The Overnight Report: Waiting Game

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By Greg Peel

The Dow closed up 13 points or 0.1% while the S&P rose 0.2% to 2091 and the Nasdaq fell 0.2%.

Profit-taking

It looked like it was going to be a dull old day on the local bourse yesterday as the market nursed its Anzac Day hangover, but at midday someone came in and started selling, possibly out of Asia. The ASX200 pretty quickly dropped 25 points.

Half of that drop was scrounged back by the closing bell and on the sector wash-up, only two moved the dial. A dip in oil prices had the energy sector off 1.0% while the big drop in the iron ore price, following the big jump last week, saw materials down 2.1%.

The two big miners were down 3% yesterday which largely told the tale. It’s not every month you see a company like BHP Billiton ((BHP)) run up around 40% so to see a 3% drop is hardly surprising as that gain is locked in. There remains much talk among analysts of iron ore prices in the sixties being unsustainable and seasonally fleeting, so you wouldn’t want to caught if BHP heads south in a hurry once more.

The other sectors didn’t much trouble the scorer yesterday. Stock markets across the world are awaiting the two big central bank meetings this week, being the Fed tonight and the BoJ on Thursday, and not doing much ahead of those outcomes.

Bad Apple

Apple is struggling to sell iPhones in China, it would appear, which is why the share price of America’s biggest company is down 8% in the Wall Street aftermarket as I write. Aside from the central bank meetings, Wall Street was quiet last night ahead of this particular earnings release.

Twitter also disappointed by posting weaker guidance with its result after the bell and its shares are down 13%. So much for the new world, although EBay is at least up a percent, but EBay’s a bit old hat these days as well. AT&T (Dow) is trying to become a bit more new hat, and it posted a reasonable result.

It might be another bad session for the Nasdaq tonight, notwithstanding on the Fed. The Apple and Twitter results serve to emphasise the point a company’s actual earnings result is not the singular factor in determining success or otherwise. In the US earnings season to date it has yet again been the case of earnings results not being as bad as expected, but revenue has been the deciding factor in, for example, the Apple and Twitter results.

There will be a lot of focus on the US energy sector as we move towards the end of the week, with results due from major oil service provider and rig counter Baker Hughes, as well as oil heavyweights and Dow components Exxon and Chevron.

In US economic news last night, durable goods orders rose only 0.8% in March when 2.0% was expected. The Case-Shiller house price index showed prices continue to rise but at a slowing pace. And the Conference Board’s monthly measure of consumer confidence showed a bigger than expected fall to 94.2 for April from 96.2 in March.

I’d be losing confidence too watching the GOP three-ring circus.

Any economic news is nevertheless trumped – ahem – by the Fed meeting tonight.

Commodities

The American Petroleum Institute each week releases US crude inventory data on a Tuesday night before the Energy Information Agency does the same on Wednesday night. But the two numbers never match. Indeed, they are more than often not wildly different.

So we might take with a grain of salt the fact the API last night suggested a bigger than expected fall last week, thus sending West Texas up US$1.67 or 3.9% to US$44.66/bbl and Brent up US$1.56 or 3.5% to US$46.34/bbl.

Iron ore has fallen another US90c to US$64.10/t. That’s twice now the iron ore price has seen mindless surges only to retreat rather swiftly back to reality. No wonder Beijing is seeking to crack down on commodity speculation.

It was another mixed bag on the LME last night, as base metals continue to oscillate a lot but move little. Nickel and zinc both bounced back a percent while copper dropped half a percent.

The US dollar index is down 0.3% at 94.53 and thus gold is up US$5.40 at US$1243.30/oz.

The Aussie is up 0.4% at US$0.7745.

Today

The SPI Overnight closed up 20 points or 0.4%, likely because of the oil price. Those Apple and Twitter results could play havoc on Wall Street tonight, at least until 2pm when the Fed statement hits the wires.

With regard local monetary policy, today sees the release of Australia’s March quarter CPI numbers. One or two economists had been predicting a May rate cut from the RBA – the central bank often waits for quarterly inflation data before making a move – but those predictions have since been tempered following the big rebound in commodity prices.

The UK will release its March quarter GDP result tonight. As we approach June, global markets are becoming increasingly uneasy about the Brexit vote.

On the local stock front, today will bring March quarter numbers from ResMed ((RMD)) and Henderson Group ((HGG)) while high-flying APN Outdoor Group ((APO)) will hold its AGM.
 

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