The Monday Report

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            [1] => ((WEB))
            [2] => ((SGM))
            [3] => ((MYX))
            [4] => ((SCP))
            [5] => ((TCL))
            [6] => ((CAR))
            [7] => ((AGL))
            [8] => ((AMP))
            [9] => ((REA))
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            [0] => CBA
            [1] => WEB
            [2] => SGM
            [3] => MYX
            [4] => SCP
            [5] => TCL
            [6] => CAR
            [7] => AGL
            [8] => AMP
            [9] => REA
        )

)

This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies.
For more info SHARE ANALYSIS: CBA
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Uncommon Wealth

The market did not respond on Thursday to the money laundering/terrorist support allegations thrown at Commonwealth Bank ((CBA)), perhaps because talk of a trillion dollars in fines seemed a bit fanciful. But by Friday the jitters had set in to the point investors sold CBA down almost -4%.

That drop affected a -1.1% stand-out fall for the financials sector over the session and was alone worth -18 index points. The fact the ASX200 closed down -14 points suggests there wasn’t much else going on.

It came down to a few individual stock stories to otherwise liven things up. Webjet ((WEB)) returned from its institutional share placement to win the day with a 10% gain. On the other end of the scale, the announced departure of both the CEO and CFO from Sims Metal Management ((SGM)) made that stock the biggest loser with a -12.5% drop. Mayne Pharma’s ((MYX)) woes continue (-8%) and in third worst place was CBA.

There was some other movement among sectors to square things up – industrials had a good session (+0.8%), buying returned to healthcare after several weak sessions (+0.7%), energy (-0.5%) goes up and down with the oil price and telcos (-0.4%) tend to bounce back and forth as well.

One interesting sector move on the day was no move at all.

Retail sales rose 0.3% in June when 0.2% was expected. It was the third consecutive month of decent gains and marked 1.4% growth for the June quarter to an annualised rate of 3.8%, compared to sub 3% earlier in the year. And we continue to hear subdued outlooks from listed retailers and warnings of the headwind of elevated household debt.

The consumer discretionary sector closed up a mere 0.06%.

Steady employment clearly provides a boost but the numbers in the next couple of months will be interesting given the farcical increase in electricity prices from July 1.

I noted early last week that the last RBA Statement on Monetary Policy a quarter ago was based on an Aussie assumption of US74c. With the Aussie currently sitting above US79c, Friday’s new Statement featured a 50 basis point reduction in the central bank’s 2017 GDP growth forecast to 2-3% and a 25bps reduction for the first half of 2018 to 2.5-3.5%. The currency was specifically noted as a risk to forecasts, in an otherwise upbeat report.

Nine Lives

The US non-farm payrolls result was 209,000 jobs added in July, beating 175,000 expectations. The unemployment rate ticked down to 4.3% from 4.4% despite an increase in participation.

Hourly wages rose 0.3% to 2.5% year on year, unchanged from June. This is the number most specifically in the spotlight. Wages growth is better than it was but still well short of what it normally would be.

Which brings the Fed back into the picture. Following the jobs release, the US ten-year bond yield is up 4 basis points at 2.27%, the US dollar index has leapt 0.7% to 93.49, and gold is down ten dollars. The implication here is that this strong jobs number increases the chance of another Fed rate hike this year.

But Yellen’s last statement highlighted low inflation expectations, hence Wall Street decided there probably would not be another rate rise. Perhaps the Fed can hold fire at least for now and use strong jobs as a sufficient excuse to get balance sheet unwinding underway.

For the US stock market, the jobs number was good but not too good, and that’s good. “Goldilocks” has been trotted out again. It’s a positive number from an economic perspective but not so runaway as to spark the Fed into hasty action.

To that end, we saw the Dow post its ninth consecutive up-day for its eighth consecutive record close, up 66 points or 0.3%, and this time the S&P and Nasdaq came along for the ride rather than going the other way, as they did most of last week. The S&P rose 0.2% to 2476 and the Nasdaq gained 0.2%.

Banks were the primary driver of strength – another move one expects if there is any greater chance of higher rates.

Commodities

The greenback revival should impact on commodity prices but only gold is notably affected, down -US$9.50 at US$1258.40/oz.

Base metals were mixed in London on smallish moves and iron ore rose US$1.70 to US$73.90/t.

West Texas crude rose US59c to US$49.52/bbl.

We might have hoped a 0.7% gain for the US dollar would have more impact on the Aussie, but it’s only down -0.3% at US$0.7928.

After a couple of dour sessions late last week, the SPI Overnight closed up 24 points on Saturday morning.

The Week Ahead

If the ASX200 does have a good day it will be on low volume, given a bank holiday in NSW today.

The predominant focus on the local market is now on corporate earnings. The reporting season quietly ramps up this week, and whaddya know the biggie will be CBA on Wednesday.

Other highlights this week include Shopping Centres Group ((SCP)), Transurban ((TCL)), Carsales ((CAR)), AGL ((AGL)), AMP ((AMP)) and REA Group ((REA)).

On the economic front, we’ll see ANZ jobs ads today, the NAB business confidence survey tomorrow and the Westpac consumer equivalent on Wednesday. Housing finance numbers are also out on Wednesday and the RBA governor will speak on Friday.

The RBNZ holds a policy meeting on Thursday.

China will release July trade numbers tomorrow and inflation numbers on Wednesday.

A quiet economic week in the US culminates with the PPI on Thursday and CPI on Friday.

Rudi will appear on Sky Business on Tuesday, via Skype, to discuss broker calls around 11.15am. He'll appear twice on Thursday; first from 1-2pm and again between 7-8pm for an interview by Peter Switzer. On Friday he'll repeat the Skype-experience at around 11.15am.
 

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