Daily Market Reports | Jul 16 2019
This story features AMP LIMITED, and other companies. For more info SHARE ANALYSIS: AMP
| World Overnight | |||
| SPI Overnight (Sep) | 6592.00 | – 5.00 | – 0.08% |
| S&P ASX 200 | 6653.00 | – 43.50 | – 0.65% |
| S&P500 | 3014.30 | + 0.53 | 0.02% |
| Nasdaq Comp | 8258.19 | + 14.04 | 0.17% |
| DJIA | 27359.16 | + 27.13 | 0.10% |
| S&P500 VIX | 12.68 | + 0.29 | 2.34% |
| US 10-year yield | 2.09 | – 0.01 | – 0.66% |
| USD Index | 96.94 | + 0.13 | 0.13% |
| FTSE100 | 7531.72 | + 25.75 | 0.34% |
| DAX30 | 12387.34 | + 64.02 | 0.52% |
By Greg Peel
Amped Down
The selling continued on the ASX yesterday in the wake of the Fed chair’s taking a lead from the Philip Lowe playbook and dropping the big hint about a pending rate cut. The Australian market was enjoying the benefits of two RBA rate cuts and now the Fed is set to undermine that advantage, and maybe even close the gap.
It was somewhat of a capitulation from the open as the ASX200 plunged -58 points in the first half hour, but buyers soon stepped in and the late morning release of Chinese data spawned a comeback to be down only -20 points at lunchtime.
China’s June quarter GDP growth came in at a 27-year low 6.2% annual, as expected, down from 6.4% in March. This is great news, of course, because it suggests Beijing will further step up the stimulus.
This belief was reflected in the big miners, which rallied against the tide to ensure materials (+0.2%) was the only sector to close in the green, with a little help from gold miners.
But if we look at the Chinese data for the month of June, it would appear Beijing’s stimulus is already beginning to make its mark.
Industrial production grew 6.3% year on year, up from 5.0% in May and beating 5.2% expectations. Retail sales rose 9.8%, up from 8.6% and beating forecasts for a fall to 8.3%. Fixed asset investment, which is where stimulus is directly evident, rose 5.8% for the year to June when 5.5% was forecast.
These numbers suggest that if Beijing has more left in the arsenal, and it continually insists it does, then there is no rush to try and concede to the US in order to have tariffs lifted.
The ASX200 faded again in the afternoon.
The RBNZ has torpedoed AMP’s ((AMP)) planned sale of its Life business to tax haven-based Resolution Life – a sale that was supposed to provide the funds to get the AMP back on its feet. The wealth manager has now been forced to cancel its dividend. AMP’s share price dropped significantly when the sale plan was announced, as risks for an equity raising have just risen, and fell -15.8% yesterday now the sale is off.
Financials closed down -0.8% yesterday but it wasn’t just Australian Mutual Provident, which no longer carries much market cap clout, but further falls for the banks as their yield attraction is undermined.
The same can be said for utilities (-1.6%), telcos (-2.0%) and industrials (-1.3%), while the consumer sectors and healthcare were less impacted. IT fell -2.2% because whenever the balloon starts losing altitude, the first weight to be jettisoned is high risk growth stocks. For once, IT ignored the Nasdaq.
In a clear tale of Royal Commission fallout (and in one case, benchmark underperformance), wealth management dinosaur Perpetual ((PPT)) and wealth platform upstart Praemium ((PPS)) each reported June quarter funds flows yesterday. Perpetual fell -5.0%, pipped only by AMP in the ASX200 losers stakes, while Praemium – not in the index – jumped 11.3%.
Toto, I don’t think we’re in Kansas anymore.
Earnings Watch
Citigroup opened the batting last night, unofficially, for the US earnings season and posted a beat on earnings. However, Wall Street was hoping to see more progress on cost reductions, and the share price dipped slightly.
In response, shares of JP Morgan, Wells Fargo and Goldman Sachs, all of whom report tonight, were sold down around -1%.
All three major US indices nevertheless managed to again post new all-time highs, if only just. Utilities, which had copped a sell-the-fact profit-taking last week on Jerome Powell’s rate cut hint, returned to lead the sectors.
The Chinese data were very much in focus. Donald Trump took credit for June quarter weakness. Wall Street, too, is heartened in assuming Beijing will ramp up the stimulus in response. Trump probably isn’t.
The Empire State (New York Fed) manufacturing index flipped back to +4.3 from -8.6 in June. The June result was among other data points at the time, such as the May jobs number, which helped to fuel the Fed rate cut expectation fire.
But as it appears the FOMC has now made up its mind, any improvement in US data no longer matters.
It was an otherwise quiet day on Wall Street as investors await the flood of earnings results to come.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1413.60 | – 2.00 | – 0.14% |
| Silver (oz) | 15.35 | + 0.15 | 0.99% |
| Copper (lb) | 2.71 | + 0.03 | 1.22% |
| Aluminium (lb) | 0.82 | + 0.01 | 1.27% |
| Lead (lb) | 0.89 | – 0.00 | – 0.10% |
| Nickel (lb) | 6.02 | + 0.08 | 1.41% |
| Zinc (lb) | 1.10 | – 0.00 | – 0.06% |
| West Texas Crude | 59.31 | – 0.90 | – 1.49% |
| Brent Crude | 66.20 | – 0.52 | – 0.78% |
| Iron Ore (t) futures | 121.40 | + 2.85 | 2.40% |
Base metal traders also cheered the weak Chinese GDP and its implications.
Iron ore appeared to benefit as well.
Oil prices continued to slip back now that the threat that was Hurricane Barry has abated.
The US dollar index came back a bit last night, up 0.1%, yet still the Aussie retreated further up into the safety of the seventies, up 0.2% to US$0.7029.
Today
The SPI Overnight closed down -5 points.
The minutes of the July RBA meeting are out today.
The US will also see industrial production and retail sales numbers tonight.
Oil Search ((OSH)) and Rio Tinto ((RIO)) post quarterly production reports.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| CAR | CARSALES.COM | Downgrade to Reduce from Add | Morgans |
| DCN | DACIAN GOLD | Downgrade to Neutral from Outperform | Macquarie |
| DTL | DATA#3 | Downgrade to Hold from Add | Morgans |
| EBO | EBOS GROUP | Upgrade to Add from Hold | Morgans |
| EVN | EVOLUTION MINING | Downgrade to Hold from Add | Morgans |
| SGM | SIMS METAL MANAGEMENT | Downgrade to Hold from Buy | Ord Minnett |
| STO | SANTOS | Upgrade to Outperform from Neutral | Macquarie |
| WPL | WOODSIDE PETROLEUM | 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: AMP - AMP LIMITED
For more info SHARE ANALYSIS: PPS - PRAEMIUM LIMITED
For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED