The Overnight Report: Holding Pattern

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            [1] => ((AGO))
            [2] => ((DXS))
            [3] => ((BGA))
            [4] => ((CKF))
            [5] => ((LNK))
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            [0] => MTS
            [1] => AGO
            [2] => DXS
            [3] => BGA
            [4] => CKF
            [5] => LNK
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This story features METCASH LIMITED, and other companies.
For more info SHARE ANALYSIS: MTS
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Dow closed up 14 points while the S&P was flat at 2439 and the Nasdaq fell -0.3%.

Flat Again

Another session and another flat close for the ASX200. The index did shoot up 34 points from the open but once again the computers got it wrong and the flat-line loomed again around lunchtime. A sideways afternoon followed.

The banks, healthcare, industrials and energy all closed flat as tacks, while materials and telcos swapped a -0.2% gain/loss. It was left to individual stock stories to provide any movement elsewhere.

The winner on the day was consumer staples, which rose 0.8% in the wake of the result release from Metcash ((MTS)). While grocery is still struggling, the result was not as bad as expected and cost controls impressed. A reinstatement of the dividend also had the shorters scrambling to cover, driving the stock up 5%. Metcash has been for a long time one of the most shorted stocks on the market.

The positive result also flowed into buying of the bigger supermarkets.

Loser on the day was retirement village operator Aveo Group ((AGO)) which fell -11% following Fairfax’s damning expose in the weekend papers and ahead of last night’s even more damning Four Corners report, which has now prompted the government to declare it will investigate. Aveo will no doubt be under further pressure today and ill will may spread across the sector.

The market is also being impacted by a raft of capital raisings – mostly acquisition related – that have investors and index-trackers in particular selling other stocks within the relevant sectors to provide the cash to participate. Dexus Property ((DXS)) was in the frame last week, Bega Cheese ((BGA)) is mid-raising, Collins Foods ((CKF)) has announced a raising and Link Administration ((LNK)) has gone into a trading halt for the same reason.

When we get to Thursday there is a sizeable lump of cash, and therefore index points, set to leave the market as quite a number of mostly yield-play stocks go ex-dividend. Capital raisings, dividends and EOFY impacts will be a feature of this final week. It remains to be seen whether any window-dressing will emerge.

Big Tech Trumped

News from Europe overnight is that the Italian government has bailed out two Venetian banks and shifted “good” assets to Italy’s biggest retail bank. It’s around eighteen months or more ago now that the European bank crisis had bank stocks across the globe tumbling on contagion fears, even GFC2 fears, so this news was well received.

It has cost Theresa May $1.6bn in pledged spending in Northern Ireland to finally secure the support of the DUP and avoid minority government. This has prompted a “What about me?” from Scotland and Wales. The pound has rallied on the removal of uncertainty.

News in the US was that durable goods orders fell by -1.1% in May – the second monthly fall in succession and the biggest fall in six months. Economists had forecast -0.8%. Lumpy transport orders made most of the impact but the closely watched capital goods segment fell -0.2% to mark its first decline this year.

The Chicago Fed national activity index also swung into the negative from the positive, suggesting the US economy is growing below potential.

The Dow had been up over a hundred points from the open with a little help from another session of gains for the oil price, but quickly fell back to bungle sideways for the rest of the session. The Nasdaq had also been supported by further relentless tech buying until news came out of the White House.

The US Supreme Court has upheld most of the elements of the travel ban order Donald Trump signed in about the first five minutes of his presidency. Immigration from a list of Muslim-majority countries will be banned within 72 hours of the ruling other than where family, education or employment is involved. Refugees from those countries will be banned for 120 days.

We recall that back when the “Trump Trade” first kicked off in November, not participating was Big Tech, given immigration bans were very much flagged in Trump’s campaigning. Silicon Valley was up in arms given the number of wunderkinds the sector had drawn over the years from the pool of immigrants. The initial overruling of the bans meant Big Tech was free to run once more.

And run it has, very hard. Last night’s ultimate -0.3% fall in the Nasdaq reflects renewed concern.

The other sector that has led Wall Street higher of late is healthcare, which remains at the mercy of the latest Obamacare replacement bill provided this time by the Senate. A growing number of Republicans has voiced criticism, suggesting a fair bit of tweaking needs to happen before the bill can go to Congress with any chance of success.

The White House has flagged a resolution before the July 4 holiday. It’s getting close. Wall Street needs a resolution not simply so the healthcare sector knows where it stands, but so the Administration can move onto the more important matter of tax reform.

Commodities

Gold was absolutely thumped in one hit in late Asian trade yesterday, on the London open, for reasons still unclear. It dropped around -US$10 in a heartbeat, triggering selling all the way down to around US$1237/oz before the buyers responded to ensure a return to US$1244.50/oz, which is still down -US$12.10 from Friday.

It was not about the US dollar, which is up 0.1% on its index to 97.41 despite weak data and pound strength.

Base metals mostly traded ups and downs but lead is the metal du jour, rising another 1.5% in London.

Iron ore is unchanged at US$55.50/t.

West Texas crude is up US37c at US$43.49/bbl.

The Aussie is up 0.2% at US$75.84.

Today

The SPI Overnight closed up 2 points.

It’s a quiet day locally for data and corporate events. Wall Street will see data for house prices and consumer confidence along with the Richmond Fed index tonight.

Rudi will connect a little later to Sky Business today, via Skype; 11.30am instead of the usual 11.15am, to discuss broker calls.
 

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