The Monday Report

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            [0] => ((TLS))
            [1] => ((VOC))
            [2] => ((TPM))
            [3] => ((PRG))
        )

    [1] => Array
        (
            [0] => TLS
            [1] => VOC
            [2] => TPM
            [3] => PRG
        )

)

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

By Greg Peel

Neatly Dressed

It appeared from the outset on Friday the local market was to put in a repeat performance of basically every day of last week, when the futures again suggested an opening points gain in the teens and the ASX200 yet again headed lower mid-morning. But having dropped to almost 5650, the tide turned.

It would be nice to be able to say it thus appears like we may have found a bottom to what has been a grindingly weak performance of late but as it was the last day of the month and quarter we have to take into account window-dressing was likely at play. We’ll have to see whether October can suggest 5650 really is the new technical support level.

Melbourne was not much of a participant in Friday’s action given parades and lunches and the sort of hoopla that goes on each year when, in this case, ultimately a tiger eats crow.

The consumer sectors and utilities were the better sector performers on the day, having been among the worst over the quarter. The resource sectors traded off a fall for energy and a gain for materials on commodity price moves while the banks were only slightly lower and healthcare dipped.

The ASX200 finished the quarter down -0.9%, compared to a 3.9% gain for the S&P500. If the quarter had not been as strong as it was for commodity prices, particularly oil, the result would have been much worse.

Energy gained 6.9% for the quarter and materials 4.3%. The next best result came from consumer staples with a 1.3% gain. On the other side of the ledger, an up and down quarter for the banks and insurers ended with a -1.0% fall, and industrials also netted -1.0%. Consumer discretionary fell -4.3% (Amazon), healthcare -5.9% (Aussie trading over US80c in the quarter and a couple of weak individuals), utilities -7.9% (rising US interest rates) and telcos a whopping -18.7%, mostly because Telstra ((TLS)) cut its dividend but also on weakness in smaller players such as Vocus ((VOC)) and TPG ((TPM)).

Indeed, Vocus was the second worst performer in the ASX200 with a -28.2% fall, beaten only by Mayne Pharma (-39.2%) on US drug pricing concerns. Healthscope (-24.2%) got the bronze on a challenging domestic hospital environment. The upside saw moves of 30-40% among the oil names, around 50% if you mine lithium, and almost 60% if you are the one infant formula company that seems to be doing everything right.

Bloody Kiwis.

We now move into the infamous month of October, and this particular October is significant to people like myself who hadn’t been in the market all that long before, 30 years ago, it crashed. That was a memorable day on what was the old, old SFE in O’Connell St. There will be much reminiscing come the 20^th. I’ll be at lunch with my former colleagues.

Eight in a Row

A tale of two markets.

It was a fairly lacklustre end to the quarter on Wall Street but a positive one nonetheless. After recovering from an early dip, the Dow closed up 23 points or 0.1%, the S&P gained 0.4% to 2519 and the Nasdaq rose 0.7%. It was another new record for both the S&P and Nasdaq.

It was also another new record for the Russell small cap index, which booked a 5.4% gain for the quarter. The Dow saw 4.9%, the S&P 3.9% and the Nasdaq 5.8%.

While the gains were in stark contrast to the ASX200, energy was the best performer among S&P500 sectors and utilities the worst performer for the same reasons noted for Australia. The difference is the US financials sector was the second best performer.

Another difference is that the five biggest S&P companies are, in descending, order Apple, Microsoft, Facebook, Amazon and Exxon (leaving out Berkshire Hathaway). Other than Exxon, Australia has no match for these names which, while dipping a bit towards the end in the case of the FANGs, had another stellar quarter.

The top five S&P companies are equivalent in market cap to the bottom 250.

Sentiment late in the quarter was dominated by Fed policy, and specifically Yellen’s declaration that despite inflation being mysteriously low, it would be imprudent not to continue to raise rates. Friday saw the release of August personal income & spending numbers.

Income rose 0.2%, beating 0.1% forecasts, while spending rose 0.1% as expected, down from 0.3% in July. The Fed’s preferred measure of inflation – personal consumption & expenditure (PCE) – rose 0.1%, both headline and core. Annual core inflation fell to 1.3% from 1.4%. The Fed remains mystified.

Commodities

Base metals closed out the quarter with mixed moves. Copper fell -0.5% and aluminium -1% while zinc rose 0.5% and lead and nickel rose 1%.

Iron ore fell US$1.20 to US$61.50/t.

West Texas crude was flat at US$51.59/bbl but posted its first quarterly gain of 2017 in rising 10.5%. Brent crude rose 16.6% over the same period and is trading around a sizeable US$5.50 spread to WTI. Brent has been more affected of late by the potential fallout of the Kurdish referendum.

The US dollar index was flat at 93.08 but gold fell -US$7.30 to US$1279.40/oz.

The Aussie dropped another -0.4% to US$0.7825.

The SPI Overnight once again closed up 14 points or 0.3% on Saturday morning.

The Week Ahead

Beijing released its official PMI data for September on Saturday. The manufacturing PMI rose to a better than expected 52.4, from 51.7 in August, to its highest level since April 2012.

The result is in contrast to the independent Caixin PMI, released on Friday, which showed a fall to 51.0 from 51.6. Beijing’s services PMI rose to 55.4 from 53.4 to mark its highest level since May 2014.

China is now closed all week for the Golden Week holiday.

Today is a public holiday in NSW, the ACT, Queensland and South Australia. The ASX is open but trading is typically thin.

It’s a relatively busy week for local data. Today sees the manufacturing PMI, tomorrow ANZ job ads and building approvals and Wednesday the services PMI. Thursday it’s retail sales and the trade balance, and Friday the construction PMI.

The RBA will meet tomorrow.

Manufacturing PMIs will be released across the globe today and services on Wednesday.

Other data releases in the US include construction spending tonight, vehicle sales tomorrow, and the ADP private sector jobs report on Wednesday. Thursday sees factory orders and trade, and Friday the September jobs number.

Janet Yellen will speak on Wednesday.

The local stock market will see another week of ex-divs this week, but the numbers are getting fewer and the companies are getting smaller. Programmed Maintenance ((PRG)) holds its AGM on Friday.

Today’s FNArena service will be abbreviated due to the holiday. Rudi will appear on Sky Business on Tuesday, via Skype, to discuss broker calls at around 11.15am.

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