The Overnight Report: Tech Presses On

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World Overnight
SPI Overnight (Sep)	5941.00	+ 44.00	0.75%
S&P ASX 200	5894.80	– 4.70	– 0.08%
S&P500	3401.20	+ 17.66	0.52%
Nasdaq Comp	11190.32	+ 133.67	1.21%
DJIA	27995.60	+ 2.27	0.01%
S&P500 VIX	25.59	– 0.26	– 1.01%
US 10-year yield	0.68	+ 0.01	1.19%
USD Index	93.08	+ 0.02	0.02%
FTSE100	6105.54	+ 79.29	1.32%
DAX30	13217.67	+ 24.01	0.18%

By Greg Peel

Thrill a minute stuff

The ASX200 opened 20 points higher yesterday and closed down -5. In the context of recent volatility, it was if the market, too, needed a rest day, along with the Tour de France.

However, while things appeared calm above the surface, there was still plenty going on below. Only one sector closed flat (industrials) while four closed in the green and six in the red.

The biggest winner was property (+1.9%), as retail landlords led the way likely spurred in by light at the end of the tunnel for Melbourne. Healthcare (+1.2%) provided the most index points to the upside.

Materials (+0.8%) gained on price rises in gold and coal, with the top five index winners’ board comprising of three gold miners on the podium, followed by a coal miner and a mining services company.

The counter was provided by the banks (-1.4%), which may have needed a rethink following Macquarie Group’s ((MQG)) profit warning on Monday, energy (-1.7%), which pulled back after surging ahead on Monday, and telcos (-1.4%), after Telstra’s ((TLS)) retail investor briefing failed to impress.

The minutes of the September RBA meeting were released yesterday and on their release, the Aussie shot up to US$0.7340. It’s back at US$0.7309 this morning, but the initial pop was due to the RBA’s stance on the currency.

“The appreciation of the Australian dollar had been consistent with the increase in commodity prices, particularly iron ore prices, over recent months. While members noted that the Australian dollar was broadly aligned with its fundamental determinants, a lower exchange rate would provide more assistance to the Australian economy in its recovery.”

Yeah, so what are you going to do about it guys? No clues here.

Nor were there any particular clues on policy. The board:

“Considered it likely that fiscal and monetary support would be required for some time given the outlook for the economy and the labour market. The Board affirmed its commitment to supporting jobs, incomes and businesses in Australia. It agreed to maintain highly accommodative settings as long as required and to continue to consider how further monetary measures could support the recovery.”

The implication here is that the RBA will wait to see what upcoming federal and state government budgets will provide in the form of ongoing fiscal stimulus, before pulling any more monetary levers.

China released economic data for August yesterday. For the first time in 2020, retail sales rose. Note that Beijing measures this in a year on year and not month on month basis. Sales rose 0.5% in August year on year, but are down -8.6% in 2020. Despite China being the first in and the first out of the virus, Chinese consumers have not come rushing back.

Industrial production grew 5.6% year on year and is up 0.4% in 2020. Fixed asset investment is down -0.3% in 2020.

Returning to the local market, our futures are up 44 points this morning, which is 0.8% to the S&P500’s 0.5%.

Presumably this includes a response to the further easing of restrictions in regional Victoria announced last night, seen as a precursor to Melbourne metro getting there too. But Dan has warned that any Melbournian trying to flee the city limits and escape to the regions will be shot first before reasons are sought.

Bearing the FANGs

On Friday night last Wall Street bounced off its lows and began to rebound. The rebound continued on Monday night with greater breadth across market sectors, aided by positive sentiment around a vaccine, M&A activity and upcoming IPOs.

Last night it was back to the familiar theme. On no macro news of any consequence, tech continued to rally, hence the Nasdaq rose 1.2%, dragging the S&P500 up 0.5% while the Dow closed flat. Among S&P sectors, the Fab Three of technology, communication services and consumer discretionary stood out.

