The Overnight Report: Shopping Spree

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This story features DOWNER EDI LIMITED, and other companies.
For more info SHARE ANALYSIS: DOW
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Dow closed up 22 points or 0.1% while the S&P lost one point to 2610 and the Nasdaq fell -0.2%.

Resistance

The ASX200 jumped straight from the opening bell yesterday to breach the 6000 mark, making it as far as 6009, up 27 points. There it met technical sellers, and back down we came.

There was nothing particularly fundamental about yesterday’s move, with not much going on at the macro level. It was more a case of traders playing around.

Bank investors appeared unsure what to think about the latest rumblings in parliament. It now looks very much like we will see a parliamentary inquiry into the banks, and insurance and wealth management, rather than a Royal Commission, to go at least some way to appease the restless natives within the Coalition. Financials rose 0.1% yesterday.

The difference? Well I suppose an inquiry is cheaper than a commission, given the Queen doesn’t have to be involved, and probably quicker, but then a commission would approach the task from an objective viewpoint, uncompromised by a political agenda. There are a lot of votes available to those who are prepared to hit the banks with a big stick.

Whatever the case, we can all enjoy our summer holidays before anything substantive happens.

Some of us, however, may have a rather quiet Christmas, given we can’t get an NBN connection through our television cables, even though NBN thought we could. That issue has to be remedied, hence telcos fell -0.4% yesterday. A delay in the rollout has been welcomed by those who still have a connection and a telephone that works, unlike their friends across town who don’t since having been hooked up.

The resources sectors also took a bit of a breather yesterday, likely index-related on profit-taking given commodity prices were mostly strong on Friday night. Commodity prices were mostly weak last night.

Healthcare (+0.6%) again provided support yesterday while utilities won the session with a 1.0% gain.

Individual stock winner of the day was Downer EDI ((DOW)), which jumped 5.1% after silencing the doubters with a positive update on the progress of the Spotless integration.

The last time the index hit 6000, earlier this month, it barely stumbled before shooting through to 6050. Then it slipped straight back down towards 5900. More work needs to be done, it would appear, and realistically a positive driver is required beyond technical hijinks.

The AGM season draws to a close this week but we may see some progress on US tax reform by Thursday night, which is when the OPEC meeting is being held. Beyond that, Santa will have to get into the act somehow.

The futures are down -10 this morning with Wall Street flat.

Cyber Attack

A new ETF has been listed in the US called The Decline of Retail. I kid you not. It effectively mirrors an existing ETF containing bricks & mortar retailers, the difference being investors are going short not long. It has sparked some debate on Wall Street of the capitalism/socialism kind. Basically you’re investing in store closures and lost jobs.

Investors have always been able to short retail stocks individually.

The final tally for Black Friday sales was a record US$5.03bn. It was noted, nonetheless, that foot traffic was down inside the aforementioned bricks & mortar establishments. Early numbers for Cyber Monday suggest not only will another record be made, the level of growth from last year will be quite substantial.

Also substantial will be Amazon’s share of the whole Black Friday to Cyber Monday period, which at one point was tracking as high as 50%. Amazon was up another 1% last night, pushing further into the bluest of skies.

The consumer sectors supported Wall Street last night, but the Nasdaq still finished lower despite Amazon’s efforts. Another sector that has run red hot this year is chip makers, riding on the wave of The Internet of Things, AI, autonomous vehicles and so on, but has now run too far according to Morgan Stanley. The broker downgraded the sector and investors responded last night.

The oil price dropped over -1% last night ahead of Thursday’s OPEC meeting. After having run rather swiftly from its breakout at US$50/bbl to US$58/bbl, WTI was surely due some squaring up on the risk OPEC doesn’t deliver.

Thursday is also expected to bring news on how tax reform is progressing, and as to whether there is any way the different House and Senate bills can be reconciled. Trump wants it done by Christmas, but he is likely being optimistic.

Wall Street appears not in any real hurry to push the market further into record territory this week ahead of such events, but not keen to sell either. All four major indices hit records intraday in last night’s session before backing off.

With earnings season now over and the Fed meeting two weeks away, a bit of consolidation might be on the cards.

Commodities

Reports out of China suggest demand for stainless steel is weakening. Nickel fell -4% in London last night. Copper fell -1% and zinc -1.5%.

Iron ore rose US10c to US$67.90/t.

West Texas crude is down -US82c at US$58.14/bbl.

Gold is up US$6.40 at US$1294.30/oz despite the US dollar index being up 0.1% at 92.90.

The Aussie is down -0.1% at US$0.7610.

Today

The SPI Overnight closed down -10 points or -0.2%.

Origin Energy ((ORG)) hosts an investor day today while BHP’s ((BHP)) investor briefing moves into Day Two.

Today’s list of AGMs includes those of Gateway Lifestyle Group ((GTY)), K&S Corp ((KSC)), Lynas Corp ((LYC)) and Mayne Pharma ((MYX)).

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

****

The Australian share market over the past thirty days…

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