Daily Market Reports | Aug 09 2019
|SPI Overnight (Sep)||6553.00||+ 39.00||0.60%|
|S&P ASX 200||6568.10||+ 48.60||0.75%|
|Nasdaq Comp||8039.16||+ 176.33||2.24%|
|S&P500 VIX||16.91||– 2.58||– 13.24%|
|US 10-year yield||1.72||+ 0.03||1.90%|
|USD Index||97.55||– 0.07||– 0.07%|
By Greg Peel
Apologies for the lateness and brevity of today’s report. If you are a Windows user don’t, whatever you do, update your computer right now, other than overnight.
And today’s magic number is…US$7.0039.
So said the PBoC yesterday at the 11.15am (Sydney) daily fix of the renminbi (yuan) against the US dollar. At that point the ASX200 was down -49 points, and by the close it was up 48.
Which funnily enough is exactly what had played out on Wall Street the night before. The Dow was down almost -600 points and closed as good as square, with no particular impetus beyond buyers moving in. Wall Street ignored Wednesday’s fix below US$7 which had driven the ASX200 higher in Wednesday’s trade. It was weakness in commodity prices (and Rio Tinto going ex) which initially drove the index down yesterday morning, but at 11.15 that no longer mattered.
The materials sector closed up 1.7%.
The fix above US$7 should have signalled warning bells, but for the fact it was actually lower than expected and commentators in China suggested any renminbi devaluation would be very slow. Add in a rise in Chinese exports of 3.3% year on year in July, greater than expected, and a fall in imports of -7.3%, less than expected, and those who had been holding out for cheaper entry points into the Australian stock market made their move.
It was a piecemeal affair among sectors nonetheless, unlike the market-wide selling/buying that has dominated this week’s trade. Gains ranged from telcos (+1.8%) to financials (+0.1%) while two sectors saw losses – staples (-0.4%) and utilities (-1.6%).
Financials were held back by the response to Insurance Australia Group’s ((IAG)) earnings result (-5%) while it was the same story for utilities in the case of AGL Energy (-4.6%). Staples were out of fashion, with a2 Milk ((A2M)) falling -3.5%.
Not all reports were poorly received however, with Mirvac Group ((MGR)) leaping 6.6% and Kathmandu ((KMD)), which reports out of cycle but issued a trading update yesterday, soaring 14.3%. Winter is here (and those bloody All Blacks).
The winners list was otherwise dominated by lithium miners – among the most shorted stocks on the market — and nickel miner Western Areas ((WSA)), with Indonesian export bans putting a rocket under nickel prices.
Beyond that, all we can say at present is the market is very skittish, headline (and tweet) driven, and torn between TINA and trade. It is not a market for the faint-hearted. But the futures are up 39 points this morning, so it could be a cheerful Friday.
Now they pay attention
Wall Street appears to be cherry-picking which headline it wants to respond to at the moment, with Wednesday’s renminbi fix being totally ignored but yesterday’s fix being offered as the driver of last night’s 1.9% rally, which ensured that despite all that has transpired, the S&P and Nasdaq are now both up for the week.
The Chinese trade numbers were also well-received, yet the trade war will continue to dominate sentiment, given the possibility of further escalation any day, any time. Trump’s 10% tariff on the remaining US$300bn of Chinese exports is set to come into effect on September 1, unless progress is made before then (good luck), and the Chinese delegation is at this stage invited back to Washington in early September, but as yet have not RSVP-ed.
Trump’s next weapon will be that 10% tariff rising to 25%. September also brings the next Fed meeting. In the meantime, the US earnings season is winding down into its long tail.
It’s day to day stuff right now.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1500.70||– 0.20||– 0.01%|
|Silver (oz)||16.89||– 0.19||– 1.11%|
|Copper (lb)||2.57||– 0.00||– 0.16%|
|Aluminium (lb)||0.79||+ 0.00||0.43%|
|Lead (lb)||0.94||+ 0.03||3.09%|
|Nickel (lb)||7.08||+ 0.37||5.44%|
|Zinc (lb)||1.03||+ 0.00||0.28%|
|West Texas Crude||52.54||+ 0.23||0.44%|
|Brent Crude||57.77||+ 0.36||0.63%|
|Iron Ore (t) futures||94.8||+2.00||2.16%|
The standout commodity price move was again nickel, on Indonesian export uncertainty.
The Aussie has finally blinked.
The SPI Overnight closed up 39 points.
The RBA will release its quarterly Statement on Monetary Policy today while Philip Lowe will provide a perfunctory testimony to parliament.
China releases inflation numbers.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ALQ||ALS LIMITED||Upgrade to Buy from Neutral||Citi|
|APE||AP EAGERS||Upgrade to Overweight from Equal-weight||Morgan Stanley|
|ARB||ARB CORP||Downgrade to Neutral from Outperform||Macquarie|
|BRG||BREVILLE GROUP||Upgrade to Neutral from Underperform||Credit Suisse|
|DMP||DOMINO'S PIZZA||Upgrade to Buy from Neutral||UBS|
|RWC||RELIANCE WORLDWIDE||Downgrade to Equal-weight from Overweight||Morgan Stanley|
|SLC||SUPERLOOP||Downgrade to Equal-weight from Overweight||Morgan Stanley|
|TNE||TECHNOLOGYONE||Upgrade to Hold from Lighten||Ord Minnett|
|TPM||TPG TELECOM||Downgrade to Equal-weight from Overweight||Morgan Stanley|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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