The Monday Report

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            [3] => ((NUF))
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This story features IGO LIMITED, and other companies.
For more info SHARE ANALYSIS: IGO
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Bargain Hunting

The local market on Friday featured weakness in miners thanks to commodity prices but otherwise appeared to be a session for the bargain hunters. Sectors that have been sold down in the most recent drop to below the entrenched range found a bid.

The banks were the primary source of strength with a 0.9% gain. As to whether they can hold that strength today might be another matter nonetheless, following the weekend’s announcements of ATM fee cuts, estimated at a value of $500m.

Telcos had a strong session, up 0.8%, while having been sold heavily each day in the wake of a hawkish Fed meeting, utilities finally found a bottom and rose 0.6%.

Consumer discretionary is another sector that has been under attack of late – basically Amazon-ed – and it rose 0.9%.

Seven of the top ten worst ASX200 performers on the day were resource sector companies, representing all of gold, nickel, copper, lithium and coal. Iron ore miners may not have made it into the top ten but suffice to say the falling iron ore price is having its influence on the usual suspects.

Sentiment won’t be a lot better today with all base metal prices down on Friday night and nickel standing out with a -5% fall. In order to stymie rampant speculation, China increased fees on nickel trading on Friday. This won’t bode well for the likes of Independence Group ((IGO)) and Western Areas ((WSA)) today although they are two of the most shorted stocks on the market.

Iron ore fell again, but only by ten cents.

Meanwhile, the energy sector is continuing to enjoy an oil price north of US$50/bbl. Energy rose 0.4% on Friday.

At 5682, the ASX200 managed to just sneak back inside the range on Friday. The futures closed up 7 points on Saturday morning. However there have been some developments over the weekend.

Winston Peters will decide whether the Nationals are returned in New Zealand or whether Labour might have a go. A Labour government is seen as a negative outcome for the large Kiwi stocks listed on the ASX and for Australian companies with an NZ presence.

The interesting thing about New Zealand – there has to be something – is that the parliament has only the one house. There is no senate. So whoever does win government has no Kiwi Xenophons, Hansons, Lambies or Hinchs to deal with.

Angela Merkel has been returned as German Chancellor but actually forming a government is going to be a challenge. It was the second worst result in the party’s history, she lost her major coalition partner, and no one wants to hook up with the far right party that won 13.5% of the vote.

Suffice to say both the Kiwi and euro are weaker this morning on uncertainty.

Then there’s the weekend competition played out between the US and North Korea as to just who does have the craziest leader. The White House has ensured Trump will do everything necessary to avoid nuclear war.

Why does that have to be said?

Fizzer

The iPhone 8 went on sale on Friday in the US and immediately prompted lukewarm reviews. Maybe it’s all a ploy by Apple to encourage more sales of the upcoming and more expensive iPhone X, but either way Apple’s share price has been falling ever since the new product suite was launched.

This is not unusual. Typically traders buy up Apple ahead of a new product launch and then take profits thereafter whether or not that product is a winner. This time it does seem as if Apple is struggling to change the world. Apple shares fell -5% over the week.

Wall Street opened lower on Friday night and kept falling through the morning session, such that the Dow was down around -60 points. Apple proved the biggest drag. But an afternoon rebound saw the Dow close down only -9 points while the S&P managed to rise a point to 2502 and the Nasdaq gained 0.1%.

Attention was drawn to the small cap Russell 2000 index which finally caught up to the majors in closing at a new record high for the first time since late July. A bull market is not considered a bull market unless small caps are involved.

What Wall Street doesn’t seem to be paying much attention to is the whole North Korea charade. Of more interest on Friday night was the news of Uber being shut down in London. Uber is not even a listed stock, although an IPO is expected eventually.

What also didn’t have much impact was news the latest attempt at getting a healthcare bill through looks again to be dead in the water given a defiant John McCain has again given it the thumbs down. The only impact was somewhat of a recovery in healthcare stocks which had earlier been sold down on the new bill’s introduction.

Tonight will tell us how Wall Street feels about the latest rhetoric regarding North Korea and the uncertain German election result. Presumably there won’t be too much talk about NZ.

Commodities

As noted, nickel fell -5% in London on Friday night. Zinc lost -2% and the others all fell around -0.5%.

Iron ore fell -US10c to US$62.90/t.

With the US dollar index relatively flat at 92.14, gold did find a little bit of support, probably geopolitical, and rose US$6.50 to US$1297.10/oz.

West Texas crude dipped slightly to US$50.65/bbl.

The Aussie is up 0.4% at US$0.7961.

The SPI Overnight closed up 7 points on Saturday morning.

The Week Ahead

A busy week of US economic data this week sees the Chicago Fed national index tonight, the Richmond Fed index, two house price indices, new home sales and monthly consumer confidence tomorrow, and pending home sales and durable goods on Wednesday.

On Thursday it’s the trade balance and a final revision of June quarter GDP (a tick up to 3.1% from 3.0% is expected) and Friday it’s the Chicago PMI, personal income & spending and fortnightly consumer sentiment.

Janet Yellen will speak on Tuesday night.

China will release industrial profits and current account data ahead of the PMIs late in the week and weekend. China is closed all next week.

The RBNZ meets on Thursday but is unlikely to do anything when there’s no government.

The only major local data point next week is private sector credit on Friday.

On the local stock front, Kathmandu ((KMD)) and Nufarm ((NUF)) release earnings results on Tuesday. ASX ((ASX)) and AGL ((AGL)) hold AGMs this week to remind us AGM season is almost upon us. Premier Investment ((PMV)) is scheduled to update on FY17 financials today.

There will be another solid round of ex-dividends this week but by now, most of the large cap stocks have come and gone.

Rudi will appear on Sky Business on Tuesday, via Skype, to discuss broker calls around 11.15am. He'll appear in the studio on Wednesday, 8-9pm to host Your Money, Your Call, then re-appear in the studio on Thursday at noon and repeat the Skype connection on Friday, probably around 11.15am.

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