REITs also had a good session, while the biggest drag were the banks. Citi has fallen -12% in two days after revealing a regulatory investigation is underway into some alleged misdemeanour, while last night JPMorgan (Dow) slightly trimmed its guidance and fell -3%.

The banks can’t take a trick. Occasionally they get a boost in a rotation-into-cyclicals session but it never lasts long. With loan books under stress and zero interest rates providing little room for earnings growth, the banks as a group remain -20% down year to date.

The Dow was up 240 points from the open before drifting back all session. It is not unusual to see Wall Street rally into a Fed meeting in recent years, in the expectation of some new or additional monetary policy stimulus, but not last night. The safer option was to square up (the Nasdaq was up 1.8% earlier on).

Given Jerome Powell did his best Ben Bernanke impression and announced a major policy shift at Jackson Hole (letting inflation run), it’s unlikely we’ll learn anything new tonight when the Fed delivers its statement and Powell holds his press conference.

There was more news on the stock stories du jour last night. Firstly, the president is deemed likely to approve a tie-up between Oracle and TikTok US despite analysts still being unsure of exactly how the relationship will work in national security terms.

Secondly, in the wake of Nikola calling in the SEC to investigate the short-selling hedge fund accusing it of fraud, suggesting short-side “front running” by the hedge fund (sell short, make the accusation, stock falls, clean up), the Department of Justice is now investigating the claims made by the hedge fund, ie investigating Nikola.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1953.00	– 2.60	– 0.13%
Silver (oz)	27.13	+ 0.03	0.11%
Copper (lb)	3.09	– 0.01	– 0.17%
Aluminium (lb)	0.80	– 0.00	– 0.13%
Lead (lb)	0.86	+ 0.01	1.60%
Nickel (lb)	6.85	– 0.00	– 0.02%
Zinc (lb)	1.14	+ 0.02	1.85%
West Texas Crude	38.39	+ 1.13	3.03%
Brent Crude	40.70	+ 1.08	2.73%
Iron Ore (t)	128.55	– 1.95	– 1.49%

Suggestions from both OPEC and the International Energy Agency that global demand is expected to fall further in 2020 than last forecast (which weighed on our energy sector yesterday) should have had oil prices down overnight, but into the Gulf blew Hurricane Sally.

I think I used to go out with her.

Having conquered US$120/t after a bit of work, iron ore seems now to be struggling at US$130/t.

With the US dollar index flat, the Aussie is up 0.2% over 24 hours at US$0.7309.

Today

The SPI Overnight closed up 44 points or 0.8%.

Fed statement tonight.

Spark New Zealand ((SPK)) holds an investor day today and Xero ((XRO)) a conference call, which in this day and age are ostensibly the same thing.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
CCP	Credit Corp	Downgrade to Neutral from Outperform	Macquarie
CSL	CSL	Upgrade to Buy from Neutral	Citi
EVN	Evolution Mining	Upgrade to Outperform from Neutral	Credit Suisse
FMG	Fortescue	Downgrade to Underweight from Equal-weight	Morgan Stanley
GXY	Galaxy Resources	Downgrade to Sell from Hold	Ord Minnett
HVN	Harvey Norman Holdings	Upgrade to Outperform from Neutral	Credit Suisse
IPL	Incitec Pivot	Upgrade to Buy from Neutral	UBS
MIN	Mineral Resources	Downgrade to Underweight from Equal-weight	Morgan Stanley
NCM	Newcrest Mining	Upgrade to Outperform from Neutral	Credit Suisse
NXT	Nextdc	Upgrade to Outperform from Neutral	Macquarie
PRU	Perseus Mining	Upgrade to Outperform from Underperform	Credit Suisse
RRL	Regis Resources	Upgrade to Outperform from Neutral	Credit Suisse
SIG	Sigma Healthcare	Upgrade to Outperform from Neutral	Credit Suisse
STO	Santos	Upgrade to Buy from Neutral	UBS
WES	Wesfarmers	Upgrade to Outperform from Neutral	Credit Suisse

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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