The Overnight Report: Temperatures Rising

This story features BANK OF QUEENSLAND LIMITED, and other companies. For more info SHARE ANALYSIS: BOQ

World Overnight
SPI Overnight (Dec)	5879.00	– 56.00	– 0.94%
S&P ASX 200	5952.10	– 0.20	– 0.00%
S&P500	3335.47	– 16.13	– 0.48%
Nasdaq Comp	11085.25	– 32.28	– 0.29%
DJIA	27452.66	– 131.40	– 0.48%
S&P500 VIX	26.27	+ 0.08	0.31%
US 10-year yield	0.65	– 0.02	– 2.71%
USD Index	93.88	– 0.39	– 0.41%
FTSE100	5897.50	– 30.43	– 0.51%
DAX30	12825.82	– 45.05	– 0.35%

By Greg Peel

Big trouble in little bank land

It was all going swimmingly for the ASX200 yesterday up to late morning, at which point the index was up over 40 points following a solid session on Wall Street. Then along came Bank of Queensland ((BOQ)).

The bank most exposed to the Hermit State revealed it had been stuffing up its payroll for years, resulting in both under- and overpayments of staff to the extent it has notified the ATO and Fair Work. But that’s a company-specific issue. More telling for the wider sector was a write-down of -$175m of bad loans and another -$133m taken as a virus-related provision against more.

A resultant turnaround in the big banks took the index back to square by the close. Bank of Queensland fell -7.2% to be the worst performing index stock on the day. It was only a -0.4% drop for the financials sector, but index-influential nonetheless. We recall that the banks jumped 3.7% on Monday when Josh loosened the lending shackles.

It was a mixed bag by the close for the other sectors. Utilities was the worst performer (-1.2%) as AGL Energy fell -1.7%. Consumer staples followed with -0.7% as a2 Milk ((A2M)) saw further selling (-4.0%) following its earlier guidance downgrade.

Rebounds in gold and iron ore prices did little for materials (-0.2%), with the Aussie now back on the rise.

The Ausdaq naturally won the day (+2.4%) on its follow-the-Nasdaq mandate. Industrials (+0.7%) were led by 2%-plus gains for Qantas ((QAN)) and Sydney Airport ((SYD)) ahead of a Kiwi invasion of the Harbour City.

God help us all. Good news for fush’n’chup shops though.

Speaking of travel, Corporate Travel Management ((CTD)) has gone into a trading halt pending a capital raising, but it’s not what you think. The company considered most sound among peers is raising capital to acquire a US travel agent. This will surely delight those holding 7.3% short positions, even if it is for a different reason.

Telcos (+0.8%) found some buyers after a couple of days of falls, while those buying energy stocks yesterday (+0.6%) have awoken to a -3%-plus fall in oil prices overnight.

To that end, with the S&P500 closing down -0.5% last night, our futures are down -0.9% this morning. The S&P was up 1.6% on Monday night and we closed flat yesterday.

At this rate we’ll be looking at 5000, not 6000.

Let’s Rumble

The first presidential debate is set to kick off at 9pm in Cleveland, or 11am Sydney time this morning. Aside from the sheer cringe value, pundits will be on the lookout for any new impactful policy measures.

Wall Street will be watching but the debate is not anticipated to be market-moving, though it was offered last night as one reason Wall Street pulled back to the bottom of the recent range after two sessions of solid gains.

Another reason was news the New York City case-count, after months of declining, has now a running average measure turned back up by 3%. The news came on the day NY kids are finally allowed back to school. The NY mayor is set to issue fines to anyone not wearing a mask.

New Hampshire has been added to the growing list of those states with alarming jumps in cases.

The global death toll has now passed one million. The country with 4% of the global population accounts for 20% of those deaths. It should be acknowledged, nonetheless, that counts in less affluent nations are either unreliable or suspicious. WHO suggests the real number is likely closer to two million.

One could forgive Americans for becoming rather worried about the second wave sweeping the UK and Europe and possibly ready to sweep the US. The Conference Board consumer confidence index released last night showed a jump to 101.8 from 86.3 last month. From deep pessimism to slight optimism in one month.

And yet there is still no second stimulus package. Pelosi and Mnuchin continue to smile and suggest confidence in an agreement being reached, but after “meeting” for an hour on the phone last night, the best they achieved is to meet again tonight.

To that point, the other concern for Wall Street this week is Friday’s jobs numbers for September – the last jobs numbers before the election. The prior two months surprised to the upside, but the first stimulus package was still in play at the time.

Spot Metals,Minerals & Energy Futures
Gold (oz)	1897.30	+ 16.10	0.86%
Silver (oz)	24.17	+ 0.50	2.11%
Copper (lb)	2.95	– 0.03	– 0.88%
Aluminium (lb)	0.79	+ 0.00	0.09%
Lead (lb)	0.82	– 0.00	– 0.16%
Nickel (lb)	6.54	– 0.00	– 0.02%
Zinc (lb)	1.09	+ 0.00	0.13%
West Texas Crude	39.11	– 1.46	– 3.60%
Brent Crude	40.84	– 1.64	– 3.86%
Iron Ore (t)	118.95	+ 1.90	1.62%

Commentators suggest last night’s fall in oil prices was due to fears of lower demand out of Europe and the US as a result of rising case-counts. So why now?

There is also a suggestion traders squared up ahead of the debate, given the two contenders have very different fossil fuel policies.

Or it could just be that forecasters are assuming a rise in US weekly inventories.

The US dollar is now clearly back in sell-mode, but this did not help base metals, while iron ore continues to drift back upward.

With US bond yields asleep now for weeks, gold is responding to the dollar.

As is the Aussie. It likely didn’t help that Westpac’s Bill Evans pushed his 0.1% cash rate forecast out to the November RBA meeting, only a couple of days after declaring October was the date, and maybe someone is making case-count trajectory comparisons, but either way the dollar index is down -0.4% and the Aussie is up 0.9% at US$0.7136.

Today

The SPI Overnight closed down -56 points or -0.9%.

The US will see private sector jobs numbers for September tonight.

China will release September manufacturing and services PMIs.

Amcor ((AMC)) hosts an investor day today, while ASX ((ASX)) and Viva Energy ((VEA)) hold their AGMs.

Grab your Buds and hot dogs, this morning should be a cracker.

The Australian share market over the past thirty days

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A2M	a2 Milk Co	Upgrade to Add from Hold	Morgans
BKW	Brickworks	Upgrade to Add from Hold	Morgans
BLD	Boral	Upgrade to Buy from Neutral	Citi
CWY	Cleanaway Waste Management	Upgrade to Outperform from Neutral	Credit Suisse
NST	Northern Star	Upgrade to Neutral from Sell	UBS
QUB	Qube Holdings	Upgrade to Buy from Accumulate	Ord Minnett
SM1	Synlait Milk	Downgrade to Neutral from Outperform	Credit Suisse
SUN	Suncorp	Upgrade to Outperform from Neutral	Macquarie

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

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