The Overnight Report: Reasons To Be Cheerless

Daily Market Reports | Oct 15 2020

This story features AUDINATE GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: AD8, APT, ARB, AWC, BHP, BOQ, CSL, EML, FLT, KGN, MHJ, PPT, SSG, SYD, TLS, WHC, Z1P

World Overnight
SPI Overnight (Dec) 6148.00 – 13.00 – 0.21%
S&P ASX 200 6179.20 – 16.50 – 0.27%
S&P500 3488.67 – 23.26 – 0.66%
Nasdaq Comp 11768.73 – 95.17 – 0.80%
DJIA 28514.00 – 165.81 – 0.58%
S&P500 VIX 26.40 + 0.33 1.27%
US 10-year yield 0.72 – 0.01 – 0.69%
USD Index 93.39 – 0.14 – 0.15%
FTSE100 5935.06 – 34.65 – 0.58%
DAX30 13028.06 + 9.07 0.07%

By Greg Peel

We’re All Individuals

The ASX200 posted its first down-day in eight yesterday in a meandering, tight-range session that was more about AGM updates and news impacting on individual sectors and stocks than it was about any overlaying macro theme.

Only four sectors closed in the green. Healthcare won the day with a 1.3% gain as CSL ((CSL)) rose 1.4% after tightening its earnings growth guidance range at its AGM to 3-8% from a prior 0-8%, despite warning of the rising cost of blood.

IT rose 1.1% with some help from EML Payments ((EML)), which rose 11.3% to top the index after announcing 46 new contracts in the past two quarters, while sector heavyweight Afterpay ((APT)) gained 1.7% after receiving clearance from AUSTRAC. Zip Co ((Z1P)) bucked the trend, falling -4.0% after announcing only an 88% increase in sales year on year.

The two consumer sectors each rose 0.7%. From the wider perspective, Westpac’s consumer confidence index for this month jumped a whopping 11.9% to an optimistic 105, reflecting budget excitement.

From a narrower perspective, Michael Hill International ((MHJ)) jumped 12.0% and Shaver Shop ((SSG)) 5.4% on sales updates while Australia’s Amazon, Kogan ((KGN)) rose 7.6% as the world embraces Prime Day. None of these stocks are in the index.

Bank of Queensland ((BOQ)) reported earnings and surprised by paying a dividend. A much reduced dividend, but a dividend nonetheless. It rose 5.2% but did not have the clout to overcome selling in the majors. The sector closed down -1.0%.

News of new cases popping up in NSW, along with the Shepparton cluster in Victoria and new cases in SA and northern Queensland weighed once more on the travel sector. Flight Centre ((FLT)) fell -7.7% to buck the consumer trend, while Sydney Airport ((SYD)) fell -1.1% to help industrials down -1.0%.

Lower commodity prices impacted on energy (-0.9%) and materials (-0.6%), and BHP Group ((BHP)) has now confirmed lower Chinese imports of Australian coal are part of ongoing retaliation to us being very disobedient.

Having jumped 4% on Tuesday on its AGM commitment to dividends, Telstra ((TLS)) fell -2.1% yesterday to take telcos down -0.9%.

Last night’s session on Wall Street was a not dissimilar, wallowing affair, with the focus mostly on earnings results. I believe our futures are down -13 points this morning.

The Bear Case-Count

Mnuchin admitted last night an agreement on stimulus is unlikely before the election. Aside from the actual raw figure gap between the two sides, currently US$1.8-2.2trn, Pelosi is standing firm on her all-or-nothing requirement, and specifically on a national strategic virus testing plan component.

Presumably the Republicans would not want to agree to something that might represent an admission of failure.

In the last week, sixteen US states have added more cases than at any time during the pandemic. North and South Dakota are reporting more cases, per capita by state population, than any state at any time. Wisconsin is erecting a field hospital in the state’s fair ground to cope with the surge.

States in the north east, where it all began and where it appeared the virus had been conquered, are now seeing cases back on the rise.

The president held another crowded, maskless rally last night, in Pennsylvania. We recall that last week Trump said "the virus will disappear, it's already disappearing".

France has reintroduced curfews, while elsewhere in Europe restrictions are being reapplied. The virus is running riot in the UK, and Sweden has proved the herd immunity approach is a failure.

Wall Street had opened higher from the bell but soon tipped over, about the time Mnuchin spoke. However, one can’t necessarily attribute the drop to stimulus matters, as it was Big Tech being sold down while cyclicals were being bought. This is evident in the spread of Dow -0.6%, S&P -0.7% and Nasdaq -0.8%.

