The Overnight Report: Steady As She Goes

This story features BHP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BHP

By Greg Peel

Bridge Street seemed a bit weary as it tried to rally again from the bell yesterday which is not so surprising after the run it’s had. Yesterday’s profit results included a couple of clangers, particularly from UGL ((UGL)), although up to this point the result season has leaned to the positive. FNArena’s Reporting Season Monitor was showing a beat/miss percentage ratio of 35/20 ahead of yesterday’s releases, but in reality it’s this week when things really hot up in terms of the number of reports.

The index was fading late morning when China released its lending data for January which proved sufficient to provide a little afternoon strength once more. Despite all the concern over Beijing tightening lending practices, new yuan loans totalled CNY1.32trn in the month – the highest level since 2010.

Is this good news or bad news? Bridge Street saw it as good news, on the basis strong lending is indicative of a strong economy, allaying fears China’s economy is once again slowing. But the numbers highlight challenges for officials trying to limit the risk of financial turbulence from defaults and bad loans. Beijing is grappling with swelling local-government debt, volatility in money markets and risks from shadow banking, highlighted by a bailout that last month averted the nation’s first trust default in at least a decade.

Yet while the aggregate lending numbers were strong, trust loans were only half the level of a year ago. On that balance one would have to suggest Beijing has things relatively under control.

Not so Shinzo Abe. The new Japanese government burst onto the scene in early 2013 with Abenomics its mantra and stimulus its strategy and immediately sparked a 30% devaluation of the yen and 80% jump in the Nikkei. Japan’s GDP grew 1.2% in the March quarter and 1.0% in the June quarter and appeared on track to post 2.8% annual growth in 2013 as forecast. Until the wheels fell off. As the government vacillated over fiscal policy changes to accompany aggressive monetary policy, the September quarter saw only 0.3% growth. The December quarter result, which was released yesterday, also showed 0.3%, when 0.7% was expected. Japanese growth fell well short of 2.8% predictions for 2013, coming in at only 1.0%.

This didn’t much seem to bother Bridge Street yesterday.

Wall Street was closed last night for Washington’s birthday, hence international markets were generally quiet. European stock markets were little changed although London still managed a one percent jump as traders trod water.

They also had their floaties on at the LME, where base metals prices all rose by less than 1%, except aluminium which slipped a little. The oils were as good as unchanged.

The post-holiday ramp-up appears to be continuing in China, with spot iron ore up another US$1.20 to US$124.40/t.

Strength in gold continued despite the absence of the US, with the metal rising another US$11.10 to US$1329.20/oz. The US dollar index was steady at 80.12 and the Aussie little moved at US$0.9030.

The SPI Overnight remains excitable, up 28 points or 0.5%.

Despite such futures exuberance, the lack of lead from Wall Street will put greater focus on today’s local round of earnings results, which include some heavyweights. BHP Billiton ((BHP)), Asciano ((AIO)), Amcor ((AMC)) and Coca-Cola Amatil ((CCL)) are all in the frame today, as are plenty of others.

The minutes of the last RBA meeting are out today and will no doubt expand on the central bank’s decision to end its easing cycle for now. The Bank of Japan will hold a policy meeting which may be interesting in the wake of the weak GDP result.

Wall Street will be back in the swing tonight.
 

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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit 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.

Click to view our Glossary of Financial Terms