The Overnight Report: But Wait…

This story features TRANSURBAN GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TCL

World Overnight
SPI Overnight (Dec)	6045.00	+ 25.00	0.42%
S&P ASX 200	6036.40	+ 74.30	1.25%
S&P500	3419.45	+ 58.50	1.74%
Nasdaq Comp	11364.60	+ 210.00	1.88%
DJIA	28303.46	+ 530.70	1.91%
S&P500 VIX	28.06	– 1.42	– 4.82%
US 10-year yield	0.79	+ 0.04	5.80%
USD Index	93.64	– 0.12	– 0.13%
FTSE100	5946.25	– 3.69	– 0.06%
DAX30	12928.57	+ 22.55	0.17%

By Greg Peel

The Assessment

The ASX200 didn’t exactly leap out of the blocks yesterday, as investors attempted to digest the balance of stimulus downunder vis a vis a lack thereof in the US. There would have been a few red-eyed analysts still trying to pull apart the budget and its stock market implications.

And they had to take into account Monday’s big rally after tax cuts and infrastructure spending were pre-announced.

The decision, however, was to the positive side, and from the open the index tracked a very straight line up to the close, no doubt fuelling itself along the way.

If Monday’s and yesterday’s trade are anything to go by, the banks are the biggest winners. The bulk of yesterday’s index gain was provided by a stand-out 2.2% jump in financials. Anything that encourages economic growth is a plus for the banks, and even if the tax cuts and other hand-outs are saved, well that’s a win for the deposit side of the ledger.

If companies leap on the no-limit immediate asset write-down opportunity, that’s good for the lending side.

The market is nevertheless assuming households will spend the money, given consumer discretionary and staples came in next with 1.9% gains each.

Most surprising was only a small gain (+0.4%) for industrials and a small loss for materials (-0.1%) when construction and the consumption of building products should be boosted. However, these sectors had already responded on Monday. Energy, nonetheless, kicked on with another 1.4%.

For materials, a week-long lack of change in the iron ore price, with China on holiday, kept the biggies quiet while after yesterday’s big run in gold stocks, driven by the Northern Star-Saracen tie-up, that sector saw some profit-taking.

Industrials required Transurban ((TCL)) to fall back on the day (-0.9%) to counter solid gains for Seven Group ((SVW)) and Cleanaway Waste Management ((CWY)), claiming third and fourth spots on the index leaders’ board with 5.2% and 4.8% moves. We’ll all be out buying used cars apparently, as Eagers Automotive ((APE)) posted a second solid session in rising 5.3%.

Ever-volatile Virgin Money UK ((VUK)) took the top spot with 6.3%.

Nothing too significant on the downside. Newcrest Mining ((NCM)) fared worst with a -2.1% fall.

Developments overnight have sent Wall Street rocketing, but only after it tanked on Tuesday night. Given we ignored this and rallied yesterday, and rallied hard on Monday to boot, the futures are only suggesting a further 25 point rise today (0.4%) when the S&P500 jumped 1.7%.

Are we finally running our own race?

Twitter Storm

“If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?”

“The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!”

These are just two of some 50 tweets, or retweets, or retweets of his own earlier tweets, Trump sent out in two hours of madness before Wall Street opened last night. Anyone would think the man was on drugs.

To that point, it has been noted Trump has been pumped full of steroids, which do act a bit like speed, and can send someone a bit whacky. But in Trump’s case, how do you tell?

The bottom line is having shut down stimulus negotiations between the White House and the Democrats over fiscal stimulus on Tuesday night, last night Trump was championing a break-down of stimulus into the individual segments he is keen to support (ahead of the election). The Democrats have to date stubbornly insisted on a full package or nothing, although on Tuesday night Pelosi did offer to concede on specific airline support.

Wall Street about-faced.

To add fuel to the fire, last night’s minutes of the September Fed meeting included:

“…if future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated”

Also encouraging investors were the latest polls showing Biden consolidating his lead. Given only a couple of weeks or so ago commentators were still discussing just how far Wall Street might fall if Biden won, taking this as a positive seems incongruous, but Wall Street would much rather welcome a clear victory on either side than a long-winded count, or worse a Trump rejection of the result that would just extend the uncertainty for weeks to months.

We can also throw in news Eli Lilly has gone to the FDA seeking emergency-use approval for its virus treatment, which is considered by medical experts to be very positive.

Speaking of medical experts, the greatest comedy act since Sadam Hussein’s Minister of Information – Trump’s spokes-doctor – gushed last night that tests had shown covid antibodies in the president’s system, implying Trump is fighting the virus himself. The man must be super-human!

Except many pointed out that aside from steroids, Trump is also being pumped full of antibodies, which might be what have come up on the tests.

It was enough, however, for Trump to decide to move out of his residence and back into the Oval Office, into the West Wing hotspot. But fear not, West Wing staff are being randomly tested every day.

Put it altogether, and last night saw a Buy Everything session on Wall Street – cyclicals, value, growth stocks, Big Tech, small caps – all jumped by uniform amounts.

As the clock ticks down, the volatility ticks up.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1887.60	+ 2.80	0.15%
Silver (oz)	23.73	+ 0.42	1.80%
Copper (lb)	3.00	+ 0.07	2.49%
Aluminium (lb)	0.79	+ 0.01	0.71%
Lead (lb)	0.81	+ 0.01	1.12%
Nickel (lb)	6.61	– 0.01	– 0.11%
Zinc (lb)	1.06	+ 0.01	0.96%
West Texas Crude	39.99	– 0.23	– 0.57%
Brent Crude	42.09	– 0.12	– 0.28%
Iron Ore (t)	123.15	0.00	0.00%

Speaking of volatility, copper is certainly having its ups and downs lately, impacted by thin trading with the Chinese on holiday. There seems no specific reason last night saw an up-day, unless it’s somehow tied to possible US stimulus.

Elsewhere, things were a lot calmer.

Having tested the 71 level yesterday on Australia’s record deficit, the Aussie has bounced a little on a drop in the greenback, up 0.3% to US$0.7138.

Today

The SPI Overnight closed up 25 points or 0.4%.

The Chinese are back today, with Caixin providing its take on September PMIs.

Transurban ((TCL)), Brambles ((BXB)) and Elmo Software ((ELO)) hold their AGMs today.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ANZ	ANZ Banking Group	Upgrade to Outperform from Neutral	Macquarie
COL	Coles Group	Upgrade to Outperform from Neutral	Credit Suisse
HUB	HUB24	Downgrade to Underperform from Neutral	Credit Suisse
NVX	Novonix	Upgrade to Add from Hold	Morgans
PTM	Platinum Asset Management	Upgrade to Neutral from Underperform	Credit Suisse
RWC	Reliance Worldwide	Downgrade to Underweight from Equal-weight	Morgan Stanley
WBC	Westpac Banking	Upgrade to Outperform from Neutral	Macquarie
WHC	Whitehaven Coal	Upgrade to Lighten from Sell	Ord Minnett

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

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