If it really were an absence of stimulus issue, that would be the other way around. More likely it was simply a lacklustre session of portfolio rejigging.

US banks were in the spotlight again. Investment bank Goldman Sachs beat on earnings and managed to close flat on the session, while commercial banks Bank of America and Wells Fargo fell -5% and -6% on big falls in net interest income.

The three big commercial banks (including JP Morgan) all topped up their bad loan provisions last quarter by much smaller amounts than for the prior two quarters, but they’re still topping them up.

Walmart announced it would offer three Black Fridays in November, discounting both in-store and online. It fell -1.6%.

JP Morgan upgraded NIO to Buy and the stock jumped 22.6%. NIO is a Chinese EV manufacturer.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1900.00 + 7.80 0.41%
Silver (oz) 24.25 + 0.15 0.62%
Copper (lb) 3.05 + 0.01 0.27%
Aluminium (lb) 0.83 + 0.00 0.30%
Lead (lb) 0.81 – 0.00 – 0.50%
Nickel (lb) 6.99 + 0.19 2.77%
Zinc (lb) 1.10 + 0.00 0.18%
West Texas Crude 41.03 + 0.84 2.09%
Brent Crude 43.31 + 0.86 2.03%
Iron Ore (t) 119.75 – 1.60 – 1.32%

The US holds two weekly inventory lotteries each week, and often the results are completely opposed. Last night’s API data suggested a drawdown, hence the oils jumped 2%.

The jump in nickel has been attributed to a rise in spot demand from alloy makers.

Iron ore is back under US$120/t again. Can it rebound again? Analysts would say probably not.

The Aussie is steady at US$0.7163.

Today

I believe the SPI Overnight closed down -13 points.

Australia’s September jobs numbers are out today (pre-dating the budget) and the RBA governor will speak.

China releases inflation data.

AGMs will be held today by Perpetual ((PPT)), ARB Corp ((ARB)) and Audinate ((AD8)).

Alumina Ltd ((AWC)) and Whitehaven Coal ((WHC)) release production reports.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AIA Auckland International Downgrade to Equal-weight from Overweight Morgan Stanley
ANZ ANZ Banking Group Upgrade to Accumulate from Hold Ord Minnett
FLT Flight Centre Downgrade to Neutral from Outperform Credit Suisse
HUB HUB24 Upgrade to Neutral from Underperform Macquarie
JHG Janus Henderson Group Upgrade to Neutral from Underperform Credit Suisse
LNK Link Administration Upgrade to Equal-weight from Underweight Morgan Stanley
Downgrade to Hold from Accumulate Ord Minnett
NCM Newcrest Mining Upgrade to Buy from Neutral Citi
SYD Sydney Airport Upgrade to Overweight from Equal-weight Morgan Stanley
TWE Treasury Wine Estates Upgrade to Hold from Lighten Ord Minnett
WOW Woolworths Upgrade to Overweight from Equal-weight Morgan Stanley

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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CHARTS

AD8 APT ARB AWC BHP BOQ CSL EML FLT KGN MHJ PPT SSG SYD TLS WHC Z1P

For more info SHARE ANALYSIS: AD8 - AUDINATE GROUP LIMITED

For more info SHARE ANALYSIS: APT - AFTERPAY LIMITED

For more info SHARE ANALYSIS: ARB - ARB CORPORATION LIMITED

For more info SHARE ANALYSIS: AWC - ALUMINA LIMITED

For more info SHARE ANALYSIS: BHP - BHP GROUP

For more info SHARE ANALYSIS: BOQ - BANK OF QUEENSLAND LIMITED

For more info SHARE ANALYSIS: CSL - CSL LIMITED

For more info SHARE ANALYSIS: EML - EML PAYMENTS LIMITED

For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE LIMITED

For more info SHARE ANALYSIS: KGN - KOGAN.COM LTD

For more info SHARE ANALYSIS: MHJ - MICHAEL HILL INTERNATIONAL LIMITED

For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED

For more info SHARE ANALYSIS: SSG - SHAVER SHOP GROUP LIMITED

For more info SHARE ANALYSIS: SYD - SYDNEY AIRPORT HOLDINGS LIMITED

For more info SHARE ANALYSIS: TLS - TELSTRA CORPORATION LIMITED

For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED

For more info SHARE ANALYSIS: Z1P - ZIP CO LIMITED