The Overnight Report: Bring It On

Array
(
    [0] => Array
        (
            [0] => ((ANZ))
            [1] => ((MQG))
            [2] => ((CAR))
            [3] => ((QAN))
            [4] => ((TAH))
            [5] => ((WOR))
        )

    [1] => Array
        (
            [0] => ANZ
            [1] => MQG
            [2] => CAR
            [3] => QAN
            [4] => TAH
            [5] => WOR
        )

)

This story features ANZ GROUP HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: ANZ
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Dow closed up 71 points or 0.3% while the S&P gained 0.1% to 2650 and the Nasdaq fell -0.1%.

Resilience

The local market had every excuse to go down yesterday. Wall Street was lower on interest rate concerns, commodity prices were weaker and the ASX200 had failed a couple of times to clear resistance at 5900. We also had ANZ Bank’s ((ANZ)) result early in the session, and it led to a -1.5% share price fall for the first cab of the rank in (major) bank reporting season.

Indeed the index did fall on the open, but only by -11 points. It then chopped around up until midday before the buyers moved in to push the market steadily up 30 points from the bottom to a positive close at 5912.

The consolidation phase continues, but it appears investors are looking at 5900 more as a launching point than a tipping point, despite the prior uninterrupted run all the way up from 5650. The good news is Wall Street turned around again last night on positive earnings, and after-the-bell earnings results from Big Tech have been crackers. The SPI futures are up 10 this morning.

Notable sector moves yesterday came from the banks, which ticked down only slightly despite ANZ’s result being weakly received, and the consumer sectors, which each gained 0.4%. Consumer staples have been notably weak of late. Info tech led the session with a 1.1% gain and energy rose 0.7% despite a slip in the oil price overnight.

Materials fell -0.2% but it could have been more. We should note that the Aussie is now looking down towards 76 rather than up towards 80, following the weak CPI result this week and a stronger greenback. Not all sectors benefit from a lower Aussie, but the ones that really count do. Healthcare is a case in point (offshore earnings). It rose 0.8% yesterday.

Today we see earnings from Macquarie Group ((MQG)) and the AGM calendar includes the likes of Carsales ((CAR)), Qantas ((QAN)), Tabcorp ((TAH)) and WorleyParsons ((WOR)) which all have the potential to impact on an individual stocks and sector basis. Otherwise we are looking to Wall Street to continue to push higher to provide the underpinning for the ASX200 to find a reason to reach 6000.

Another Hurdle

Last night the ECB announced after its policy meeting that monthly bond purchases (QE) would halve to E30bn beginning January, but that the program will be extended at least through to September. Mario Draghi described QE as an “open-ended” program that is not going to end suddenly.

Tapering was largely anticipated given European economic strength but the open-ended extension represented a more dovish approach from the ECB than markets had feared. Inflation in Europe, as everywhere, remains stubbornly low.

The news was positive as the opening bell rang on Wall Street but closer to home, the market was buoyed by news the House had passed the budget proposal bill. The Senate passed the bill last week, prompting a solid rally. This means, tacitly, that tax reform is on its way.

But there’s still plenty of work to do given so far what has been proposed is only an outline. Whether a more specific package can be passed will not come down to party lines but how new measures impact in each state, given each state has its own tax system. Thus it’s not just a matter of outnumbering the Democrats in Congress, it’s a matter of getting all Republicans on side.

It’s another step down the path, and meanwhile the busiest week of the earnings season is turning out to be a solid one. If we throw in aftermarket releases last night, it was the busiest day of the earnings season.

Among the Dow stocks, Ford was a winner with its earnings beat. Star of the day was Twitter, which shocked all the doubters by suggesting the company should turn its first profit next quarter. Twitter shares jumped 18%.

Only in America could you have a listed company called Buffalo Wild Wings. Shares in the fast food chain leapt 20% following its earnings release, with success stemming from the introduction of – get this – boneless chicken wings. I wonder where they get the boneless chickens.

Between the ECB, the budget and earnings results, the Dow jumped 130 points from the open. Thereafter the market came under pressure from weakness in the healthcare sector as the president vowed to go after producers and distributors of opioid drugs, the consumption of which has reached epidemic proportions in the US.

The impact was felt most in the Nasdaq, which is heavily weighted in biotechs. Hence the index disparity last night.

But while Wall Street may have come off its highs to the close, what happened after the bell should ensure, all things being equal, another strong session tonight.

Mircrosoft, Google (Alphabet) and Amazon all posted earnings results. As I write the shares of those three companies are up 3.5%, 3.5% and 7.5% respectively in the aftermarket. Amazon’s result was a particular surprise because analysts were expecting a weaker quarter for the company given its recent buying spree and forays into new markets.

Incidentally, Amazon is also now targeting pharmaceuticals.

So hang onto your hats tonight, which also brings the first estimate of US September quarter GDP.

Meanwhile, the budget news has the US dollar index up a full percent and the US ten-year yield hitting 2.45%.

Commodities

Such a jump in the US dollar is a drag on commodity prices, but realistically gold was the most obvious victim last night in falling -US$10.30 to US$1266.80/oz.

Nickel’s fall of -1% was the only standout to the downside among the base metals, with zinc shrugging and rising 1.5%.

Iron ore fell -US50c to US$60.60/t.

West Texas crude also ignored the currency in rising US47c to US$52.67/bbl.

The US dollar index is up 1% at 94.68 and the Aussie is down -0.5% at US$0.7660.

Today

The SPI Overnight closed up 10 points or 0.2%.

Australia’s September quarter wholesale inflation numbers are out today. The PPI does not get the same media attention as the CPI but economists will be taking note.

The US GDP is out tonight, as noted. It will nevertheless be hurricane-impacted and therefore none too clear cut.

As noted, Macquarie reports today and Carsales, Qantas, Tabcorp and WorleyParsons are among those holding AGMs.

Rudi will connect with Sky Business via Skype to talk broker calls at 11.15am.

****

The Australian share market over the past thirty days…

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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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

Click to view our Glossary of Financial Terms