The Monday Report – 16 Sep 2019

Daily Market Reports | Sep 16 2019

By Greg Peel

Muddled Market

While Wall Street quietly ticked up towards the prior highs over the course of last week – the Dow marked eight straight up-days on Friday night – the ASX200 closed only marginally higher for the week after bumbling around without a clear theme emerging.

One consistent factor was financials, which posted another rally on Friday (+0.6%) in a solid week in which the spike in global bond yields dominated. Industrials (+0.9%) won Friday's session, but had been up and down throughout the week.

Defensives were consistently sold over the week on Wall Street but were another case of ups, downs and inconsistencies. Utilities (+0.6%) and telcos (+0.5%) did well on Friday but staples (-0.4%) did not. Healthcare (-0.1%) was mostly weaker over the week, notwithstanding CSL's ((CSL)) dividend.

IT (-0.8%) followed the Nasdaq around as usual while materials also saw ups and downs, balancing a volatile iron ore price, a spike in the nickel price and pullback from the highs for gold. That sector sat it out on Friday.

There was nothing remarkable on Friday among individual stock moves other than to note nib Holdings ((NHF)) won the day (+4.5%) after admitting it had stuffed up claims inflation guidance and had now reset that expectation lower, while Pro Medicus (-5.7%) was again the biggest loser. That stock has fallen some -25% since two founders each sold one million shares.

With Wall Street posting another rotation session on Friday night our futures closed down -7 points on Saturday morning, but this was all before the Saudi refineries suffered their drone attacks.

The loss of half of Saudi refining capacity is set to send global prices of petrol, diesel et al soaring. The Saudis have said they will release domestic inventories and the US has said it will dip into strategic reserves, encouraging other countries to do the same.

As for the crude price, in isolation the loss of such capacity might weigh on the crude price if inventories back up as a result, but the overriding factor is the escalation of geopolitical tension the act itself implies. The US has blamed Iran.

ANZ Bank analysts, for one, suggest the Brent price could jump up to US$70/bbl (currently US$60/bbl) in a hurry, which of course implies our local energy sector might be in for a bit of a boost today.


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