Daily Market Reports | Jul 11 2017
By Greg Peel
The Dow closed down -5 points while the S&P gained 2 points to 2427 and the Nasdaq rose 0.4%.
Tentative
The ASX200 shot up early yesterday and kicked on to late morning, buoyed by the turnaround on Wall Street. The index thankfully did not kick on to post a hundred point gain this time around – I say thankfully because such recent volatility has been mindless and inevitably such a gain would have been followed soon enough by a hundred point fall.
Rather, at 44 points up the buying eased off into the afternoon and the index closed a more relaxed 20 points higher. There were no particular sector standouts among those finishing in the green, with buying fairly even. Having fallen sharply on Friday, energy managed to close flat despite another drop in the oil price. Materials closed slightly weaker on a mix of lower gold and base metal prices offset by a gain in iron ore, while healthcare dipped on an intellectual property challenge to CSL (CSL)).
If there was anything much to take out of yesterday’s trade it’s that the market is pretty steadfast about seeing value at index levels below 5700. As to whether any value remains when 5800 is breached is the question, given the number of failures at this point in recent months.
China released June inflation data yesterday which was underwhelming but unsurprising. The CPI remained flat at 1.5% year on year as expected and the PPI also remained flat at 5.5%. China’s PPI spent years falling after Beijing’s initial massive stimulus injection in 2008 but has now marked ten consecutive months of recovery. The pace is fading however – February’s PPI was 7.8%.
China will release trade numbers on Thursday and for markets across the globe, the concentration of data releases, central bank speak and US earnings reports later this week is keeping traders quiet early on. Locally we also have school holidays in NSW and other states and this typically ensures lower volumes, as was the case yesterday.
Much to Absorb
Fed chair Janet Yellen is due to provide her scheduled testimonies on Wednesday night and Thursday night before the House finance and Senate banking committees respectively. Typically if there’s anything controversial to be heard, it will come on Wednesday. No doubt last week’s strong US jobs numbers will rate a mention.
There are virtually no US economic data releases this week until Friday, when suddenly retail sales, industrial production, the CPI and consumer sentiment all come at once.
Friday also brings the unofficial kick-off of the US quarterly earnings season, with JP Morgan (Dow) and Wells Fargo set to report.
Put all this together, and the fact last Friday saw a strong rally as Wall Street absorbed the jobs numbers, and last night always appeared destined to be quiet. As it was. The oil price stopped falling, thus providing somewhat of a floor, and traders decided for reasons known only to themselves that Monday is a good day to buy Big Tech rather than sell it.
The most notable element of last night’s trade on Wall Street was the ongoing slow death of retail. That’s the bricks & mortar kind of retail that Amazon is supposedly set to drive into extinction. Consumer discretionary proved the weakest sector on the day and every one of the top ten worst S&P500 performers were b&m retailers.
After the big investment banks kick off on Friday with their results, the season will run all month with the greatest concentration being in the first two weeks. Wall Street is now firmly focused on earnings given there is little expectation of fiscal policy excitement coming out of the White House anytime soon.
The March quarter was a cracker, with S&P500 earnings rising some 12% on average despite a weak GDP result for the same period. The June GDP number is expected to show improvement, but can earnings do it again?
Commodities
The US dollar continues to stage a grafting recovery now the euro has settled down. It’s up a tick to 96.05.
This should begin to put pressure on commodity prices but they are playing their own games at present. Last night saw aluminium fall -1.5% in London while lead and nickel each gained 1%, having fallen on Friday night.
Iron ore shot up US$1.70 to US$63.80/t.
Gold managed to rise a tad following its big fall, to US$1214.10/oz.
West Texas crude is also up modestly, at US$44.55/bbl.
The Aussie appears currently rooted around the US$0.76 mark.
Today
The SPI Overnight closed down -1 point, likely suggesting the tenor of today’s activity, or lack thereof.
We will nevertheless see local housing finance numbers and the NAB monthly business confidence survey.
Rudi will Skype-up with Sky Business and talk broker calls around 11.15am today.
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