Tag Archives: The Week Ahead

article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

Aside from whatever comes off Donald’s Twitter feed next week, the local market is likely to be completely dominated by earnings season, which as of next week jumps straight from first into third gear, before hitting top gear the week after. Strap in.

Reporting companies are too numerous to highlight so please refer to the FNArena Calendar.

On the economic front, next week sees December quarter GDP results from Japan and the eurozone, along with inflation numbers from China.

The US will also see inflation data along with industrial production, retail sales, housing sentiment and starts and the Empire State and Philly Fed activity indices. Real data is nevertheless taking a backseat in the US at present, it would seem, to imagined future data.

In Australia we’ll see the monthly NAB business and Westpac consumer confidence surveys along with the monthly jobs lottery.
 

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article 3 months old

The Monday Report

By Greg Peel

China Shock

The local market opened slightly higher on Friday morning before flattening out and looking very “Friday”. Talk around the desks would have been of where best to go for lunch. But then out came Caixin’s China data.

Beijing’s official January manufacturing PMI, published at the usual time of first of the month, showed a slight dip to 51.3 from 51.4 and caused little concern. Caixin waited until the holiday week was over before releasing its own PMI, which showed a more significant drop to 51.0 from 51.9 in December.

That December number had represented the best result in 47 months, in a trend that had been rising. Now a pullback. The Australian stock market was just starting to sell out of resources stocks when the double-whammy came through.

The PBoC announced a hike for its benchmark seven-day interest rate (closest equivalent to cash rates elsewhere) by ten basis points to 2.35%. The rate had not moved from 2.25% since October 2015 and this is the first move up in rates in six years. Suddenly, and without warning, China is in tightening mode.

The assumption is Beijing is acting to stem China’s worrying pace of debt growth. As is evident from Caixin’s PMI, it is not about runaway economic growth. China’s December quarter GDP came in at 6.8% against 6.7% forecast but that’s not a reason to hike rates.

The response in the Australian stock market was swift. Tighter lending conditions imply lower demand for commodities. In an otherwise relatively flat session for the ASX200, the materials sector closed down -2.2% and energy -1.2%. Traders took that money out and put it into the defensives of healthcare (+0.6%), telcos (+0.7%) and utilities (+0.9%).

The Chinese move also took a bit of wind out of the Aussie dollar’s recent run, but only briefly, before the US session opened.

On Friday night, metals prices duly fell although it wasn’t a trashing. Then a strong session on Wall Street changed the mood.

About Time

The US added 227,000 new jobs in January to mark the best result in four months, beating expectations of 197,000. The unemployment rate ticked up to 4.8% but this was because the participation rate rose as more people decided it was worth looking for a job again. Wage growth was an anaemic 0.1%.

I suggested last week US jobs reports will likely now be met with more of a shrug than the sort of angst we’ve been used to this past few years, given we’ve seen a changing of the guard in Washington and it’s only early days. But this particular report could not have been much better.

There was a risk that such a “beat” on new jobs could put upward pressure on wages and thus inflation, leading the Fed to raise rates more rapidly than previously assumed and pushing up the US dollar, the strength of which is acting as a headwind for US exporters and multinationals. But to add 227,000 jobs and only see 0.1% wage growth is real cake-and-eat-it-too stuff.

However, the ultimate rise in the Dow of 186 points or 0.9% to regain the 20,000 mark, a 0.7% gain for the S&P to 2297 and a 0.5% gain for the Nasdaq to a new all-time record, was not just about jobs. The jobs report was just the opening support act.

On Friday, Donald Trump signed an executive order directing the Treasury to review Dodd-Frank legislation, which was put in place after the GFC as a response to the banking crisis. While most US bankers agree there needs to be some legislation in place to reduce the risk of another GFC, Dodd-Frank has always been seen by the sector as overbearing and unnecessarily restrictive.

Indeed, there are few who disagree that Dodd-Frank – hastily pushed through in a time of severe crisis – could use a bit of a rethink. What might be a little more concerning is that Trump signed another executive order which will delay the implementation of the so-called “fiduciary rule” – that which requires brokers and investment advisors who handle what we in Australia call superannuation clients to act in the best interest of their clients.

