The Monday Report

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This story features COMPUTERSHARE LIMITED, and other companies.
For more info SHARE ANALYSIS: CPU
The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

By Greg Peel

Resilient

A very flat session on the ASX200 close-to-close belied the fact it was quite a pitched battle over the course of the day between the sellers and the buyers. The index opened lower, traded back to square, chopped its way lower again to a low of -27 points by lunchtime, and then recovered that ground in the afternoon.

Evident was an intention by some to take profits on large cap movers such as the banks and big miners at month’s end, met by buying interest on any dip. The 5900 level had twice proven solid resistance in April and looks now like becoming support, given the index failed to hang around very long underneath 5900 in Friday’s trade, closing at 5921.

It was also an options expiry day, although mid-quarter months typically attract far less interest than the quarterly expiry months of March, June, September and December. Still, any large positions can impact the market on the day.

Breaking down the sectors, a good session for gorilla-in-the-sector Computershare ((CPU)), following its update last week, lifted info tech 1.8%, and industrials chimed in with 1.0% gain. The banks, big miners and telcos all closed flat or thereabouts, after overcoming early selling.

Not providing such a positive update last week was Wesfarmers ((WES)), and consumer staples was Friday’s biggest loser with a -0.6% fall.

April is typically a good month for stocks globally and that’s now done and dusted. May has a bad reputation, although the old adage doesn’t seem to be quite as effective as it once was in the past.

But the question must be asked: What would get this market back to 6000?

Seasonal

The first estimate of US March quarter GDP came in at 0.7% growth, a disappointing outcome compared to 0.9% forecasts and the December quarter’s 3.5% gain. But Wall Street was not too upset. A trend has become apparent.

The last three years have seen the same pattern for the US GDP – weak March, rebound in June, then a wet sail through the second half. The March quarter 2014 saw a negative result given a lot of snow, and 2015 and 2016 weren’t much better. With other “soft” data measures such as PMIs and consumer confidence very much contradicting this March quarter outcome, the question is being asked as to whether it’s time some new seasonal adjustment metrics are applied.

Wall Street made its own seasonal adjustment nonetheless, in largely shrugging the numbers off. If they don’t quite correlate with other data points, they certainly don’t correlate with a run rate so far of almost 12% corporate earnings growth for the quarter and a long awaited and significant bounce-back in revenues.

The Dow closed down -40 points or -0.2% while the S&P lost -0.2% to 2384 and the Nasdaq was flat.

The big winner among the earnings reporters on Friday was Alphabet (aka Google), which rose 4% having posted a strong number on Thursday night. Amazon also ran up on Thursday night but managed only a 0.7% gain on Friday. That stock is up more than 50% for the year. Both companies are fast approaching the $1000 per share mark. Jeff Bezos is fast approaching the mantle of richest man in the world.

It’s a race between Bezos and Bill Gates to become the world’s first trillionaire. Meanwhile, I best go and pay that gas bill.

Big oil names Exxon and Chevron, both Dow components, also found some strength on Friday following better than expected earnings reports. The energy sector nevertheless remains the weakest sector on Wall Street for the year. But despite a soft close, last week was the Dow’s best for 2017.

Commodities

The oil price appears to be once again stuck in a funk, having moved very little all week. It’s a push-pull between OPEC production cuts and US shale production increases. West Texas closed a tad lower on Friday night at US$49.17/bbl.

Base metals saw some buying in London, possibly because China is on holiday today. All rose around 1-2% bar aluminium, which fell -0.5%.

Iron ore rose US$1.40 to US$68.00/t.

The US dollar index dipped -0.1% to 99.04 and gold made another small move higher to US$1267.70/oz.

The Aussie is 0.3% higher at US$0.7487.

The SPI Overnight closed down -7 points on Saturday morning.

The Week Ahead

Beijing released April PMI data yesterday given the holiday today. Manufacturing came in at 51.2, down from March’s five-year high 51.8. Forecasts were for 51.6.

Services dropped to 54.0 from a three-year high 55.1.

Markets in China, the UK and Europe will be closed today for May Day. Japan will shut down from Wednesday for the rest of the week.

The mix of holidays means the usual round of global manufacturing and services PMIs will be spread hither and thither across the calendar this week.

A first estimate of eurozone GDP is due on Wednesday. A good chance here of embarrassing Donald Trump.

The US will see personal income & spending data tonight, including the Fed’s preferred PCE inflation measure, along with the manufacturing PMI. Tuesday it’s new vehicle sales, and Wednesday the services PMI. Wednesday also brings the private sector jobs report.

The Fed holds a policy meeting on Wednesday, but no change is expected. Aside from having hiked in March, the Fed will no doubt be waiting for some more clarity on Trump’s tax package. Trade, factory orders and productivity numbers are due on Thursday ahead of Friday’s non-farm payrolls report.

In Australia we’ll see the manufacturing PMI today, services on Wednesday and construction on Friday.

Today also brings house prices and the trade balance is out on Thursday. The RBA meets tomorrow and will leave rates on hold given no other choice. The RBA’s quarterly Statement on Monetary Policy is due on Friday.

Bank reporting season kicks off this week locally, with reports due from ANZ Bank ((ANZ)) tomorrow, National Bank ((NAB)) on Thursday and Macquarie Group ((MQG)) on Friday.

The AGM season heats up, with this week’s meetings including those of QBE Insurance ((QBE)), Rio Tinto ((RIO)), Santos ((STO)), and Woodside Petroleum ((WPL)). Qantas ((QAN)) and Transurban ((TCL)) will update investors.

Rudi will appear on Sky Business on Tuesday, via Skype, to discuss broker calls at 11.15am. He'll re-appear on Thursday noon-2pm and again via Skype-link on Friday, 11.15am.
 

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