The Monday Report

This story features BEACH ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: BPT

By Greg Peel

The 5400 level continues to be elusive for the ASX 200. The index had another go at it on Friday but managed only 5397 before the Friday afternoon drift set in. The Shanghai index had another weak session, falling 1.45%, which no doubt is influencing a suddenly less robust Aussie dollar. The Aussie was down another 0.4% to US$0.9581 in the 24 hours to Saturday morning. It’s the right direction, but not for the right reason.

The Japanese stock market also tanked, down 2.75%, when the country’s core CPI result for September came in at flat growth. The whole point of Abenomics is to spark up long lost Japanese inflation, so a flat result this far down the track is clearly not inspiring for the stock market. The reality is this is the first non-negative result in a whole five years, and that has to be good news.

The euro remains the go-to currency of choice now that the US dollar is wallowing again on the “no tapering” effect. The euro proved resilient on Friday night despite an unexpectedly weak IFO business sentiment survey out of Germany. As the US keeps up the money pump to compensate for Congressional cretinism and an unconvincing US economic recovery, everybody else suffers as a result from artificially inflated currencies.

The pound nevertheless fell back on Friday night despite the first estimate of UK September quarter GDP marking three-year high 0.8% growth over the June quarter. The result was as forecast, so the fact was sold.

The upshot of major currency movements was a US dollar index up a tick to 79.22 on Friday. For Wall Street, the focus was on earnings reports. There is not much point in focussing on anything else – even economic data – when Fed tapering is no longer on the horizon. And it was a very good day.

Microsoft (Dow) and Amazon both thrilled the market with not only beats on the earnings line, but solid revenue growth. Revenue growth is the missing piece of the corporate pie. Microsoft shares jumped 6% and Amazon 9%. Economic bellwether United Parcel Service also posted an encouraging result which took its shares up 1.2%.

The surge in the two big tech stocks took the Nasdaq up 0.6% while the Dow gained 61 points or 0.4% and the S&P added 0.4% to 1759 in fresh blue sky.

Wall Street did have economic data releases to contemplate on Friday nevertheless. September durable goods orders surprised with a 3.7% gain, but it was all about a jump in demand for Boeing aircraft. Take out transport, and orders fell 0.1% to mark a third straight monthly decline. Economists blame the government shutdown which was still pending in September.

Michigan Uni’s latest fortnightly survey of consumer sentiment was conducted after the government reopened, so economists were a little disappointed in a fall to 73.2 from the 75.2 reading mid-shutdown. It is the weakest read this year.

And speaking of Tea Party morons (pardon the tautology), Rand Paul, Republican senator from Kentucky, has threatened to block the president’s appointment of Janet Yellen to replace Ben Bernanke as Fed chair. There is no indication Paul is anti-Yellen, it’s just that he is determined to force his own bill that would see Fed policy audited by the Government Accountability Office and intends to use a block as leverage. Now the Fed might be an often clandestine and mysterious organisation, but can you imagine if the politicians were dictating monetary policy as well as fiscal policy? I mean seriously. Imagine an Australian Treasurer in charge of indirectly setting mortgage rates when party support in the swinging seats was waning ahead of an election. Let alone the Tea Party – a minority of a minority within US government – being in control of the world.

Gold ticked up a further US$4.70 to US$1351.40/oz on Friday. Base metals were mixed on smallish moves. After falling for most of the week, the oils recovered some ground, with Brent rising US30c to US$107.23/bbl and West Texas rising US85c to US$97.96/bbl.

Spot iron ore fell US20c on Friday to US$133.30/t.

The SPI Overnight really wants to see that 5400 level broken in the physical. It was up 33 points or 0.6%.

Just when it looked like tensions between China and Japan may have eased, with trade data indicating a relaxation of earlier boycotts, the two were at it again on the weekend. Japan was forced to scramble fighters when China flew drones over the disputed islands in the East China Sea and military aircraft close to Okinawa, and Beijing responded by suggesting if any attack was launched, it would be considered an act of war. Abe is looking to reinstate Japan's military power and China is flexing its regional muscles. Presumably little more will come of it, but the yen is trading lower this morning.

As we look to next week, the US economic release calendar has been thrown somewhat into disarray. Data that was previously scheduled for release has been postponed to allow government agencies to catch up on the numbers, while data scheduled for release during the shutdown continues to find the light of day. The result is that the FNArena calendar as it appeared last week has now been superseded and as of today is up to date. Most notably, the previously scheduled releases for US third quarter GDP and October non-farm payrolls have been delayed a week. But there is a raft of previously delayed data in their place.

Tonight thus sees industrial production and pending home sales, and Tuesday retail sales, business inventories, the PPI, the Case-Shiller house price index and Conference Board consumer confidence. Wednesday it’s the CPI and ADP private sector jobs number. Thursday sees the Chicago PMI and Friday vehicle sales along with the manufacturing PMI.

The Fed will meet this week and release a policy statement on Wednesday. Wall Street will be looking for some assessment on the impact of the fiscal shutdown and just what implications it has had on monetary policy, specifically any clues on taper-timing.

Japan’s manufacturing PMI is due on Thursday while Friday brings the official and HSBC numbers for China and the UK’s result. The eurozone number is not out until next week.

Australia’s PMI is also out on Friday, preceded by new home sales, building approval and private sector credit data on Thursday. The RBA governor will provide the opening remarks to a Citi conference on Tuesday. Other data releases on Friday include the RP Data-Rismark house price index and the September quarter PPI.

On the corporate front, the local AGM season will trundle along, with another few hundred cups of tea and bikkies at the ready, while quarterly production reports are due from AlacerGold ((AQG)), Beach Energy ((BPT)), Perseus Mining ((PRU)), AWE ((AWE)) and OceanaGold ((OGC)).

ANZ Bank ((ANZ)) will report its full-year results on Tuesday and National Bank ((NAB)) will follow on Thursday. We’ll also see a full-year result from BT Investment Management ((BTT)) and a quarterly from Henderson Group ((HGG)), while on Friday Macquarie Group ((MQG)) will post its interim.

Rudi will appear on Sky Business today at 11.15am, on Wednesday at 5.30pm and on Thursday at noon.
 

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.

Click to view our Glossary of Financial Terms