Why “act in the best interest of clients” should require legislation in any jurisdiction is a cause for concern, but clearly legislated punishments are needed to deter the shysters. Either way, Trump’s move on perceived over-regulation in the US banking system had the unsurprising effect on the US financial sector on Friday night. The banks drove Wall Street higher.

This is what, among other things, Wall Street has been waiting for, having become more and more impatient and uneasy as Trump concentrated on killing off free trade, introducing immigration bans (now overturned) and generally pissing off one world leader after another.

Now, about tax reform…

Commodities

The strong US jobs number might on any other day had sent the greenback higher but with no sign of wage inflation, the dollar index was down -0.1% to 99.76. For metals prices, it was all about the Chinese rate hike, although moves were not dramatic.

Aluminium remained steady on the LME while copper, lead, nickel and zinc all fell -1-2%.

Iron ore awoke from its New Year slumber to fall -US40c to UD$82.00/t.

West Texas crude rose US24c to US$53.83/bbl.

Gold rose US$4.40 to US$1219.40/oz.

The Aussie had come off a little on Friday on China’s news but shot up again when the US jobs report was released. It was 0.3% higher on Saturday morning at US$0.7682.

The SPI Overnight closed up 24 points or 0.4% on Saturday morning.

The Week Ahead

It’s a quiet week for US data releases this week, with the trade balance tomorrow and consumer sentiment on Friday the only highlights. The US earnings season has passed its peak and now heads into its long tail.

The opposite is true in Australia, where this week sees the earnings season ramping up. There are several reports due out this week before the following two weeks see an inundation.

Data-wise, Australia will see retail sales and ANZ job ads today, the construction PMI tomorrow, new home sales on Thursday and housing finance on Friday. The RBA will hold it first meeting for 2017 tomorrow and leave rates on hold, before releasing a quarterly Statement on Monetary Policy on Friday.

Caixin will release its China service sector PMI tomorrow and Beijing will release January trade numbers on Friday.

National Bank ((NAB)) will provide a quarterly update today. Alacer Gold ((AQG)) may report today or, given total disagreement among covering brokers, any day this week.

Rudi is in Perth this week to present to members of the Australian Shareholders Association (ASA) and of the Australian Investors Association (AIA), both on Tuesday. After his return to Sydney he will appear on Sky Business on Thursday at noon.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

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article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

As the US earnings season enters its long tail next week, the local earnings season begins to ramp up. From a dribble of reports this week we move to a busier week next week, before the avalanche hits in the following two weeks.

Rio Tinto ((RIO)) is the biggie among the reporters next week while National Bank ((NAB)) will provide a quarterly update and Macquarie Group ((MQG)) an operational briefing.

All known reporting dates can be found in the FNArena Calendar (link above).

The Chinese are back on board next week and Caixin will release its take on China’s service sector PMI. China’s January trade numbers are due on Friday. New Zealand has a long weekend ahead of the RBNZ policy meeting on Thursday.

The RBA will meet on Tuesday for the first time this year, make note of the record December trade surplus, call the strong Aussie a “complication”, and leave rates on hold. The RBA’s quarterly Statement on Monetary Policy will be released on Friday.

Next week also sees retail sales, the ANZ job ads series and housing finance numbers.

While it will no doubt be another wild week politically in the US next week, economic data-wise it is quiet with trade and consumer sentiment numbers the only highlights. Maybe tonight’s jobs number might spark a reaction, but maybe not.

Trump’s Twitter thumb has sucked the oxygen out of everything.


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article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

It will be interesting to see how Wall Street responds to tonight’s release of the first estimate of US December quarter GDP. If it’s a good number, then that’s good. If it’s a bad number then, well, Mr Trump is now on board to fix all that.

The US earnings season will continue next week amidst a barrage of economic data. Wednesday is the first of the new month which means manufacturing PMI numbers from across the globe, and service sector PMIs on Friday. The US will also see pending home sales, house prices, personal income & spending, consumer confidence, construction spending and productivity.

Wednesday sees the private sector jobs number and Friday brings non-farm payrolls. And Wednesday also features the first Fed policy meeting under the new Administration. How will Yellen perceive the prospects ahead?

China will be closed through to Friday for the New Year holiday, although Beijing will still dutifully release its PMI data.

The first estimate of the eurozone’s December quarter GDP is out next week. The Bank of Japan and the Bank of England will both hold policy meetings.

