Daily Market Reports | Feb 16 2015
By Greg Peel
Local Flyer
“So we have oil up, base metals up, iron ore up, and Wall Street up. How will we fare today?” I asked in Friday’s Overnight Report. 134 points later I had my answer. Energy and materials each up 4%, banks, industrials and the telco each up 2%, and otherwise consistent green on screen. Quite a session.
The Aussie also jumped on the day, before falling back again afterward. This might imply some foreign buying being unleashed on Friday in a blanket Buy Australia trade. But the question now is: have we gotten a bit ahead of ourselves?
From a stock analyst standpoint, that’s a conclusion we may be able to draw from the earnings season to date. Of around 400 stocks covered by FNArena database brokers (not all of which report on a February-August cycle), 54 have posted earnings results, hence we’ve only just begun. But the early stats are interesting, as evident in FNArena’s Reporting Season Monitor.
Of those 54 companies, 28 have beaten estimates and only 9 have missed, which is a much higher beat ratio than previous seasons (so far). But the response from analysts has been to upgrade their Buy-Hold-Sell ratings in only 5 cases, while on the other hand downgrading their ratings in no less than 32 cases. That is one hell of a bias. The great majority of the downgrades reflect perceived overvaluation.
We are now entering the bulk of the reporting season this next two weeks, so it will be interesting to see if this theme continues.
Hail Germany
Friday night saw the release of the first estimate of eurozone December quarter GDP. It rose 0.3% from the previous quarter, beating expectations of 0.2%, to provide 1.4% annual growth in 2014. But the heavy lifting was all done by Germany, which saw its annual GDP rise to 1.6% in 2014 from a mere 0.1% in 2014, despite the impact of sanctions against Russia.
France managed only 0.4% annual growth, and some members – Greece, understandably but also Finland, for one – went backwards again. Germany accounted for 30% of output from 18 member countries, which has become 19 in 2015 as Lithuania comes on board. Economists are hoping for further net improvement in the March quarter as lower energy prices assist and ECB stimulus kicks in. Greece, however, may yet upset the apple cart, or at least keep Europeans worrying.
High Tide on Wall Street
Overvaluation is not just a potential issue in Australia, but it is a point of discussion on Wall Street as well. It was a quieter session on Friday night which closed modestly positive, but the S&P500 closed just below its all-time intraday high. The Dow is back over the 18k mark for the first time in 2015, having closed up 46 points or 0.3%, while the S&P rose 0.4% to 2096 and a 0.8% gain for the Nasdaq took the tech-heavy index to a new post tech-wreck high. The small cap Russell 2000 also posted a new all-time record.
Wall Street ignored a drop in the fortnightly Michigan Uni consumer sentiment index. It fell to 93.6 from 98.1 at end-January to mark a three month low. However, given January’s result was an 11-year high, and petrol prices have bounced back a little this month, traders were unperturbed.
Oil Rigged
The wild ride that is the rebound in oil prices continued on Friday night, with prices closing at their highest level in 2015. A report suggested the oil and gas rig count has fallen by 406 rigs to 1368 over twelve months to a five-year low. West Texas rose US$1.22 to US$52.68/bbl while Brent rolled over into the new March delivery front month, and jumped US$2.17 to US$61.44.
Have we seen the last of oil in the forties? Some commentators are not so certain.
Base metals were quiet on Friday night ahead of the Chinese New Year break beginning on Wednesday. Only tin moved the dial much with a 1% gain. The US dollar index was flat on Friday at 94.12 but gold managed to add US$5.40 to US$1228.20/oz.
Iron ore rose US50c to US$63.30/t.
On Saturday morning the Aussie was up 0.3% at US$0.7765 over 24 hours, having traded close to 78 during Friday’s stock market buying spree.
It’s also worth noting that a 3 basis point rise in the US ten-year bond yield has now returned the global benchmark to above 2%.
The ever exuberant SPI Overnight closed up 32 points or 0.6% on Saturday morning.
The Week Ahead
It’s Presidents’ Day in the US tonight and all markets are closed.
Japan will release its first estimate of December quarter GDP today before the Bank of Japan holds a policy meeting on Wednesday.
China will shut down on Wednesday for a week.
The eurozone will see trade data tonight, along with the important ZEW investor sentiment index and a consumer confidence measure during the week ahead of a flash reading of February PMIs on Friday.
The US will return from its long weekend to see housing sentiment and the Empire State manufacturing index on Tuesday, housing starts, industrial production, the PPI and the minutes of the last Fed meeting on Wednesday, and the Philly Fed manufacturing index and a flash manufacturing PMI on Thursday.
The minutes of the RBA’s rate-cut meeting will be out tomorrow and the market will be scouring for signs another cut might be forthcoming as soon as March. But in Australia, the big focus this week, and next, will be the bulk of the earnings result season.
The calendar is absolutely choc-a-bloc these next two weeks so strap in, and there are way too many reports due to justify noting any highlights. Please refer to the FNArena calendar.
Rudi will appear on Sky Business on Thursday at noon this week.
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
