The Overnight Report: Trump Weighs In

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            [6] => ((FMG))
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This story features TELSTRA GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: TLS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Dow closed down -59 points or -0.3% while the S&P lost -0.4% to 2344 and the Nasdaq fell -0.5%.

Phone Home

There has been a lot of talk of late about whether or not Telstra ((TLS)) can maintain its dividend. It began with the loss of fixed line business in the handover to the NBN, but more recently there has been concern that the company’s primary earnings driver, mobile, was beginning to slip in the face of competition.

Yesterday that competition became stiffer. TPG Telecom ((TPM)) has paid a world record price to buy the spectrum it will need to build Australia’s fourth mobile network, alongside those of Telstra, Optus and Vodaphone ((HTA)). TPG will raise equity to provide part of the funding.

Telstra shares fell -7.5% yesterday to a level not seen since 2012. That fall was worth -13 ASX200 points. Throw in another bad session for struggling Vocus Communication ((VOC)), down -5.6%, and we find the bulk of the counterbalance to what would otherwise been a positive, rather than a flat session for the index. Healthcare was off somewhat but every other sector finished in the green.

Defensives were the winners as the index continues to look to old highs, with utilities (+0.5%) and consumer staples (+0.7%) seemingly picking up the funds liquidated as Telstra investors headed for the exits. Gold miners managed to hold materials afloat despite falls in other metals prices; energy rose again as oil, and the banks just keep finding support.

Consumer discretionary was decidedly flat on a day in which Westpac reported a -0.7% fall in its consumer confidence index to 99.0, following a 0.1% gain last month. The index nevertheless remains 4.1% higher than a year ago.

It would appear the race to 6000 will not be won ahead of Easter. On Wall Street’s lead last night, the local futures are down -31 points this morning.

Trumponomics

During his election campaign, Donald Trump criticised Fed chair Janet Yellen and accused the Fed of holding off on rate rises in order not to upset Clinton’s campaign. Last night Trump suggested the US dollar is too strong, and interest rates should be kept low.

He took the blame for the strong dollar, given “people have confidence in me”, but also pointed to other countries that are devaluing there currency. He has decided not to declare China a currency manipulator, at least for now. Not helpful when the US is pushing China to do something about North Korea. And as far as Janet Yellen being renominated for Fed chair, on that matter he is undecided.

Wall Street had, up to that point, been following a familiar pattern. Early on the Dow was down almost a hundred points but yet again the dip-buyers appeared, and it looked as if another return to a flat close was on the cards.

Early weakness reflected ongoing political concerns. Following lengthy meetings between the US Secretary of State and his counterpart, and separately with Putin, the Russian president suggested rather than any progress being made, relations had deteriorated. He has at least agreed to reinstate the memorandum which ensures the Russia and US militaries remain in contact in Syria so as to avoid any unwitting clashes. It was ditched following the US strike.

The deterioration in relations and the fact the US navy is sitting in the Sea of Japan seemingly daring Kim Jong-un to launch a nuke, assuming he has one, had investors continuing to seek safe haven last night. Gold is up another twelve dollars and the yen is once again stronger. But just when it looked like the stock market might finished little changed once more, Trump’s comments were published.

The US dollar index immediately fell and is now down -0.6%, with the yen again the main beneficiary. The US ten-year bond yield briefly traded below the previous low of 2.27%, but that level is offering strong support and 2.30% was regained by session end. Stock markets stopped recovering and started sinking again.

The biggest loser was the banking sector, which is now almost back to its November launch point. The banks led the Trump rally on a promise, indirectly, of higher rates. Rates have since come back, and even Trump himself wants to keep it that way.

Oil prices had also been a beneficiary of geopolitical fears, running back into the fifties despite concerns over growing US inventories. Last night weekly data showed a rare decline in US crude inventories, but traders decided to take profits anyway. With the WTI price lower, the energy sector also contributed to Wall Street weakness.

Commodities

West Texas crude is down -US59c at US$52.81/bbl.

Gold is up US$12.60 at US$1286.60/oz.

Copper took a tumble last night in London, falling -2.5%. Aluminium and nickel both fell -1% while zinc recovered 1%.

Iron ore copped another beating, falling -US$4.60 or over -6% to US$67.90/t.

With the US dollar index down -0.6% at 100.11, the Aussie is up 0.4% at US$0.7532.

Today

The SPI Overnight closed down -31 points or -0.5%.

China will report March trade numbers today.

Locally, we’ll see jobs number and the RBA’s Financial Stability Review.

Cimic ((CIM)) and Macquarie Atlas Roads ((MQA)) both hold AGMs today while Fortescue Metals ((FMG)) and Whitehaven Coal ((WHC)) will publish quarterly production reports.

The tumbleweeds will roll through after lunchtime. Have a Happy Easter.

Rudi will travel to Macquarie Park today to appear in the Sky Business studio; noon till 2pm.
 

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