leading to a -9.8% drop.
All other sectors were relatively quiet, finishing flattish.
Among other individual stock moves, mining contractor Ausdrill ((ASL)) shot up 10.5% after being awarded a five-year contract in Botswana.
Star of the day, outside the index, was furniture retailer Adairs ((ADH)), which bounced a solid 18.4% having fallen -30% on Friday. Brokers were confused by a sudden lack of sales growth at the company (See: Adairs Confounds Analysts), but agreed the share price response was overdone.
As we count off the days to the G20, with nothing much on the local economic data front to ponder, it's difficult to see the market going much one way or the other. Swing factors are of course Iran, and the OPEC meeting tonight.
And Twitter.
Not Fighting Back
Australia went down then up yesterday and last night Wall Street went up then down, again. It was a similar pattern to that seen on Friday night only this time the range was tighter, with the Dow giving up an early gain of 87 points.
The worst sector performance was posted by energy, which has been enjoying higher oil prices. Were there to be a conflict with Iran, or if, one way or the other, Iran closed the Strait of Hormuz, oil prices would quickly be in triple digits. But this uncertainty is clearly leading investors to steer clear.
The Dow and S&P may have closed flat, and the Nasdaq slightly lower, but commentators were quick to point out big falls in the Dow Transports (-1.5%) and Russell small cap index (-1.3%).
Century-old "Dow Theory" has it that a falling Dow Transports average is a precursor to falling Dow Industrial average, but then that harks back to a time when the equivalent of the internet were the railroads. Transport is nevertheless still a valid bellwether of global economic activity, so a falling Transports average remains a sign of weakness.
Another sign of weakness last night was a -10 point fall in the Dallas Fed activity index when -1 was forecast. Dallas joins Philadelphia and New York (Empire State) in posting much weaker than expected activity indices this month.
As for the Russell, it appears investors are at this time preferring to stick to the big names rather than the riskier small names, and preference remains for lumbering defensives. We note also that small caps rallied strongly when the trade war broke out, being mostly domestic-centred and thus immune to tariffs.
Wall Street still thinks it's going to get a deal.
On that note, Monday has already set the pattern for the week which, as suggested above, will likely be quiet ahead of the G20 barring any other distractions.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1419.20 | + 20.20 | 1.44% |
| Silver (oz) | 15.41 | + 0.09 | 0.59% |
| Copper (lb) | 2.68 | – 0.01 | – 0.47% |
| Aluminium (lb) | 0.80 | + 0.01 | 1.36% |
| Lead (lb) | 0.86 | – 0.00 | – 0.23% |
| Nickel (lb) | 5.48 | + 0.01 | 0.17% |
| Zinc (lb) | 1.17 | + 0.02 | 1.43% |
| West Texas Crude | 56.91 | + 0.03 | 0.05% |
| Brent Crude | 64.79 | – 0.55 | – 0.84% |
| Iron Ore (t) futures | 116.30 | – 0.10 | – 0.09% |
If ever there were a momentum trade to jump on right now it's gold. It's a pity gold doesn't pay a dividend. But it is a store of wealth in uncertain times. Gold has not only woken up, it's on pills.
Not much going on elsewhere.
The US dollar index is down, again, by -0.2% to below 96. The Aussie is up, again, by 0.5% at US$0.6962, rather spoiling the USD gold rally.
Today
The SPI Overnight closed down -16 points or 0.2%. Will we fight back again today?
OPEC meeting tonight.
US consumer confidence will be in the frame.
Collins Foods ((CKF)) posts its earnings result.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BXB | BRAMBLES | Downgrade to Neutral from Outperform | Credit Suisse |
| CCL | COCA-COLA AMATIL | Downgrade to Underperform from Neutral | Credit Suisse |
| CTX | CALTEX AUSTRALIA | Downgrade to Neutral from Buy | UBS |
| DMP | DOMINO'S PIZZA | Upgrade to Buy from Neutral | Citi |
| SYD | SYDNEY AIRPORT | Upgrade to Neutral from Underperform | Macquarie |
| TLS | TELSTRA CORP | Upgrade to Neutral from Underperform | Macquarie |
| VEA | VIVA ENERGY GROUP | Downgrade to Hold from Add | Morgans |
| WPL | WOODSIDE PETROLEUM | Upgrade to Buy from Hold | Deutsche Bank |
| WTC | WISETECH GLOBAL | Downgrade to Lighten from Hold | Ord Minnett |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website. Click here. (Subscribers can access prices on the website.)
(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com
FNArena is proud about its track record and past achievements: Ten Years On
Click to view our Glossary of Financial Terms
CHARTS
For more info SHARE ANALYSIS: ADH - ADAIRS LIMITED
For more info SHARE ANALYSIS: CKF - COLLINS FOODS LIMITED
For more info SHARE ANALYSIS: MTS - METCASH LIMITED