Australia will see numbers for the PMIs, private sector credit, building approvals, housing finance and the NAB business confidence survey. The RBA will publish its quarterly Statement on Monetary Policy.

On the local stock front, the end of the resource sector production report season will merge with the early stages of the corporate earnings result season. Next week sees a handful of companies reporting.


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article 3 months old

The Monday Report

By Greg Peel

Back to Earth

The pressure has eased for the local banks with regard the possible need for capital raisings, analysts suggest, but that doesn’t mean valuations achieved in the post US election rally, spurred on by strong rallies for the US banks, are realistic. A slow credit growth environment in Australia continues to drag on bank earnings.

Thus local bank share prices ran too far, and hence have been pulling back in the past few sessions as analysts call for a reality check. Macquarie, for one, downgraded its bank sector call to Neutral from Outperform late last week and the Friday session was another in which a -1.2% fall for the financials sector was the influential move on the day.

The miners have also enjoyed a solid run and here, analysts have been forced to play catch-up with regard commodity price forecasts. They have not, however, caught up to spot price levels, which all agree are more likely to ease in the near term than run further. Analysts have upgraded forecasts based on commodity prices forecasts still sitting below spot.

Indonesia has also thrown a spanner in the works in the nickel sector by lifting export bans, and overall the materials sector has also seen some cooling. Friday saw materials down -1.3%.

After a big jump on Thursday, CSL ((CSL)) enjoyed another kick on Friday from the latecomers to provide the only significant sector offset to the banks and miners. Healthcare rose 1.1%.

There was no doubt an element of squaring up on Friday ahead of Trump’s inauguration, as was the case on Wall Street. The ASX200 is now close to 200 points lower than its peak at the height of Trump excitement, as reality awaits.

There was no excitement generated when China’s December quarter GDP came out at 6.8% year on year, beating 6.7% forecasts.  For 2016, GDP rose 6.7%, meeting Beijing’s target of “at least 6.5%”. Blow me down.

Industrial production rose 6.0% in 2016, compared with 6.1% in 2015, retail sales rose 10.4% (10.7%) and fixed asset investment rose 8.1% to December, down from 8.3% to November. Friday’s data dump provided no reason to be either delighted or particularly concerned.

New Era?

Day One and President Trump is already bitching about how many people the press have suggested didn’t turn up to his inauguration parade. And many of those who did were protesters. It’s going to be a turbulent four years.

Wall Street’s focus was on the inauguration ceremony but there were still earnings reports to digest. Among the Dow components, American Express missed on earnings but beat on revenue, which is actually a welcome surprise, General Electric missed on revenue and Proctor & Gamble posted a solid earnings beat.

The Dow was nevertheless around 90 points higher form the opening bell, likely suggesting the pullback from the peak of Trump euphoria had been sufficient, according to traders. Trump’s address potentially offered more upside after the pullback than downside. But as was anticipated, Trump’s address contained nothing of note on the policy front. The Dow duly dropped back again, not quite to square.

Yet the word from the new Administration is that promised policies such as tax reform will be seen to as quickly as possible. As the afternoon progressed, and Trump managed not to make a fool of himself at each step, the Dow quietly regained its mid-session losses. It is typical for Wall Street to fall on the day of any inauguration. Not this time.

Okay. That’s over and done with. Aside from ongoing earnings reports, Wall Street will remain focused on cabinet confirmations and actual movement on policies. A retest of Dow 20,000 likely depends on policy clarification and action.

The Dow closed up 94 points or 0.5% while the S&P gained 0.3% to 2271 and the Nasdaq rose 0.3%.

Commodities

Nickel was down yet another -2% in London in a mixed session that saw aluminium rise 1% and lead 2%, while copper and zinc stood still.

Iron ore fell -US30c to US$80.10/t.

The US dollar index fell -0.3% to 100.85 but gold remains relatively steady at US$1207.80/oz and the Aussie is little moved at US$0.7552.

The International Energy Agency’s December report, released on Friday morning in the US, showed OPEC production dropped by -320,000 barrels per day in the month to 33.09 million barrels. By God, they’re actually doing it. OPEC’s target ceiling is 32.5m barrels.

This news had oil prices shooting up early in the day but they soon eased off when the weekly US rig count showed an increase of 29 to 551. West Texas crude ultimately closed up US$1.05 or 2% to US$52.42/bbl.

