The Overnight Report: Nowhere To Run To

Daily Market Reports | Oct 22 2020

This story features TEMPLE & WEBSTER GROUP, and other companies. For more info SHARE ANALYSIS: TPW

World Overnight
SPI Overnight (Dec) 6112.00 – 69.00 – 1.12%
S&P ASX 200 6191.80 + 7.20 0.12%
S&P500 3435.56 – 7.56 – 0.22%
Nasdaq Comp 11484.69 – 31.80 – 0.28%
DJIA 28210.82 – 97.97 – 0.35%
S&P500 VIX 28.65 – 0.70 – 2.39%
US 10-year yield 0.82 + 0.02 2.38%
USD Index 92.66 – 0.42 – 0.45%
FTSE100 5776.50 – 112.72 – 1.91%
DAX30 12557.64 – 179.31 – 1.41%

By Greg Peel

Not again, surely?

Our futures closed down -69 points or -1.1% this morning despite the S&P500 bumbling its way to a -0.2% close with little conviction. Presumably this reflects the news one student at a school in Melbourne has tested positive, and the residents of no less than five surrounding suburbs have been told to get tested immediately. The school is now closed and close contacts are self-isolating.

Also being told to get tested is anyone attending last weekend’s Bathurst 1000 after traces of covid were found in the sewage. Doesn’t bode well for this weekend’s grand finals.

There is also the issue of the Aussie dollar, which had been trending down quietly over the week in anticipation of further RBA action, bouncing back 0.9% overnight on a drop in the US dollar index. Looks like the market, as always, was short.

So that’s the set-up for this morning, after a session yesterday of chopping around and doing little at the index level, but of notable sector moves cancelling each other out. Those moves reflected both quarterly updates from individual companies and the day’s economic data.

Retail sales fell -1.5% on a preliminary estimate from the ABS, after having fallen -4.0% in August. Economists had expected a rebound. It was not the Victoria factor, as that state’s sales copped it in August, although Victoria remains the only state not to mark growth in year on year sales.

The breakdown is interesting. The ABS notes the bulk of the fall was in food and household goods. This implies to ANZ Bank economists dining & fashion and department store sales did not fall, as was the case in August, reflecting the easing of restrictions around the country. The drop in food and household goods likely suggests a saturation point has been reached.

So we might guess that furniture sales fell while jewellery sales rose. Funny we should guess that. Yesterday saw quarterly updates from both furniture retailer Temple & Webster ((TPW)), which has been going hard on the TV advertising lately, I’ve noticed, and costume jewellery retailer Lovisa Holdings ((LOV)), which is a mostly in-store business.

Temple & Webster revealed its September quarter sales were greater than that of FY20, and the stock fell -17.2%. It’s not a case of sliding sales but of expectation of sliding sales ahead. Mind you, the stock has risen 400% in 2020.

Lovisa’s update revealed the buyers are back, and it rose 7.2%. Its stock price remains below pre-pandemic levels.

On a net basis the consumer discretionary sector fell -0.2%, but the word “food” in the ABS report had staples down -1.1%.

The banks gained 0.9% after Westpac’s ((WBC)) AUSTRAC fine was announced. Lucky the majors have been ditching their wealth management businesses. Disruptor platform Praemium ((PPS)) jumped 20% on its funds under management update.

Energy gained 1.3% to be the best performing sector on the day. WTI fell -3% last night.

Healthcare (-1.1%) is beginning to become a coin-toss affair, up one day and down the next.

Materials (+0.5%) enjoyed rising commodity prices, and copper is up 3% overnight.

IT (-0.8%) was impacted by Megaport ((MP1)), which fell -13.2% on its update to be the worst index performer.

Best index performer was Orora ((ORA)), up 8.0% after someone suggested its valuation is now low enough to draw private equity interest. Wonder if they got set first. Apart from market speculation, Orora provided a much better than expected market update.

It’s all academic at the wider level, with the futures down -69 as noted. We have been ignoring Wall Street lately in heading northward, so now we are set to ignore Wall Street and head southward.

Get the Religion

CNBC’s Kayla Tausche summed it up perfectly this morning at the close of Wall Street, asking when is the market going to “get the religion” and realise there’s not going to be a stimulus deal agreed upon before the election.

Yet Pelosi and Mnuchin have again spent hours on the phone, having failed to achieve anything on Tuesday, and may still be on the phone as I write, while Mitch McConnell has warned both Republicans and the White House against striking a big deal before the election.

