The Overnight Report: Pass the Burgers

This story features CSL LIMITED, and other companies. For more info SHARE ANALYSIS: CSL

World Overnight
SPI Overnight (Sep)	6660.00	– 2.00	– 0.03%
S&P ASX 200	6718.00	+ 32.50	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	96.74	– 0.04	– 0.04%
FTSE100	7603.58	– 5.74	– 0.08%
DAX30	12629.90	+ 13.66	0.11%

By Greg Peel

Out of Breadth

Another day, another 30-odd point rally for the ASX200 to another post-GFC high. However, this time the bulk of the market sat it out and watched the banks and healthcare do all the work.

Financials rallied 1.0%, flipping to outperformers in the recent rally having been a little sluggish up to this point. Healthcare kept on keeping on, rising 1.1%.

Recent gains in healthcare are largely down to sector heavyweight CSL ((CSL)), as this year’s flu outbreak proves to be a particularly nasty one, and not just in Australia.

As for the banks, well I suppose we can make a connection between tax cuts and mortgage affordability.

As to whether we can soon make a connection between tax cuts and consumer spending is yet to be seen. Yesterday’s retail sales data were again weak, showing a mere 0.1% gain in May after April’s -0.1% drop. Economists had forecast +0.2%.

There is a possibility consumers put off buying anything pricey ahead of the mid-month election, but the reality is year on year growth declined in May for a third straight month, to 2.4%.

Once upon a time a healthy sales growth rate was considered to be something above 3%, and back before 2007 Australian sales were growing for a time at 6%.

Utilities (+0.9%) had another good session on the yield play while on the flipside, it appeared bank purchases were funded by taking profits in materials (-0.4%), as the iron ore price trended down during the day.

At the individual stock level, SpeedCast International ((SDA)) finally hit the earth and bounced, up 9.9%.

A debate is ranging among bank analysts as to whether the independent investment platforms will be forced to lower margins in the face of RBA rate cuts, as returns on cash allocations on platforms threaten to fall into the negative net of fees. Both Netwealth ((NWL)) and Hub24 ((HUB)) have been weak in recent times on fee competition and net funds outflows across the industry.

Yesterday Hub24 shares jumped 8.7% as the company's response to the ASX effectively rubbished the analysis published by Macquarie and the likes, suggesting do your homework, boys, you're not seeing the wood for the trees.

On the other side of the ledger, increasingly weak lithium price forecasts have Pilbara Minerals ((PLS)) on the slide, down another -5.8% yesterday.

Yesterday gave us a sign the local market is beginning to lose breadth as the air gets thinner at new post-GFC highs, with the 2007 high looming just over a hundred points away (or over 150 if you take the intraday high of November 1).

Next week we’ll see the first of the resource sector quarterly production reports, which will provide a clue as to whether miners in particular are deserved of today’s lofty valuations.

Those reports will roll out over July, and then we’re into earnings season proper, in which all will be revealed.

In the meantime, it’s Friday, there’s no Wall Street to follow, and the futures are down -2.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1414.90	– 3.30	– 0.23%
Silver (oz)	15.24	– 0.04	– 0.26%
Copper (lb)	2.68	+ 0.02	0.58%
Aluminium (lb)	0.80	+ 0.00	0.40%
Lead (lb)	0.85	+ 0.00	0.34%
Nickel (lb)	5.56	+ 0.02	0.30%
Zinc (lb)	1.11	– 0.02	– 1.85%
West Texas Crude	56.79	– 0.61	– 1.06%
Brent Crude	63.30	– 0.55	– 0.86%
Iron Ore (t) futures	122.30	– 4.05	– 3.21%

Evidence of increased Chinese production had the zinc price tumbling on the LME.

Iron ore had to have been due a pullback.

The oils are posting a lot of ups and downs without going anywhere much.

The Aussie has stabilised, down slightly at US$0.7024.

Today

The SPI Overnight closed down -2 points. It’s bound to be a quiet one today, ahead of tonight’s critical US jobs numbers.

Locally we’ll see the construction PMI.

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
IAG	INSURANCE AUSTRALIA	Downgrade to Equal-weight from Overweight	Morgan Stanley
IGO	INDEPENDENCE GROUP	Downgrade to Hold from Accumulate	Ord Minnett
ILU	ILUKA RESOURCES	Downgrade to Hold from Accumulate	Ord Minnett
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
PLS	PILBARA MINERALS	Upgrade to Hold from Lighten	Ord Minnett
RHC	RAMSAY HEALTH CARE	Downgrade to Hold from Accumulate	Ord Minnett
SDA	SPEEDCAST INTERN	Upgrade to Neutral from Underperform	Macquarie
SUN	SUNCORP	Downgrade to Underweight from Equal-weight	Morgan Stanley
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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