The Overnight Report: Global Nerves

Array
(
    [0] => Array
        (
            [0] => ((CLW))
            [1] => ((NHF))
            [2] => ((SOL))
            [3] => ((ISD))
            [4] => ((SKT))
            [5] => ((VRT))
            [6] => ((TLS))
            [7] => ((CSR))
        )

    [1] => Array
        (
            [0] => CLW
            [1] => NHF
            [2] => SOL
            [3] => ISD
            [4] => SKT
            [5] => VRT
            [6] => TLS
            [7] => CSR
        )

)

This story features CHARTER HALL LONG WALE REIT, and other companies.
For more info SHARE ANALYSIS: CLW
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Playing it Safe

Just to reiterate, S&P announced on Friday that Charter Hall Long WALE REIT ((CLW)), nib Holdings ((NHF)) and Washington H Soul Pattinson ((SOL)) will be promoted into the ASX200 at the expense of iSentia ((ISD)), Sky Network Television ((SKT)) and Virtus Health ((VRT)). The first Overnight Report published yesterday had used an incorrect source.

Apologies, again, if anyone was misled.

Yesterday’s fall on the local market in response to North Korea’s hydrogen bomb test was not as extensive as the earlier fall seen when NK fired a missile over Japan. The index chopped around somewhat, but ultimately finished on support at 5700. With Wall Street closed last night, it was not a good idea to be too panicked.

All sectors were sold down relatively evenly, with the exception of telcos, which were a whisker stronger as investors appear to have completed their Telstra ((TLS)) exit, and materials, which was only a whisker lower given support for gold stocks. Interestingly, the weakest sector on the day was utilities, down -1.3%, despite this sector being defensive and having found buyers previously when the missile flew over Japan.

The -0.4% fall in the ASX200 was more muted than falls on neighbouring markets. The Japanese and South Korean indices both fell around -1%, and understandably so.

The region remains poised.

Yesterday’s Australian June quarter business indicators report showed company profits down -4.5% in the quarter as expected, reflecting a pullback in mining sector profits of -11.5% from the previous surging quarter. This pullback was reflected in mining company profit reports over the earnings season now past, with many results coming in short of forecasts.

Not that anyone really minded. Commodity prices may have pulled back in the quarter from heights seen in the March quarter but miners are still pumping out cash, and most specifically handing out presents to shareholders. Annual mining sector profit growth stands at 49.5%.

Non-mining profits fell -0.6% to be up 10.9% annually. This series excludes the financial sector, which is somewhat of a significant exclusion. Wages grew 1.2% in the quarter, reflecting strong jobs growth, but are only 1.6% higher annually with inflation running at 1.9%.

Today we will see the current account numbers ahead of tomorrow’s GDP result. Presumably the terms of trade will reflect the same pullback in commodity prices, mostly bulks, as we recall iron ore threatened to hit US$100/t in the March quarter and Cyclone Debbie forced a spike in coal prices. Of course it will also come down to volumes as well as prices.

Overnight we saw similarly modest falls in European markets, with the UK, France and Germany all down around -0.3% to -0.4%. Dow Jones futures have also fallen -0.3% with US stock markets closed.

The SPI futures have closed up 11 points this morning, probably because the US futures are not reflecting panic and World War III did not break out overnight.

Commodities

Gold is up another US$9.40 at US$1333.80/oz.

A shift into the “safe haven” of the yen sees the US dollar index down -0.3% at 92.60. You might wonder why a country right under Kim Jong-un’s nose is considered a safe haven. It’s strictly a misnomer. The yen is the popular carry-trade currency given negative Japanese interest rates, meaning one borrows in yen and invests in an asset somewhere else in the world. In times of panic, those risky trades are unwound, meaning buying back the yen to pay off the loan.

The Swiss franc is nevertheless a true safe haven currency. The Aussie is down -0.3% at US$0.7944 currently, as it is not.

That said, copper was up over 1% in London last night and nickel was up 2%. Iron ore rose US$1.40 to US$77.20/t.

West Texas crude is relatively steady at US$47.44/bbl. The spike in US gasoline prices has begun to ease as Harvey-hit refineries come back on line.

Today

The SPI Overnight closed up 11 points or 0.2%.

The RBA will meet today before republishing last month’s statement.

As noted, June quarter current account numbers are due.

Services PMI numbers are due across the globe, including Caixin’s China reading.

CSR ((CSR)) will host an investor day today.

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

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