Interestingly, the Senate would not normally be in session this close to an election, but was reconvened to confirm the Supreme Court nomination. That’s expected to be rubber-stamped tonight, at which point the senators will all rush home to pick up their election campaigns.

Suppose you threw a party and nobody came.

Wall Street was all over the shop last night, back and forward on stimulus newsflow and individual earnings reports.

Having reported after the bell the night before, Snap jumped 30%, putting a rocket under Twitter (+0.8%) and Pinterest (+0.9%), and even dragging beleaguered Facebook up 4%. It’s all about the growth in advertising on social media.

Netflix also reported the night before and fell -6%, with investors now realising the company’s sensational earlier growth in subscribers was a lockdown story without legs.

Tesla smashed it on earnings, reporting after the bell, but is only up 2%. A lot baked in there.

Perhaps the most notable aspect of last night’s reports was that there were plenty of solid earnings beats, but they were met with either lacklustre share price gains or straight out selling.

Tonight is supposedly the last night a deal on stimulus could be struck. But it’s still meaningless ahead of the Senate becoming involved, if it even does become involved.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1924.50 + 14.60 0.76%
Silver (oz) 25.02 + 0.29 1.17%
Copper (lb) 3.15 + 0.10 3.11%
Aluminium (lb) 0.83 – 0.00 – 0.41%
Lead (lb) 0.80 + 0.01 0.93%
Nickel (lb) 7.19 + 0.00 0.03%
Zinc (lb) 1.14 + 0.01 0.48%
West Texas Crude 39.97 – 1.49 – 3.59%
Brent Crude 41.69 – 1.28 – 2.98%
Iron Ore (t) 120.40 + 0.90 0.75%

The big jump in copper is attributed to upbeat talk at the annual LME Week conference, at which the focus was on the renewables angle, ie the need for more electrical connections.

A -0.5% fall in the USA dollar had gold springing back to life.

The weekly US inventory lottery was behind oil price falls. It was not a case of a build, but rather of a less than expected decline.

The Aussie is depressingly up 0.9% at US$0.7118.

Today

The SPI Overnight closed down -69 points or -1.1%.

NAB will release September quarter business confidence numbers today.

It’s a very busy day on the local stocks front.

There’ll be some interesting AGMs today, including those of Crown Resorts ((CWN)), Scentre Group ((SGR)), Suncorp ((SUN)), Webjet ((WEB)) and Whitehaven Coal ((WHC)).

In the wake of Praemium’s stellar FUM performance, AMP ((AMP)) posts an update.

Qantas ((QAN)) and Mirvac ((MGR)) will also update, while production reports are due from OZ Minerals ((OZL)), Santos ((STO)) and Woodside Petroleum ((WPL)).

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
CCL Coca-Cola Amatil Upgrade to Accumulate from Hold Ord Minnett
SGP Stockland Downgrade to Neutral from Outperform Macquarie
SYD Sydney Airport Downgrade to Lighten from Hold Ord Minnett
WOW Woolworths Upgrade to Buy from Neutral Citi

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

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CHARTS

AMP CWN LOV MGR MP1 ORA OZL PPS QAN SGR STO SUN TPW WBC WEB WHC WPL

For more info SHARE ANALYSIS: AMP - AMP LIMITED

For more info SHARE ANALYSIS: CWN - CROWN RESORTS LIMITED

For more info SHARE ANALYSIS: LOV - LOVISA HOLDINGS LIMITED

For more info SHARE ANALYSIS: MGR - MIRVAC GROUP

For more info SHARE ANALYSIS: MP1 - MEGAPORT LIMITED

For more info SHARE ANALYSIS: ORA - ORORA LIMITED

For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED

For more info SHARE ANALYSIS: PPS - PRAEMIUM LIMITED

For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED

For more info SHARE ANALYSIS: SGR - THE STAR ENTERTAINMENT GROUP LIMITED

For more info SHARE ANALYSIS: STO - SANTOS LIMITED

For more info SHARE ANALYSIS: SUN - SUNCORP GROUP LIMITED

For more info SHARE ANALYSIS: TPW - TEMPLE & WEBSTER GROUP

For more info SHARE ANALYSIS: WBC - WESTPAC BANKING CORPORATION

For more info SHARE ANALYSIS: WEB - WEBJET LIMITED

For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED

For more info SHARE ANALYSIS: WPL - WOODSIDE PETROLEUM LIMITED