The SPI Overnight closed up 27 points or 0.5% on Saturday morning, suggesting the local market may also see a break in the pullback today.

The Week Ahead

Aside from any news from Camp Trump this week, it will be a busy time for Wall Street at both the corporate and economic levels. A flood of earnings reports will be joined by a slew of economic data.

Tomorrow night sees existing home sales, the Richmond Fed index and a flash estimate of January manufacturing PMI. Wednesday it's FHFA house prices and Thursday brings new home sales, the trade balance, leading economic indicators, the Chicago Fed national index and a flash services PMI estimate. On Friday it’s durable goods, consumer sentiment and a first estimate of December quarter GDP. Forecasts are for 2.1%, down from September’s 3.5%.

The UK will also deliver its first estimate of December GDP on Thursday.

Holidays will dominate this week, with New Zealand off today, Australia off on Thursday, and China off on Friday for the beginning of the week-long New Year break.

The key data release for Australia this week is Wednesday’s December quarter CPI numbers.

On the local stock front, the resource sector production reports will continue to flow, with BHP Billiton ((BHP)) the highlight on Wednesday.  Northern Star Resources ((NST)) and Syrah Resources ((SYR)) are today’s reporters.

This week will also see a couple of early earnings results reports, ahead of next month’s season proper. ResMed ((RMD)) reports tomorrow and Alumina Ltd ((AWC)) on Wednesday.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

There’s a new world somewhere, they call the Promised Land.

So once sang a bunch of folksy Aussie nerds. Will the new world begin emerging after tonight? Jury’s out.

Life will nevertheless go on in the market next week, albeit in the vast shadow of Trump and his yet to be confirmed cabinet. In the US, life next week will mean a ramp-up of corporate earnings reports and a wealth of economic data.

They include new and existing home sales, house prices, the trade balance, durable goods, the Richmond and Chicago Fed indices, flash estimates of manufacturing and services PMIs and, on Friday, the first estimate of December quarter GDP.

China’s one and only GDP result is out today, and as of Friday next week China will enter the week-long annual New Year holiday.

On the local front, it’s a short week punctuated by the Australia Day Holiday on Thursday, and a lot of summer colds on Friday. The highlight of the week will be the release of December quarter CPI numbers on Wednesday.

On the local stock front, the resource sector quarterly production report season ploughs on, with reporters next week including BHP Billiton ((BHP)), Oil Search ((OSH)), and a beaten-down Independence Group ((IGO)).

Early earnings reports from ALE Property Trust ((LEP)) and ResMed ((RMD)) remind us that our own reporting season is fast approaching.
 

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article 3 months old

The Monday Report

By Greg Peel

Happy New Year to all. I hope those who are now back at the desk for 2017 have, like myself, enjoyed their summer break.

Funny Old World

The point of a break is, of course, to detach oneself from the action so forgive me if it takes a couple of days for this writer to get back into the swing. While not completely ignoring the world this past month, I can’t say I’ve tried to pay a great deal of attention. But I have noticed two interesting points.

Back in mid-December the Dow had fallen back from a first attempt to reach the 20,000 mark but most commentators were convinced the typical end of year rally would see the milestone reached. It hasn’t been. Indeed a month later, it’s basically where I left it. I do note, nonetheless, a 52-week high of 19,999.

Despite an assumption the Dow would have hit 20,000 by now, another popular belief was that the post-Trump euphoria rally would continue through to inauguration on campaign promises before petering out on the reality that (a) policy changes will take time and (b) a lot of what Trump was promising in the campaign is just not feasible or at least will be watered down. But as we approach Trump’s inauguration this coming Friday, already doubt is creeping in.

Aside from the US-Russia-China brouhaha that has dominated the past month, and has had many a global citizen lying awake at night, Trump’s first truly presidential speech last week, despite still officially being President-elect, was devoid of any policy updates or commitments. Is the next US president all Twitter and no substance? Wall Street has stalled for the time being as it waits to find out.

The other interesting point is that I left the local market looking bullish but struggling to push through the technical level of 5600 for the ASX200. Chartists were suggesting a breach of 5600 would be followed by a swift move to 5800 and then maybe a push back to the post-GFC high of 6000. Well as soon as I stepped out the door, the push began, in thin Christmas holiday trade. The ASX200 peaked at 5800, largely on the promise of a stronger economy thanks to robust commodity prices, before dropping back towards 5700.

