The Overnight Report: Triple High

Daily Market Reports | Jul 04 2019

World Overnight
SPI Overnight (Sep) 6645.00 + 22.00 0.33%
S&P ASX 200 6685.50 + 32.30 0.49%
S&P500 2995.82 + 22.81 0.77%
Nasdaq Comp 8170.23 + 61.14 0.75%
DJIA 26966.00 + 248.57 0.93%
S&P500 VIX 12.57 – 0.36 – 2.78%
US 10-year yield 1.95 – 0.02 – 1.16%
USD Index 96.78 + 0.02 0.02%
FTSE100 7609.32 + 50.13 0.66%
DAX30 12616.24 + 89.52 0.71%

By Greg Peel

Woolies Pulls the Handle

The big news on the ASX yesterday was the announcement by Australia’s largest owner of poker machines it will combine its pub and bottle shop businesses and hive them off in a new entity next year, which will become Australia’s largest drink & hospitality company.

The ESG lobbyists have won. Woolworths’ ((WOW)) remaining supermarket/BigW/petrol station businesses will no longer be a no-go for ethical investors – a group which grows by the day.

The announcement was worth a 2.7% pop for Woolworths and a market leading 2.0% gain for the staples sector.

The news came after the ASX200 stumbled from the open before resuming rally-mode to another new post-GFC high. Big moves up in iron ore and gold prices supported materials (+0.6%) while a big move down in oil ensured energy (-2.2%) was the contrary loser on the day.

Industrials (+1.3%), utilities (+1.9%) and telcos (+0.8%) continue to March higher as the RBA marches lower, with financials (+0.2%) a little less certain.

The ASX200 is now only a bit over 100 points away from an actual all-time high. All we need is some really bad economic news.

We didn’t get that yesterday, rather we learned May delivered the Morrison government with a record trade surplus, despite both exports and imports rising. No prizes for guessing what drove export receipts, and June promises to be better still as the iron ore price continues to rise. Lumpy aircraft purchases boosted imports, but could not counter commodities.

Iron ore should allow the government to cover its tax cuts, which, we learned this morning, should now sail through the Senate with cross-bench support. Interestingly, the Aussie dollar yesterday did not much react to the surplus news, sitting just under US70c at day’s end, but this morning is up 0.5% on a flat greenback.

In other news, building approvals ticked up 0.7% in May after having fallen in the prior two months. Apartment approvals actually rose, by 1.2%, having fallen -5.1% in April. Is it a blip? Or is it another sign of a stabilising housing market?

Among individual stocks, rumours have it private equity is sniffing around drought-afflicted Nufarm ((NUF)), sending that stock up 7.4% yesterday. On the flipside, SpeedCast International ((SDA)) added to Tuesday’s -40% drop with another -16.5%. Gold miners featured in the top five winners, and oil & gas companies in the top five losers.

Rocket’s Red Glare

It was fireworks on the NYSE last night – literally, they set them off inside the exchange at the 1pm close of the holiday-short session.

Otherwise fireworks were provided by some more fabulously weak US data.

The US service sector PMI fell to a two-year low 55.1 in June, down from 56.9 in May, and below 55.9 expectations.

Factory orders fell -0.7% in May.

The ADP private sector jobs number for June came in a 102,000, up from 41,000 in May but missing 140,000 forecasts. Wall Street was ecstatic. If Friday’s non-farm payrolls result can be wonderfully weak as well, put that Fed rate cut in the bag.

They’re even talking -50 points.

And pricing it all in, by the looks. All of the S&P, Dow and Nasdaq closed at all-time highs last night. All S&P sectors closed in the green, although the leaders were still the defensive sectors while cyclicals dragged the chain.

Wall Street was also encouraged by news Mario Draghi is to be replaced by former IMF boss Christine Lagarde as ECB president when his tenure expires. Lagarde is highly respected, but also known to have a dovish leaning.

Global stock markets continue to rise on the TINA theme, combined with the safety of a global central bank put option.

At least until a frustrated Trump unleashes his last round of tariffs.

No Wall Street tonight.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1418.20 + 0.10 0.01%
Silver (oz) 15.28 0.00 0.00%
Copper (lb) 2.66 + 0.00 0.11%
Aluminium (lb) 0.80 + 0.00 0.05%
Lead (lb) 0.84 – 0.00 – 0.53%
Nickel (lb) 5.55 + 0.05 0.92%
Zinc (lb) 1.13 – 0.01 – 0.89%
West Texas Crude 57.40 + 1.08 1.92%
Brent Crude 63.85 + 1.25 2.00%
Iron Ore (t) futures 126.35 + 0.15 0.12%

The rock and roll story for oil continues. Monday night oil rallied on a confirmed extension of OPEC+ production cuts, and Tuesday night collapsed after OPEC said weak global demand is the reason. Last night the US crude inventory lottery again pulled out a drawdown, so oil bounced back.

Not much going on elsewhere, except that Aussie, which is up 0.5% at US$0.7030. Told you it doesn’t like the sixties.

Today

The SPI Overnight closed up 22 points or 0.3%.

Australian retail sales numbers are out today for May.

Happy Fourth to all our Seppo mates.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AGL AGL ENERGY Upgrade to Neutral from Underperform Credit Suisse
IGO INDEPENDENCE GROUP Downgrade to Underperform from Neutral Credit Suisse
MND MONADELPHOUS GROUP Downgrade to Neutral from Buy UBS
NHC NEW HOPE CORP Upgrade to Add from Hold Morgans
NWL NETWEALTH GROUP Downgrade to Underperform from Neutral Macquarie
ORG ORIGIN ENERGY Upgrade to Outperform from Neutral Credit Suisse
PRU PERSEUS MINING Downgrade to Neutral from Outperform Credit Suisse
RHC RAMSAY HEALTH CARE Downgrade to Hold from Accumulate Ord Minnett
SDA SPEEDCAST INTERN Upgrade to Neutral from Underperform Macquarie
TLS TELSTRA CORP Downgrade to Neutral from Buy UBS

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.)

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CHARTS

NUF SDA WOW