The Monday Report

This story features OOH!MEDIA LIMITED, and other companies. For more info SHARE ANALYSIS: OML

World Overnight
SPI Overnight (Sep)	6678.00	– 12.00	– 0.18%
S&P ASX 200	6751.30	+ 33.30	0.50%
S&P500	2990.41	– 5.41	– 0.18%
Nasdaq Comp	8161.79	– 8.44	– 0.10%
DJIA	26922.12	– 43.88	– 0.16%
S&P500 VIX	13.28	+ 0.71	5.65%
US 10-year yield	2.05	+ 0.10	4.86%
USD Index	97.29	+ 0.55	0.57%
FTSE100	7553.14	– 50.44	– 0.66%
DAX30	12568.53	– 61.37	– 0.49%

By Greg Peel

No Lead Required

Another day, another 30 point gain for the ASX200, as it continues its seemingly relentless push towards the old high. With rate cuts in the bag, and tax cuts in the bag, the TINA trade continues to underpin, and even a day off on Wall Street made no difference.

Notably, the local VIX volatility index is just over 10, which is a clear signal of complacency.

Investors continued to take profits in the big miners on Friday, sending materials down -0.9%. News out of China is that relevant state ministries are highly concerned about the sharp rise in the price of iron ore. They are subsequently investigating, and have threatened to “severely” crack down on any irregular behaviour.

The only other sector to close in the red were utilities (-0.4%), but would not have done so if toll roads and airports were in the right sector.

APRA confirmed on Friday that the prior “at least 7%” mortgage serviceability rate will be abandoned for a 2.5% above prevailing rate requirement. Not exactly new news, but the banks (+0.6) had a positive session.

Confirmed tax cuts also proved beneficial for the consumer sectors, while healthcare (+1.4%) just keeps revelling in those coughs and sneezes.

Leading the individual ASX200 names on Friday was EclipX Group ((ECX)), up 20% on the announcement the company had sold its troubled Graysonline business. The stock has now recovered around three-quarters of what it lost in March.

News from the advertising industry that outdoor revenues increased another 5.2% in the June quarter following a 5.9% increase in March had oOh!media ((OML)) up 9%.

On the other side of the ledger, SpeedCast International ((SDA)) can’t find a bottom, falling another -4.8%, and Fortescue Metals ((FMG)) took the silver with a -4.3% fall.

The rally on Friday came despite the potential for Wall Street volatility on Friday night on the release of the June jobs report. Suffice to say the futures were down -12 points on Saturday morning.

Maybe Not

The US added 224,000 jobs in June, far above forecasts of 164,000. An increase in participation pushed the unemployment rate up to 3.7% from 3.6%. Annualised wage growth was unchanged at 3.1%.

After the weak (75,000) number in May, economists had expected a rebound, but not by quite so much.

The news was nevertheless somewhat of a tree falling in the forest, given the bulk of market participants were enjoying an unofficial long weekend. The US ten-year yield shot up 10 basis points to 2.05%, the US dollar index jumped 0.6%, and the Dow fell over -200 points on low volume.

The strong jobs number has brought into doubt the assumed Fed rate cut at the end of the month. Certainly it has put paid to any notion of a -50 point cut, if that was ever a possibility. But just when you thought Friday could be the start of an overdue pullback on Wall Street, the indices bounced after the close in Europe and recovered most of the losses.

The down-then-up session, thin trading notwithstanding, underscored two major features of Wall Street’s recent rally to new all-time highs: it’s all about the Fed; and there remains a lot of cash on the sidelines held by fund managers who have been left behind in what has been described as one of the most hated of bull markets. Hated because it’s difficult to countenance surging stock markets and slowing global growth, yet there is no alternative investment to stocks.

The Fed is no longer “patient”, according to the most recent policy statement, but nor is it trigger-happy. It is very much data-dependent, and after taking on board this jobs number will now be watching closely as data drops during the month for the likes of inflation and June quarter economic growth.

Inflation data are due out this week and Wednesday night Jerome Powell will provide a biannual testimony to Congress, with the minutes of the June meeting also due on Wednesday.

The US earnings season begins in earnest at the end of next week, so Fed-watching is the name of the game until then.

Tonight it will be interesting to see what the bulk of the market thought about the jobs numbers, and about China insisting Trump has to drop his tariffs if any trade deal is to be reached.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1398.30	– 16.60	– 1.17%
Silver (oz)	14.97	– 0.27	– 1.77%
Copper (lb)	2.66	– 0.02	– 0.74%
Aluminium (lb)	0.80	+ 0.00	0.46%
Lead (lb)	0.84	– 0.00	– 0.42%
Nickel (lb)	5.61	+ 0.05	0.83%
Zinc (lb)	1.10	– 0.01	– 0.92%
West Texas Crude	57.73	+ 0.94	1.66%
Brent Crude	64.23	+ 0.93	1.47%
Iron Ore (t) futures	114.25	– 8.05	– 6.58%

Iron ore traders did not like the news of government scrutiny.

Gold traders did not like the jump in the greenback, and the tempering of Fed rate cut expectations.

Base metals held up reasonably well against the greenback.

Not so the Aussie, which fell -0.6% to US$0.6981. Here we are again.

The SPI Overnight closed down -12 points on Saturday morning.

The Week Ahead

The Fed chair will testify before a House Committee on Wednesday night and a Senate Committee on Thursday night. The minutes of the June Fed meeting are due on Wednesday night, followed by the US CPI on Thursday and PPI on Friday.

China releases inflation numbers on Wednesday and trade numbers on Friday.

Locally we’ll see ANZ job ads today, the NAB business confidence survey on Tuesday, Westpac consumer confidence survey on Wednesday and housing finance data on Thursday.

Perseus Mining ((PRU)) releases earnings numbers tomorrow and Whitehaven Coal ((WHC)) kicks off the quarterly production report season on Thursday.

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

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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