So the wash-up, since my last Report, is Wall Street unchanged and the local market a couple of hundred points higher. Looking at commodity prices, I note the bulks and oil are roughly where they were a month ago, copper and aluminium have improved slightly but lead, nickel and zinc have slipped, and gold has staged quite a substantial comeback, as the US dollar rally has waned. The Aussie is a couple of cents higher.

I note also the critical benchmark of the US ten-year bond yield has slipped back to 2.38% as of Friday having hit 2.50% in December on its way, it was then assumed, to 3%.

I suppose the best we can say at this point is that the world is supposedly set to change as of this Friday, but as to how it will change will dominate trading in 2017.

Friday

The ASX200 breached 5800 last Monday, dropped on Trump’s non-event speech, stalled as half the market hit the beach, and then dropped again on Friday. One might make the assumption that last Monday saw many a trader return from holidays to wonder just why we were at 5800, hence the bias last week was more to the downside than the up. Today will see more of the market return.

Friday’s 0.8% fall in the index was mostly about a 1.4% drop for the banks, accompanied by a 0.9% fall in materials. The banks have had a good run since Christmas so perhaps were due some selling, while a lift in Indonesia’s ban on raw nickel exports had nickel miners, particularly Western Areas ((WSA)) and Independence Group ((IGO)), copping a hammering. And trouble continues in infant formula land.

Barring anything unforeseen, one assumes the market will stay relatively quiet ahead of Friday night’s inauguration, with Friday’s Chinese data drop, including December quarter GDP, also in focus. Locally we have unemployment numbers due on Thursday, but no one pays much attention to those anymore.

Friday Night

All focus on Wall Street at present is of course on Trump, but there is also the small matter of the US December earnings results season, which has now kicked off. The post-Trump rally that has seen all major US indices hitting new all-time highs has been led by the financials sector, which has risen 20% since the election. The pressure was on for the three big banks reporting on Friday night.

JP Morgan (Dow) and Bank of America didn’t disappoint. Wells Fargo did, but then Wells is still smarting from the sales tactics scandal it has endured since September.

Despite the banks proving a net positive, the S&P500 only managed a 0.2% gain for the session to 2274. The Dow fell 5 points and remains over a hundred points shy of the 20,000 milestone. Last week was all about the tech-laden Nasdaq, which continues to hit new highs. It did so again on Friday night with a 0.5% gain.

Commodities

Nickel rebounded 2% in London in a session that saw all base metals rising 1-2%, aside from a 5% jump for lead.

Iron ore fell US30c to US$80.20.

Gold is steady at US$1197.50/oz.

West Texas crude fell US59c to US$52.48/bbl.

The US dollar index is off 0.1% at 101.22 and the Aussie is presently trading slightly lower at US$0.7483.

The Week Ahead

US markets are closed tonight for Martin Luther King Day.

Through the rest of the week, US data releases include the Empire State activity index tomorrow, the CPI, industrial production, housing sentiment and the Fed Beige Book on Wednesday, and the Philadelphia Fed index and housing starts on Thursday. Friday is Trump Day.

Janet Yellen will be speaking on both Wednesday and Thursday.

China will release monthly industrial production, retail sales and fixed asset investment numbers on Friday along with the December quarter GDP. Expectations are for 6.7%.

Locally, we’ll see housing finance numbers tomorrow, the Westpac consumer confidence survey on Wednesday, jobs numbers on Thursday and new home sales on Friday.

As far as individual corporate news is concerned, it’s a quiet week.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

article 3 months old

The Monday Report

By Greg Peel

Party Time

Another day, another blow-up for a high PE growth stock, this time Sirtex Medical ((SRX)). The oncology biotech announced a 40% downgrade to guidance on Friday and copped a near 40% fall in share price in response.

It was an otherwise quieter day on the local market on Friday, more of a shuffle-about of sector positions following a solid rally rather than any market theme. We opened modestly higher and drifted through the afternoon. Last Friday and this coming Friday are your classic office Christmas lunch/party dates and as business starts to wind down for the year, less work and more frivolity is ahead.

