The Overnight Report: Flat On Top

This story features RAMSAY HEALTH CARE LIMITED, and other companies. For more info SHARE ANALYSIS: RHC

By Greg Peel

The Dow closed up 15 points while the S&P moved 0.00% from 2000 and the Nasdaq was flat.

If we consider that yesterday’s two big ex-divs – Telstra and Woodside – represent around 8.5 points, the ASX 200 closed over 20 points higher yesterday. Whatever the case, anything up is a new post-GFC high. After a bad few sessions, the materials sector enjoyed a bit of bargain hunting yesterday despite another drop in the iron ore price. The new high on Wall Street assisted sentiment, but we’re mostly trading the alpha at present with results season making its presence felt.

Gains came despite the big economic data release of the day – June quarter construction work done. It came in with a net 1.2% fall when a fall of 0.5% was expected. Year on year growth stands at minus 0.6%, which is reasonably encouraging given the weight of mining construction decline.

Engineering fell 3.1%, which is your mining, while residential construction rose 2.2% and non-residential 0.5%. On the public/private split, public construction fell 6.4% while private was flat. Mining construction will continue to decline, so it’s up to that residential sector to do the heavy lifting. We will still see support for a little while yet from ongoing LNG-related construction, nevertheless, and in theory the government wants to step up its infrastructure spending but let’s face it, the budget is going to look nothing like Joe first proposed.

The overall result was a little weaker than expected but not discouraging, and certainly no reason to suggest the RBA will change its stance. That may explain why the Aussie is up 0.3% to US$0.9335.

Today brings the all-important June quarter capital expenditure and capex intentions numbers.

Meanwhile, a day after the meeting between the Russian and Ukrainian presidents, Ukraine has accused Russia of new military incursions into its territory. Speaking after the meeting, Poroshenko claims Putin signed his support for a “peace plan” while Putin denies this, insisting the meeting was only about economic cooperation between the two nations.

Whatever the case, US stock markets didn’t really care last night and went absolutely nowhere. The S&P500 closed 0% unchanged at its new high of 2000 and barely wavered from that level all session. There were no data releases of note. The Labor Day long weekend approacheth, and since last Friday the market has seen year-low volumes. That is unlikely to change much tonight despite the first revision of US June quarter GDP, and by Friday night it’ll be tumbleweeds.

Bond traders may be playing it a little more warily, nevertheless. The German ten-year fell another basis point to 0.91% last night and the US ten-year fell 3 points to 2.36%. Gold is steady at US$1283.00/oz. The US dollar index fell 0.2% to 82.47.

Continuing the geopolitics theme, no one seems to care much, either, that talk is of escalating the response to Syria-Iraq potentially to a level suggesting Gulf War III.

Commodity markets were also mostly quiet last night. No meaningful moves were registered in either base metals or the oils.

Iron ore nevertheless fell another US70c to US$88.20/t.

Futures traders don’t seem to like this new-high stuff. The SPI Overnight closed down 14 points.

The first estimate of US June quarter GDP came in at 4.0% growth and tonight’s first revision is expected to trim that to 3.9%. July pending home sales data is also due.

Before that, Australia will see new home sales data and the aforementioned June quarter capex numbers.

It’s the penultimate day of the reporting season and while again we’ll see a lot of companies reporting, there are a lot of mid/smaller caps. The exceptions are Ramsay Healthcare ((RHC)), Qantas ((QAN)), Perpetual ((PPT)) and Nine Entertainment ((NEC)) while miners Independence Group ((IGO)) and Paladin Energy ((PDN)) should draw attention.
 

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