The Overnight Report: Was That A Pin Dropping?

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            [3] => ((HSO))
            [4] => ((EHE))
            [5] => ((FPH))
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This story features TRANSURBAN GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: TCL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Out of Favour

The ASX200 opened sharply lower yesterday but a swift rally back to over the 5750 mark by 11am suggested perhaps the buyers thought this selling had gone on long enough. How wrong they were. The index was slapped for the rest of the day.

The -0.8% fall to 5707 now has chartists eyeing off the 5680 level they deem to be critical support. Break that, and the downside will seriously open up, they suggest. We’re a long way from previous uniform calls of 6000 being a stroll. We could take solace that the dreaded month of May comes to a close tomorrow, but then June isn’t typically that flash either as losing positions are dumped for tax purposes.

The banks, big and small, led the market down yesterday with a further -1.4% drop, representing almost half of the index’s -44 point fall. Levies to the left of us, credit downgrades to the right, a housing market rollover threatening and little in the way of growth elsewhere. The saving grace is that eventually bank yields will become just too attractive once more.

The second worst performance on the day came from utilities, down -1.2%, suggesting no real switch into defensives. Yet stocks one might otherwise consider as utilities but actually reside in industrials, such as Sydney Airport ((SYD)) and Transurban ((TCL)), continue to attract buying. Industrials was the only sector to finish in the green yesterday, up 0.7%.

Healthcare managed to close flat despite talk of a hospitals shake-up by the government weighing on the likes of Ramsay Health Care ((RHC)) and Healthscope ((HSO)). There was evidence of switching within the sector, with buyers moving into the likes of heavily shorted residential aged care provider Estia Health ((EHE)) and Kiwi medical devices company Fisher & Paykel Healthcare ((FPH)).

Otherwise it was selling across the board.

Meanwhile, Wall Street continues to go the other way. It’s not a screaming rally anymore, but still a persistent graft. Investors are clearly prepared to hold their breath over what might eventuate, or not, from the whole Russian probe circus in the hope that long promised tax cuts are still there to look forward to.

Yet with Wall Street holding up at what many believe to be elevated levels, the trade du jour is to buy Europe. There’s a bit of a best-of-both-worlds going on in Europe at present given economic growth is beginning to recover from the dark days post GFC, but a lack of inflation has the ECB sticking fast to its easy monetary policy. This is where the US was two or three years ago before the Fed’s gradual tightening phase began.

Wall Street has continued to break records in the meantime.

China, on the other hand, is not really exciting anyone at the moment. Concerns that addressing rapidly growing debt levels will ensure at least a soft Chinese economy, if not a weak one, means the focus for investors lies on different shores. And given China is difficult for most to trade, the best way to reduce exposure is to sell China’s most correlated proxy – Australia.

We might also note that our commodity-based cousin Canada has equally seen its stock market slipping away since April as well.

Commodities

No base metals trading last night with London closed.

Iron ore trading was open in Singapore, but with China also on holiday, the spot price is unchanged at US$57.80/t.

Oil traded electronically and West Texas crude is up US30c at US$50.16/bbl, which is a psychological recovery of the 50 mark.

Gold didn’t move. It’s at US$1266.80/oz.

The US dollar index is up 0.1% at 97.48 and the Aussie is down -0.1% at US$0.7437.

Today

The SPI Overnight closed down -4 points.

China is closed again today.

Local economists are expecting a rebound in building approvals when April numbers are released today.

Tonight in the US sees income & spending, including the Fed’s preferred PCE measure of inflation.

Sydney Airport will hold its AGM today.

Rudi will connect with Sky Business at around 11.15am, through Skype, to discuss broker calls.
 

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