Sirtex helped drag the healthcare sector down 0.6% but the biggest loser on the day was consumer discretionary, down 1.0%. Among the biggest individual stock losers on the day were the gambling names, led by Crown Resorts, which fell 5% on news authorities in Macau are looking to limit ATM withdrawals.

The leaders on the day were energy, up 1.1% on positive noises from Non-OPEC regarding OPEC’s production cuts, and the banks, up 1.0% because they are back in favour at present alongside their US counterparts.

Utilities also had a decent session, up 0.7%, as investors return to the sector to pick up some pretty decent looking yields following the long running sell-off. It must be said, nonetheless, it’s hard to find any stock analyst suggesting this sector is now a raging Buy on valuation given rising interest rate headwinds are set to persist.

Eyes on 20k

How far can the Trump rally run prior to the man actually taking office? Well all talk on Wall Street now is of Dow 20,000. Friday night saw the Dow gain another 142 points or 0.7% to 19,756, while the S&P rose 0.6% to 2259 and the Nasdaq added 0.5%.

The three major indices made new all-time highs every day last week, for the first time in five years.

It seems the US consumer is a Trump fan as well – probably hard not to be on promised income tax cuts. Michigan Uni’s fortnightly consumer sentiment gauge jumped 4.5% to 98.0, a mere 0.1 shy of the 2015 high which itself was the highest level for the gauge since 2004. Economists had assumed only a 95.0 result.

That was the good news for the day but realistically Wall Street just kept powering on because it is feeding on itself. Signs are that more retail investors are now moving in, providing the rally with greater depth.

For those investors already enjoying the rally, Friday night saw more of the week’s theme of buying up the sectors that had initially been left behind and easing off on the first movers. Again, REITs, utilities, telcos and consumer staples were primary drivers while industrials lagged. It’s not a full-on switch, otherwise Wall Street would not keep rising. It’s just a shift in focus on what to buy next. Leading the Dow higher on Friday night were the likes of Coca-Cola and Nike (both considered consumer staples in the US) which had previously been left at the starting blocks due to the surging US dollar.

The US dollar index was up another 0.5% at 101.06 and this is bringing into focus the dichotomy of large multinationals on the one hand, which face export headwinds thanks to the strong greenback, and small and mid-sized US companies that are domestically focused and thus currency ambivalent. The latter group is a bit of a waking giant post-election.

With the Fed meeting and press conference only days away, the US ten-year bond yield jumped another 8 basis points on Friday night to 2.46%. It’s now well over 100 basis higher than the 2016 low and yet the market is still only expecting a 25 point hike to the Fed funds rate.

The US banks and insurers are loving it.

Commodities

The US dollar should be providing headwinds for commodity prices as well but the trade-off is expectations of a stronger US economy, and as last week’s data suggested, an improving Chinese economy. Friday saw China’s November CPI come in at 2.3% annual, up from 2.1% in November, driven to a large extent by China’s housing boom and subsequent demand for household goods.

LME traders liked the numbers, and hence pushed zinc up 0.5%, aluminium and copper up 1%, lead up 2.5% and nickel up 3%.

More whiplash in iron ore – it fell US$2.30 to US$79.60/t.

And more growing expectations Non-OPEC, basically Russia, will join in with OPEC’s planned production cuts had West Texas crude up US62c at US$51.47/bbl.

Having held relatively flat over the week, Friday night saw gold capitulate to the rising greenback and surging US interest rates. It fell US$12.90 to US$1157.90/oz.

The Aussie, torn between strong commodity prices and the strong US dollar, is down 0.1% at US$0.7449.

The SPI Overnight closed up 23 points or 0.4% on Saturday morning.

The Week Ahead

The Fed policy statement is due out on Wednesday night. The FOMC will update its forecasts and Janet Yellen will hold a press conference. The focus for markets will be on any change in policy thinking post-election, or basically when will the next hike be. Wednesday night’s 25 basis point hike is assumed.

It’s also a busy week for US data releases. Wednesday sees business inventories, industrial production, retail sales and the PPI and Thursday brings the CPI, housing sentiment, the Empire State and Philadelphia Fed activity indices and a flash estimate of the December manufacturing PMI. Friday it’s housing starts.

Friday is also the quadruple witching derivatives expiry.

China will release November industrial production, retail sales and fixed asset investment numbers tomorrow.

In Australia we’ll see September quarter house prices tomorrow along with the NAB business confidence survey, followed by the Westpac consumer confidence survey on Wednesday. Thursday it’s the jobs numbers.

