Daily Market Reports | Sep 26 2016
By Greg Peel
Sea of Green
It was a text book rally on the local market on Friday as the index tracked a 45 degree straight line from the bottom left of the chart to the top right, closing on its highs. The ASX200 pushed solidly past the 5400 resistance level and for the first time in a while, every sector finished in the green.
The resource sectors were the underperformers, posting only small gains, but they had had their moment in the sun on Thursday following the Fed meeting. Notably, telcos won the day with a 2% gain while the other yield sectors of utilities, banks and staples all pushed up over 1% in an otherwise consistent market-wide run.
Things are looking a little different this morning following a sharp drop in the oil price on Friday night which saw the US energy sector leading Wall Street lower. The same will no doubt be repeated today locally but mostly confined to the energy sector rather than across the market.
Wolf!
The unofficial OPEC meeting planned for the end of the the oil conference in Algeria this week started out as simply a good opportunity to have a chat while everyone’s present, then became a formal meeting at which a production freeze would be discussed and possibly agreed upon, and now is back to merely a “consultation”, according to the Saudis, after which it is unlikely any agreement will be reached.
What a shock.
WTI was down 4% at one stage on Friday night before settling back to close down 3% on Saturday morning.
While Saudi Arabia has offered to lower its production from record levels as part of an agreement, as long as everyone’s on board, Iran is still in the process of ramping up its production post the lifting of sanctions. It would not be too much of a burden on the Saudis to freeze at a near record production level but Iran is not interested in being stuck, after all its time in the wilderness, at a level representing under-capacity.
Perhaps when full capacity is reached Iran might come to the table, but until such time there’s really no point in contemplating any sort of OPEC freeze. Yet still the market prices one in each time, only to be disappointed, each time.
In other news that no one should be too surprised about, iPhone7 sales have not been as flash as expected in the opening weekend. We recall that on better than expected iPhone7 pre-sales, Apple shares ran up 12% recently.
On Friday night they fell 1.5%, which is not a lot under the circumstances but America’s biggest company need only blink to shift all the indices by a margin. Between oil and Apple, the Dow closed down 131 points or 0.7%, the S&P down 0.6% to 2164, and the Nasdaq down 0.6%.
Apple had said all along that following the step-up in technology that was the iPhone6, the iPhone7 would only be incrementally different. The next step-up will come with next year’s iPhone8. So the fact sales of the 7 have apparently fallen short of comparative sales of the 6 is no real surprise.
With central bank shenanigans not over in the near term, Wall Street’s attention now turns once again to earnings results, with September quarter numbers being reported from next week. US stock markets remain near all-time highs but forecasts are yet again for a net earnings decline, albeit only 2% for the S&P500 this time rather than numbers around the 6% mark or worse that have preceded the last few quarters.
Commodities
West Texas crude fell US$1.41 or 3.1% to US$44.69/bbl.
After a solid Fed-related run the night before, base metals returned to being mixed on smaller moves on Friday night. Lead fell 1.5%.
Iron ore rose US20c to US$56.50/t.
Gold is barely changed at US$1337.10/oz.
The US dollar index is 0.2% higher at 95.51 and the Aussie is 0.3% lower at US$0.7618.
The SPI Overnight closed down 24 points or 0.4% on Saturday morning, thanks to oil.
The Week Ahead
The oil conference in Algeria begins tonight and the OPEC “consultation” is set for Wednesday night.
The US will see new home sales tonight, Case-Shiller house prices, Conference Board consumer confidence, the Richmond Fed activity index and a flash estimate of September services PMI on Tuesday, and durable goods on Wednesday.
On Thursday it’s pending home sales, the trade balance, and the “final” revision of September quarter GDP. An upgrade to 1.3% from 1.1% is expected. Friday it’s personal income & spending, Michigan Uni fortnightly consumer sentiment and the Chicago PMI.
Japan will see retail sales numbers, industrial production, unemployment and inflation late in the week.
There’s an awful lot of central bank chatter set for this week, including from the BoJ governor (twice), the ECB president and no less than ten different speeches from Fedheads across the week, the last being from Janet Yellen.
It’s a quiet economic week for Australia until Friday, when private sector credit and new home sale numbers are due.
On the local stock front there’s another handful of ex-divs to work through.
Rudi will appear on Sky Business on Thursday, 12.30-2.30pm and again on Friday, via Skype link around 11.05am to discuss broker calls. Later on the Friday he'll participate in Your Money, Your Call Fixed Interest, 7-8pm.
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