The Overnight Report: Nowhere To Run To

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By Greg Peel

Do Not Pass Go

Up 18 points from the open, down 34 at lunchtime, down 8 at the close. That was the story for the ASX200 yesterday in what one would assume was a session packed full of conflicting reports and releases, sending investors hither and thither. But it wasn’t.

The only report of any note was a rare profit warning from ever reliable Amcor ((AMC)), confessing to a Venezuelan forex impact in its upcoming result. That stock lost 8% on the day.

The only release of any note was Chinese inflation for May. Annual CPI came in at 2.0%, slightly lower than 2.3% expectations, while the PPI printed minus 2.8%, better than minus 3.1% expectations. So nothing to cause any great anxiety there.

Not only did the index close almost flat, there were no stand-out performers among the sectors either. Telcos (-0.7%) and healthcare (-0.5%) were the worst performers on the day, while utilities, energy and consumer discretionary (all up 0.3%) were the best performers. The banks were off a tad and materials flat.

We still seem to be in Limbo Land, with no great incentive to break away in either direction. Today is a Friday before a long weekend and not a great deal has happened offshore overnight, although the futures are down 27 points this morning to suggest a weak open.

More Work Needed

The common trend on Wall Street at present is to open lower and spend all day grafting back again. This has occurred many times in the last several sessions. It happened again last night, with the Dow opening down to be off 90 points by lunchtime before recovering.

The Dow was sitting smack on 18,000 with only minutes to go, before sell-on-close orders ensured a slight down-day at the bell.

Again, there was not a lot of news to inspire conviction either way. Having shot up over 50, oil fell back a dollar to be just above 50 this morning. Oil’s fall helped Wall Street lower from the outset, but the direct correlation that existed in the March quarter has now all but disappeared in the June quarter.

It would appear Dow 18,000 has been selected by the market as the pivot point as we move towards next week’s Fed meeting and the following week’s Brexit vote. Brexit continues to dominate debate, and we’ve two more weeks to wait.

Commodities

West Texas crude is down US$1.08 at US$50.45/bbl. The selling can be attributed to nothing more than consolidation following the long awaited breach of the 50 mark, with traders now assuming longstanding resistance at 50 will now become support.

It might be interesting to make note at this point that as the price of oil has risen on falling US production, the price of natural gas in the US has also been on a run of late. This seems logical, other than natural gas did not collapse in January as oil did. Having hung around under the US$2/mmbtu mark for a very long time, the Henry Hub price is currently US$2.60, representing a substantial rise.

Not only has US oil production been curtailed, US gas production is being curtailed. The price rise belies the seasonal trend of demand falling off into summer.

While there is no direct correlation between the closed-shop US domestic gas price and the price at which Australia’s LNG producers can sell their product to the Chinese, it’s better to see higher US prices than lower, now that the US is moving towards export.

Having run hard on Wednesday night, last night aluminium fell back 1% and lead 2%. Copper did not run up on Wednesday and has fallen 1% overnight.

Iron ore is unchanged at US$52.10/t.

Gold is up another US$7.00 at US$1269.50/oz despite the US dollar index jumping 0.6% to 94.10.

That jump has helped the Aussie down 0.7% to US$0.7432.

Today

The SPI Overnight closed down 27 points or 0.5%.

Chinese markets are closed today.

Beijing will release May industrial production, retail sales and fixed asset investment numbers on Sunday.

The ASX will be closed on Monday, as will FNArena.

Rudi will Skype-link with Sky Business around 11.15am to discuss broker calls.
 

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