Daily Market Reports | Jun 01 2017
This story features SUNCORP GROUP LIMITED.
For more info SHARE ANALYSIS: SUN
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
By Greg Peel
The Dow closed down -20 points or -0.1% while the S&P fell a point to 2411 and the Nasdaq lost -0.1%.
Vale May
It was a choppy session on the ASX yesterday. The ASX200 fell early to be down -9 points before staging a sawtooth rally to a peak of up 23 at lunchtime. It then dropped quickly, recovered just as quickly, and finally drifted off to a rather negligible close.
Probably the result of being the last day of the month, but there were also economic data releases to consider.
Total private sector credit rose by 0.4% in April but year on year growth dropped to 4.9% to mark the first sub-5% growth rate in three years. Housing credit continued to grow, by 0.5%, to mark 6.5% annual growth. That is again faster than the rate of growth of household income.
Loans to both owner-occupiers and investors grew, with the former running at 6.1% and the latter at 7.3%. The annual rate of loans to investors actually increased in April, but economists suggest this is a misleading trend, stemming from the first APRA crackdown causing weakness around a year ago and the second APRA crackdown only beginning to have an impact. Those year-ago weak numbers are falling off the end.
Economists are in no doubt that trend will eventually turn south.
Business loans grew 0.4% which on one hand is positive and on the other somewhat disappointing. The drag from the end of the mining investment boom is now fading, yet non-mining investment is not exactly powering along. The balance is being provided by public sector investment growth, funding infrastructure projects in various states.
As was the case on Tuesday with the building approval numbers, these housing credit numbers also suggest the Australian housing market is cooling, but not falling off a cliff. The index rose after the release, and the banks finished the day up 0.4%.
The next releases of the day were China’s official manufacturing and services PMIs for May. Manufacturing remained steady at 51.2 when forecasts had a fall to 51.0. Services rose to 54.5 from 54.0. A not-so-bad result, and again the index rallied on the release.
That’s where it all ended, but again we might assume end-of-month was influential, as were promotions and relegations of the stocks within the MSCI Australian indices (as opposed to S&P indices).
With household debt continuing to grow faster than household income, it’s not hard to understand why the RBA is warning of a consumer recession ahead. Yet the consumer sectors were the biggest winners on the day yesterday, with discretionary up 0.6% and staples 0.8%.
Energy was the biggest loser, falling -1.0% on the lower oil price, and healthcare (-0.6%) also copped some selling.
What will June bring? Well on day one, the index seems to be holding off against that technically significant 5680 level, but is not looking comfortable. The futures are down again this morning.
Banks and Oil
Wall Street had tended to shrug off the Fed’s periodic Beige Book assessment of the US economy of late, getting a bit sick of the broken record that is “modest to moderate growth”. But there are couple of worrying factors coming out of last night’s release.
There was recognition of a slowdown in consumer spending in some regions. In most regions, there was recognition that fiscal policy uncertainty was holding back investment across a range of sectors. Aside from general tax reform being a big unknown, different regions were variously seeing the impact of uncertainty over issues such as a border tax, immigration laws and healthcare reform.
And that about sums up Wall Street’s state of mind at present. The White House is in stasis, so until something concrete happens it’s hard to get excited and go in and buy the market. But the good things, such as tax cuts, may yet happen, so it would be foolish to sell.
Meanwhile, the low volatility environment dominating markets at present due to this stalemate is making it harder for US banks to make money from their trading operations. One might have thought this was a no-brainer assumption, but when JP Morgan CEO Jamie Dimond pointed this out last night, the banks copped some selling.
Over in the energy sector, news that Libya had been pumping up production had traders wondering whether the extended round of OPEC production cuts will actually be adhered to. Everyone was sceptical the first time around, until production numbers did actually suggest adherence. But how long can the likes of a Libya hold on?
WTI was down almost -3% at the official close of trade in the afternoon but subsequent weekly US inventory data from the American Petroleum Institute, which showed a drop in stocks as expected, allowed for a bit of a recovery later in the day.
US economic data continues to send mixed signals, with last night featuring a drop in pending home sales on the one hand but the highest level for the Chicago PMI in two and a half years on the other.
At this stage, and despite some doubt around the Beige Book, Wall Street still expects a Fed rate hike this month.
Commodities
West Texas crude is down -US$1.02 or -2% to US$48.63/bbl.
The US dollar index continues to slide away, falling another -0.3% to 96.97. This time gold responded with a US$5.80 rally to US$1268.60/oz.
Aluminium, copper and lead were all up around 0.5% in London but nickel fell -1.5% and zinc -1.0%.
Iron ore fell -US$1.70 to US$56.20/t.
Despite the weaker greenback, the Aussie is down -0.5% to US$74.31 on those lower commodity prices.
Today
The SPI Overnight closed down -8 points.
A busy 24 hours for data today sees manufacturing PMI releases across the globe, including Caixin’s take on China, and the US private sector jobs number.
Australia will see the PMI and house prices, along with retail sales and March quarter private sector capex.
Suncorp ((SUN)) will host an investor day.
Rudi will travel to Macquarie Park to appear twice on Sky Business today. First at noon, then later again between 7-8pm to be interviewed by Marty Switzer.
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