The Overnight Report: Stall Speed

This story features A2 MILK COMPANY LIMITED, and other companies. For more info SHARE ANALYSIS: A2M

World Overnight
SPI Overnight (Dec)	6715.00	– 14.00	– 0.21%
S&P ASX 200	6730.00	+ 23.00	0.34%
S&P500	3135.96	– 9.95	– 0.32%
Nasdaq Comp	8621.83	– 34.70	– 0.40%
DJIA	27909.60	– 105.46	– 0.38%
S&P500 VIX	15.64	+ 2.02	14.83%
US 10-year yield	1.83	– 0.01	– 0.71%
USD Index	97.64	– 0.06	– 0.06%
FTSE100	7233.90	– 5.76	– 0.08%
DAX30	13105.61	– 60.97	– 0.46%

By Greg Peel

Settling Down

After a wild week of index-based selling and buying last week on trade news volatility, the local market settled down to a more “normal” session yesterday with a greater foucus on fundamentals. Volumes were below average, likely as investors prepare for this week’s major events.

Wall Street had posted solid gains on Friday night on a very strong US jobs report and on a trade deal being “close”. The ASX200 rallied 34 points in the first 15 minutes. But then someone pointed out that while the US labour market might be strong, the Australian labour market is not, and on the trade front, that the villagers are getting pretty tired of having to jump out of bed when the sheep are quite safe.

At midday the index was up 6 points.

But from there the buyers regrouped and led the market to a positive close featuring mixed ups and downs among sectors. Individual stock moves were influential.

The resource sectors were the winners on the day, with energy rising 1.6% on the OPEC production cut and materials putting in a solid 1.2% on a bit of a rise in iron ore and copper and despite a big drop in the gold price.

Funds to buy resources were sourced from taking profits in healthcare (-0.8%).

Utilities (+1.0%) and telcos (+0.5%) made the day otherwise looked defensive but then a -0.5% drop for staples seemed otherwise. Given discretionary also fell (-0.2%) we might say investors are not expecting a particularly happy Christmas.

The fall in staples did nevertheless include a -3.9% drop for a2 Milk ((A2M)) after the CEO of 18 months either jumped or was pushed, however one might interpret it.

Otherwise it was a day for profit warnings.

Salary packager McMillan Shakespeare ((MMS)) kicked off the profit warnings with its trading update, citing challenging conditions. It fell -7.5%. Residential aged care provider Estia Health ((EHE)) pointed to lower occupancy and competition for its earnings downgrade and fell -7.1%. Caltex rival Viva Energy ((VEA)) also blamed competition, and volatile oil prices, for its downgrade, and fell -6.6%.

Moves to the upside were unremarkable. Beach Energy ((BPT)) led out the sector rally with a 5.2% gain.

Wall Street drifted off last night and this morning our futures are down -14. Ahead of the Fed, the UK election and the tariff deadline it could be a quiet few days before something actually happens.

Biding Time

President Trump and the majority House Democrats reached a tentative agreement on the US-Mexico-Canada trade deal (Nafta 2.0) last night.

I know…I didn’t realise that one was still ongoing either. Doesn’t get much oxygen for obvious reasons.

Otherwise, the euphoria of Friday’s jobs-led rally gave way to a bit of a hangover last night on Wall Street as investors there, too, await the week’s developments. All the major indices closed lower, but no one was much concerned.

There were no economic data releases of note last night and all-up is was a nothing-to-see-here session.

More attention was being paid to the Golden Globe nominations, which Netflix completely dominated. And it was not just Netflix. Across television and movies, streaming services shared the spoils, with traditional production houses mostly MIA.

Toto, I don’t don’t think we’re in Kansas anymore.

In other news, a Tesla on autopilot managed to crash into two other cars, one of them being a cop.

Don’t blame me officer.

Driverless vehicles? Not in my life time. The technology might get there but the insurance implications will keep us behind the wheel for decades to come.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1459.90	+ 0.20	0.01%
Silver (oz)	16.56	– 0.01	– 0.06%
Copper (lb)	2.73	+ 0.03	1.00%
Aluminium (lb)	0.80	– 0.00	– 0.49%
Lead (lb)	0.85	– 0.00	– 0.38%
Nickel (lb)	5.99	– 0.09	– 1.50%
Zinc (lb)	1.02	– 0.01	– 0.49%
West Texas Crude	59.00	– 0.20	– 0.34%
Brent Crude	64.19	– 0.18	– 0.28%
Iron Ore (t) futures	94.35	+ 4.95	5.54%

Friday night’s Chinese copper data were reinforced by China’s import/export numbers for November released on the weekend. Copper imports have exceeded expectations, suggesting demand for copper in China is greater than anyone believed given a slowdown in the economy.

Copper thus stood out on an otherwise weak day on the LME.

Iron ore was the star of the show yesterday nonetheless. According to CBA economists, the 5.5% jump is attributable to demand optimism after China's leaders vowed to maintain growth and pursue domestic reforms in 2020.

The Aussie is a tad weaker at US$0.6832.

Today

The SPI Overnight closed down -14 points or -0.2%. No one seems that excited about iron ore.

China releases inflation data today while locally the NAB business confidence survey is due.

Philip Lowe will deliver a speech today.

Bank of Queensland ((BOQ)) holds its AGM and IOOF ((IFL)) hosts an investor day.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BLD	BORAL	Downgrade to Lighten from Hold	Ord Minnett
CSL	CSL	Downgrade to Hold from Accumulate	Ord Minnett
CTX	CALTEX AUSTRALIA	Downgrade to Neutral from Buy	Citi
DXS	DEXUS PROPERTY	Upgrade to Outperform from Neutral	Credit Suisse
MTS	METCASH	Upgrade to Accumulate from Hold	Ord Minnett
NST	NORTHERN STAR	Upgrade to Buy from Neutral	UBS
SYD	SYDNEY AIRPORT	Downgrade to Lighten from Hold	Ord Minnett
TLS	TELSTRA CORP	Upgrade to Buy from Neutral	UBS
WSA	WESTERN AREAS	Upgrade to Neutral from Sell	UBS

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)

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

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms