The Overnight Report: Data Dependent

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    [0] => Array
        (
            [0] => ((TLS))
            [1] => ((PTM))
            [2] => ((SFR))
            [3] => ((GTY))
            [4] => ((BLD))
            [5] => ((RHC))
            [6] => ((HVN))
            [7] => ((MQA))
        )

    [1] => Array
        (
            [0] => TLS
            [1] => PTM
            [2] => SFR
            [3] => GTY
            [4] => BLD
            [5] => RHC
            [6] => HVN
            [7] => MQA
        )

)

This story features TELSTRA GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: TLS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The Dow closed up 27 points or 0.1% while the S&P gained 0.5% to 2457 as the Nasdaq jumped 1.1%.

Memories

Telstra ((TLS)) went ex yesterday, which was worth a -9 point handicap for the ASX200 from the opening bell. The company also revealed NBN Co will not be agreeing to the securitisation of its payments to Telstra, which the market didn’t like either.

Telstra shares fell -6%, taking the share price back to the level of the float price of the initial (T1) tranche twenty years ago. If you still got those, you’ve gone nowhere, but you have collected a handsome flow of dividends over the period. Yesterday was the last hurrah.

The telco sector was the glaring standout in the index yesterday in falling -5.7%. The next biggest fall was -0.5% for healthcare. On the other side, the defensives of utilities (+1.0%) and consumer staples (+1.0%) led the way, providing for the flat close.

It was a disappointing session, Telstra notwithstanding, given the futures had suggested we would regain the ground lost on Tuesday when the market feared World War III was about to break out and Wall Street would tumble. Wall Street didn’t tumble, but the only ground we made up was effectively the 9 points of Telstra’s dividend plus a couple of other ex-divs, such as Platinum Asset Management ((PTM)).

The index is still sitting below the long-standing range, and the fact it failed to return to that range yesterday makes it increasingly more likely the risk is now firmly to the downside. Today is the last day of reporting season, so we’ll be back to macro-watching by next week.

On the subject of macro…

Yesterday’s June quarter construction work done numbers came as a bit of a shock, with total construction rising 9.3% when 1% had been forecast. It was all about a 21.5% surge in engineering, but that appears to be simply as a result of one large piece of infrastructure being installed at the Ichthys LNG development.

So as you were. Building work was up only 0.1%, and a 0.4% rise in residential building represents a declining trend. The housing construction cycle appears to have peaked, so it will be up to non-residential to carry the can from here.

To that end, building approvals fell -1.7% in July but this was well short of the -5% drop expected. Approvals are down -13.9% from a year ago. Lumpy apartment numbers continue to make this series volatile, but the trend is clear.

In terms of the micro, yesterday’s reporters who made it onto the top ten winners’ and losers’ boards included Sandfire Resources ((SFR)), up 3.6%, and Gateway Lifestyle ((GTY)), up 3.2%, along with Boral ((BLD)), down -2.9%, and Ramsay Health Care ((RHC)), down -5.3%. Once again the boards were dominated by companies which reported a day or two before.

It’s the economy, stupid

Adding in the numbers for the third month of the quarter to the prior extrapolation of the first two months took the US June quarter GDP to a growth rate of 3.0% from 2.6% — better than expected. Consumer spending, which represents around three quarters of GDP, rose a solid 3.3%.

Last night’s ADP report showed 237,000 private sector jobs added in August – better than expected.

Wall Street took these numbers as a cue to buy growth stocks, and that meant Big Tech and biotech. Industrials struggled, which is why the Nasdaq rose 1.1% to the Dow’s 0.1%. The S&P split the difference.

Wall Street will wait for non-farm payrolls tomorrow night, but it appears the debate over whether the Fed will or won’t will rage again. On the other side there’s Harvey, and a bill that just keeps mounting.

And then there’s North Korea. Trump’s minders may be able to grab him quickly enough to ensure measured press statements but they’ll never contain his late night Twitter rants. Having been praised for his “all options are on the table” statement on Tuesday night, last night he had heads shaking in disbelief once more by tweeting “the time for talk is over”.

In other words, not all options are on the table. But that’s just Trump. An urgent call to the Pentagon from the South Korean equivalent led to the reassurance that yes, we are still trying to work on a diplomatic solution. Just ignore him.

Kim Jong-un won’t ignore him, of course.

But just when everyone was again wishing Trump would just shut up, he makes a rousing speech about tax reform. No detail, of course, no hints as to how a 15% tax rate could ever be paid for, but enough to have Wall Street feeling confident that something, at least, is imminent.

It’s just a matter of being patient.

Commodities

The strong US data provided a boost to the languishing US dollar last night, sending the index up 0.6% to 92.87.

Gold hung in there nevertheless, at US$1308.10/oz.

After their solid gains on Tuesday night, base metals all gave around half a percent back in London, except for nickel, which fell over one percent.

Iron ore fell -US70c to US$75.40/t.

West Texas crude slipped another -US35c to US$45.97/bbl as the inventories keep building with no refineries to go to. Brent surprisingly fell -US$1.27 to US$50.69/bbl, but that’s likely due to front month expiry.

The Aussie matched the greenback by falling -0.6% to US$0.7899, but not before another push towards 80 yesterday on the strong construction numbers.

Today

The SPI Overnight closed up one point.

The next constituent of Australia’s June quarter GDP is private capex, due today, along with July private sector credit numbers.

China will release official August manufacturing and services PMIs today.

Tonight’s US data include personal income & spending, and the Fed’s preferred PCE measure of inflation.

The last day of the reporting season (hurrah!) will feature a slew of stragglers, including Harvey Norman ((HVN)) and Macquarie Atlas Roads ((MQA)).

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