Thursday is also index derivative expiry day on the ASX.

Things are winding down now on the corporate front but there is still a handful of AGMs this week, most notably ANZ Bank ((ANZ)) and National Bank ((NAB)) on Friday.

Rudi will appear on Sky Business on Tuesday, via Skype-link, to discuss broker calls around 11.15am. On Thursday he'll appear between 7-8pm for the Switzer Report. On Friday he'll repeat the Skype-link at around 11.05am.

Rudi will also present twice this week. On Wednesday, starting at 7pm, he'll participate in a Christmas Special organised by the Chatswood branch of the Australian Investors Association (AIA). On Thursday, noon-1pm, he'll do his final presentation for the year on behalf of the Australian Shareholders Association (ASA) in Sydney.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

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Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

Tonight’s US jobs report might be highly anticipated, as all US jobs reports are, but it is all but certain the outcome won’t alter the assumption the Fed will hike this month. Something really bizarre would have to transpire, and already Wednesday night’s better than expected private sector result has economists upgrading forecasts.

Less certainty surrounds Sunday’s Italian referendum on constitutional reform. The polls currently suggest a rejection, which would lead to the prime minister’s resignation and again throw Europe into turmoil. The referendum itself is not a “Brexit” moment, but a loss would leave markets wondering if “Italexit” is not far away.

Australia’s September quarter GDP result is due next Wednesday. Earlier in the week we’ll see numbers for company profits and inventories and the current account, which includes the terms of trade. The question will be one of whether improvement in the trade balance, thanks to the commodity price rebound, will be enough to offset weakness implied by the previously released construction and capex numbers.

Next week also sees the first RBA meeting post-Trump. While no policy change is expected, the governor’s take on the New World will make for interesting reading.

Next week also brings ANZ job ads, the monthly trade balance and housing finance numbers. The services sector PMI is out on Monday.

The rest of the world will also release services PMIs on Monday. In a quieter data week for the US, trade, factory orders and consumer sentiment will feature.

Next week also sees trade and inflation numbers out of China.

While the AGM flow has now slowed to a trickle in the local market, Westpac’s ((WBC)) meeting next week will be the highlight.

Insurance Australia Group ((IAG)) and Santos ((STO)) will host investor days.


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The Monday Report

By Greg Peel

Drift Up

While a 22 point gain for the ASX200 is quite a positive session, brokers report the local market was deathly quiet on Friday, following no trading on Wall Street on the Thursday night. More of an upward drift than a rally of conviction.

Materials was again among the sector leaders on yet again stronger iron ore and base metals prices, rising 1.2%. But the stand-out theme on the day was support for the beaten-down yield stocks, which over the week saw some tentative bargain hunting. Telcos rose 1.2% and utilities 1.4%.

The only other sector to particularly bother the scorers was consumer discretionary, which rose 1.3% mostly thanks to a 7% jump for Tatts Group ((TTS)). Tatts announced it had entered into an equity swap deal for 10% of rival bookie Tabcorp ((TAH)), seen as a blocking stake designed to prevent a third party spoiling an eventual merger between the two.

While we’re on the subject of consumer discretionary, a word to the new owners of the Good Guys, who have been running saturation TV ads promoting “Black Friday” and Cyber Monday” sales. These are American events relating to Thanksgiving, the relevance to Australia of which is zero. If it’s not bad enough retailers have taken to the trough of Halloween, are they going selling us turkeys in November now as well?

Half Hearted

The irony of course is just as an Australian retailer attempts to find a new bandwagon to jump on, Black Friday and Cyber Monday have all but evaporated in the US, existing now in name only. Thanksgiving sales now stretch out for days.

In years gone by, the Friday half-session on Wall Street would be solely focused on the volume of foot traffic evident at US bricks & mortar retailers, and tonight would be all about the same but online. In last Friday night’s market reports, the focus was on the amount shoppers spent online on the day of the Thanksgiving holiday itself which, for the record, was up 13.6% on last year.

Friday night saw another quadrella record for the US stock market, with all the the Dow, S&P500, Nasdaq and Russell hitting new highs once more. The Russell small cap index posted its fifteenth consecutive positive session, a feat last achieved in 1996. The promise of reduced regulatory barriers and lower tax rates has seen the Russell outperform the larger cap indices since the election.

