The Overnight Report: Distracted

Array
(
    [0] => Array
        (
            [0] => ((BSL))
            [1] => ((VOC))
            [2] => ((BPT))
            [3] => ((GEM))
            [4] => ((FMG))
            [5] => ((APO))
            [6] => ((BHP))
            [7] => ((AMC))
            [8] => ((OSH))
            [9] => ((SYD))
            [10] => ((WES))
        )

    [1] => Array
        (
            [0] => BSL
            [1] => VOC
            [2] => BPT
            [3] => GEM
            [4] => FMG
            [5] => APO
            [6] => BHP
            [7] => AMC
            [8] => OSH
            [9] => SYD
            [10] => WES
        )

)

This story features BLUESCOPE STEEL LIMITED, and other companies.
For more info SHARE ANALYSIS: BSL
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Dow closed up 29 points or 0.1% while the S&P rose 0.1% to 2428 and the Nasdaq was flat.

Movers & Shakers

Yesterday’s trade on the local market was all about earnings reports, which provided for some big moves in individual stocks. Poorly received reports weighed during the session, leading the ASX200 down as many as -48 points by mid-afternoon, but a bounce off the 5700 mark and late buying led to a more modest fall by the close.

Train crash of the day was BlueScope Steel ((BSL)), which provided the clearest evidence to date the market is expecting a lot from this reporting season – perhaps too much – hence any disappointment is severely punished.

BlueScope posted an earnings beat on a 100% increase in profit, increased its dividend and announced a buyback. What else does one have to do? The stock fell -22%. The reason being, FY18 guidance is for only 80% of the FY17 result. A disappointed market thus took the -20% difference off the stock price.

The other big downside mover of the day was Vocus Communications ((VOC)), which is yet to report but fell -14% when both suitors withdrew their takeover offers.

Despite the BlueScope shadow over the session, the four top upside movers on the day all published earnings. Beach Energy ((BPT)) jumped 10%, G8 Education ((GEM)) 9%, and Fortescue Metals ((FMG)) and APN Outdoor ((APO)) each 6%.

Fortescue actually missed with its earnings result, but the company’s rapid debt reduction program – made possible by higher for longer iron ore pries – has prompted not just a better than expected final dividend but an announced increase in payout ratio to 50-80% from a prior 40%.

Fortescue is joining its two big iron ore rivals in becoming a yield stock.

Sector moves proved relatively mixed although mostly to the downside yesterday. The bounce off 5700 indicates traders are still happy to buy at the bottom of the range. The numbers of companies reporting each day increases sharply as the week progresses. Assuming the range is entrenched for now, we’re likely to see more of these micro moves shaking up the index.

In the Dark

No one was sacked in Washington last night. The US earnings season has run its course. There were no major economic releases last night. The Jackson Hole symposium begins later in the week.

It could have been the dullest session of the year to date on Wall Street last night were it not for a 99-year total solar eclipse, which completely blacked out a large segment of the US on a bright day. It’s all anyone could talk about, there being little else to talk about.

Perhaps the most interesting movement in stocks was that of solar-related companies, particularly solar energy utilities, some of which were sold down by as much as -9%. There was supposedly some concern the sharp fluctuation in sunlight, moving from concentrated brightness as the moon moves into place, to total darkness, then more concentration on the way out – the bit that forces the wearing of special glasses – may cause havoc with solar infrastructure.

At the very least, solar generators saw as much as a 90% drop in power as the eclipse played out, meaning lost revenues. So far it looks as if they all handled it.

Otherwise it was a typically low-volume session in the dog days of summer.

Outside of stocks there was some fresh movement into safe havens, as the US and its allies (including us) began two weeks of war games on North Korea’s doorstep. Show of force or red rag to a bull? We’ll soon know.

Gold is up US$7.10 at US$1291.30/oz as the US dollar index falls -0.3% to 93.10.

Commodities

Gold aside, last night saw another strong session on the LME, with aluminium up 1%, copper 1.5% and nickel 3.5%, while lead and zinc sat this one out.

Iron ore jumped US$3.00 to US$78.10/t.

It was expiry day for the West Texas crude contract which likely explains a -US$1.33 fall to US$47.40/bbl. There was no bearish news, on the contrary the news flow was mostly bullish.

The Aussie is up 0.2% at US$0.7938.

Today

The SPI Overnight closed up 4 points.

BHP ((BHP)) reports today, as does Amcor ((AMC)), Oil Search ((OSH)), Sydney Airport ((SYD)) and a whole swathe of other companies. Note also that all those announced dividends are beginning to build in impact – Wesfarmers ((WES)) being a case in point today – and will begin to handicap the index.

Rudi will connect via Skype with Sky Business at around 11.15am to discuss reporting season and broker calls.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

Click to view our Glossary of Financial Terms