It was a typically quiet, low volume half-session which saw traders simply carry on the theme of the past three weeks. The Dow closed up 68 points or 0.4%, the S&P rose 0.4% to 2213 and the Nasdaq gained 0.3%. The month of November winds up this week, so we may see some further window-dressing early in the week.

December might be a different story. There is much talk now of a market having run about as far as it possibly could on an election win, and probably further.

Commodities

The US dollar index slipped back 0.3% to 101.48 on Friday night, which typically is supportive of commodity prices. But given commodity prices have rallied hard since the election in lockstep with the surging greenback, there’s no suggestion the dollar had anything to do with Friday night trading on the LME.

Lead jumped 6.8% -- its biggest session move in five years. The impetus was a surprise fall in Chinese inventories held by the Shanghai exchange. Chinese lead stocks have declined by 62% since July. Low inventories held in Shanghai and London are not currently an issue for zinc, yet zinc jumped 3.7% on Friday night.

For zinc it is a matter of major mine closures and suspensions, which have pushed the metal up 77% in 2016 to an eight-year high.

Otherwise, aluminium slipped 0.7% on the LME on Friday night and copper and nickel were flat.

Iron ore was at it again, rising another US$2.30 to US$79.20/t. Will we see 80 tonight?

West Texas crude suddenly saw some sharp selling, falling US$1.96 or 4% to US$46.00/t. There was no specific impetus other than the suggestion shorts have begun building ahead of this week’s OPEC meeting, taking advantage of recent price rises to back a lack of agreement on a production freeze being reached.  If an agreement is reached, we will see a rather sharp short-covering rally.

Despite the pullback in the US dollar, gold was flat at US$1183.60/oz.

That pullback nevertheless has impacted on the Aussie, which was up 0.4% at US$0.7437 on Saturday morning.

The SPI Overnight closed unchanged.

The Week Ahead

All eyes will be on Vienna on Wednesday night as OPEC meets to attempt to nut out some sort of production freeze compromise. All year Saudi Arabia has said there will be no agreement if Iran doesn’t join in, and all year Iran has said it won’t join in given it has only just had global sanctions lifted. Now it appears the Saudis are prepared to grant an exemption to Iran.

And to Iraq, and Nigeria, and Libya, if needs be. Indeed, there’ll be so many hands up for exemptions one wonders how any sort of meaningful deal can be struck. We’ll see.

It’s jobs week in the US this week, but with the market pricing in a 100% chance of a Fed rate hike at the next meeting, it’s unlikely the usual attention will be paid.

Tuesday night in the US sees Case-Shiller house prices, monthly consumer confidence and the second revision of US September quarter GDP. Economists are forecasting a tick up to 3.0% from a previous 2.9% growth.

Wednesday it’s pending home sales, personal income & spending, the Chicago PMI and the Fed Beige Book, the latter also being fairly meaningless ahead of Donald Trump getting the keys. Thursday sees construction spending, chain store sales, vehicle sales and the manufacturing PMI, and Friday it’s non-farm payrolls.

Thursday is the first of the month which means manufacturing PMIs across the globe, with Beijing also providing China’s service sector PMI.

In Australia we’ll see building approvals, new home sales and private sector credit on Wednesday and September quarter private sector capex, monthly house prices and the PMI on Thursday. Friday it’s retail sales.

While there are a few late cycle AGMs remaining due for the local market in December, this week otherwise sees a late rush to get meetings out of the way by end-November.

ALS Ltd ((ALQ)) will report earnings tomorrow, followed on Thursday by all of Aristocrat Leisure ((ALL)), Collins Foods ((CKF)), Freelancer ((FLN)), SAI Global ((SAI)), SMS Management & Technology ((SMX)) and Touchcorp ((TCH)).

Sirtex Medical ((SRX)) will hold an R&D day today and CSL ((CSL)) will follow suit on Thursday.

This week we’ll be hearing much talk of the Italian referendum on constitutional reform, which is to be held on Sunday. A loss would be the first step towards Italexit.

Rudi will appear on Sky Business on Tuesday, via Skype, to discuss broker calls around 11.15am. He'll appear in the studio on Thursday, 12.30-2.30pm and use Skype again on Friday, around 11.05am, to discuss more broker calls.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com