Daily Market Reports | Mar 28 2018
| World Overnight | |||
| SPI Overnight (Jun) | 5758.00 | – 60.00 | – 1.03% |
| S&P ASX 200 | 5832.30 | + 41.80 | 0.72% |
| S&P500 | 0.00 | 0.00 | 0.00% |
| Nasdaq Comp | 7008.81 | – 211.74 | – 2.93% |
| DJIA | 23857.71 | – 344.89 | – 1.43% |
| S&P500 VIX | 0.00 | 0.00 | 0.00% |
| US 10-year yield | 2.79 | – 0.06 | – 2.00% |
| USD Index | 89.35 | + 0.29 | 0.33% |
| FTSE100 | 7000.14 | + 111.45 | 1.62% |
| DAX30 | 11970.83 | + 183.57 | 1.56% |
By Greg Peel
Never Mind
It was “risk on” across the board yesterday on the local market in line with a collective sigh of relief across the globe with regard trade. It has all come to naught nonetheless, with the a -60 point fall in the futures this morning suggesting yesterday’s rally for the ASX200 will be more than wiped out today.
And 5800 will again be breached.
So little point in noting that all sectors finished in the green yesterday, with materials (+1.2%) and energy (+0.8%) enjoying the macro story of an easing of trade fears rather than the simply micro of commodity price movements on the day.
Healthcare (+1.1%) and industrials (1.4%) are two other sectors for which cross-border businesses are fundamental.
Clocking the biggest gain was consumer discretionary (+1.6%) as investor concern with regard milk product sales to China abated.
Missing out on all the excitement were the banks, which managed only a 0.2% gain despite US banks enjoying a strong session on Wall Street. Just can’t find any love at present.
It was interesting to note yesterday that the local market enjoyed a strong bounce despite news the government does not have the numbers to pass its planned corporate tax cuts. If this were America 2017, and someone said “no tax cuts”, Wall Street would have plummeted like a stone. But in Australia 2018 it all seems a bit ho-hum.
Anyway, yesterday’s session is now history as we move towards the end of the March quarter and a four-day holiday, suggesting there could be some steep volatility ahead.
Clouds in the Cloud?
Forecasts for US March quarter GDP growth have been gradually wound back from initial numbers predicted months ago. Those numbers included the kicker of the new, lower US tax rates, but the reality is weak first quarters have become de rigeur in the US over past years, largely due to the weather.
While there were no catastrophic weather events in the US this winter, there was still a great deal of snow – a fact Americans seem now to have to take as a given. Snow shuts down economies, and hence US March quarters are typically weak.
Last night’s monthly US consumer confidence data showed an unexpected dip.
Last night chip-maker Nvidia announced it had suspended its autonomous vehicle testing program on public roads in the wake of the death of a pedestrian in Arizona at the hand of a self-driven Uber vehicle using Nvidia’s technology. US chip-stocks have surged in the past 18 months or so, and the whole self-drive story has provided a considerable impetus, along with general “Internet of Things”.
Facebook founder Mark Zuckerberg has refused a request to appear before a UK regulatory committee with regard to the data breach scandal. Zuckerberg is not obliged, as he is not a UK citizen. He is nevertheless a US citizen, and more than one US regulatory committee is already insisting Zuckerberg appear before the US Congress.
Twitter’s data are even more vulnerable to breaches, suggested Citron Research last night. Citron has thus shorted the stock.
It is becoming increasingly likely regulations will be required for social media across the globe, which can only serve to put some sort of dent in the tech giants’ earnings trajectories. It seems now that the world of driverless cars is still a world away.
It seems now that having run so far, so fast over the past 18 months or so, it might be time for Big Tech to take a step back.
Around midday in Wall Street’s session, the Dow was up around 250 points. It was about that time the US ten-year bond yield dipped below 2.80% for the first time since early February. It was in early February that the yield spiked up to 2.85% on what now appears to be a blip in US wage growth. Then, the resultant correction was all about inflation fears, and assumptions the ten-year would soon hit 3.00%.
Now, everything’s swung the other way.
US March quarter GDP appears set to be weak. Subsequent quarters may also suffer from lower than expected earnings from Big Tech. Despite a record issuance of US Treasuries this week, bond buyers are back.
From lunchtime on, selling in US tech stocks began to pick up pace. When the ten-year yield fell through 2.80%, investors started selling US banks. As the afternoon progressed, downside momentum built. The Dow turned around in a near 600 point range. The Nasdaq closed down almost -3%.
This time there were no other sectors to run to. Industrials have rebounded on easing trade war fears, but tariffs still remain an issue of concern. The only outperformers on Wall Street late night were the defensives – utilities, telcos, REITs and staples.
Facebook fell -5%, Twitter fell -12%. Goldman Sachs fell -3%.
From risk on to risk off in a heartbeat. And the March quarter ends this week for the US too, ahead of a three-day break.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1344.50 | – 8.60 | – 0.64% |
| Silver (oz) | 16.50 | – 0.18 | – 1.08% |
| Copper (lb) | 2.99 | + 0.02 | 0.65% |
| Aluminium (lb) | 0.92 | – 0.00 | – 0.51% |
| Lead (lb) | 1.09 | + 0.01 | 0.91% |
| Nickel (lb) | 5.86 | + 0.02 | 0.35% |
| Zinc (lb) | 1.49 | + 0.01 | 0.72% |
| West Texas Crude (May) | 64.86 | – 0.65 | – 0.99% |
| Brent Crude (May) | 69.75 | – 0.30 | – 0.43% |
| Iron Ore (t) | 63.50 | 0.45 | 0.71 |
LME traders were still responding to the easing of trade war fears last night, with the exchange closing before Wall Street tipped over. Metal prices mostly rose despite a stronger US dollar.
While a fall in US bond yields might imply the greenback should also fall, yields fell across the globe last night as traders worried about a chink in the “synchronised global growth” story, or at least, slower growth than previously thought. In the cross-rate wash-up, the US dollar index rose 0.3%.
This, and the easing of trade war fears, had gold slipping back last night.
The weekly US crude inventory chocolate wheel is anticipated to show a bigger than expected build.
The Aussie has taken a dive, down -0.9% at US$0.7676.
Today
The SPI Overnight closed down -60 points or -1.0%, despite Australia not having a Big Tech sector.
Tonight sees the last revision of US December quarter GDP ahead of the first estimate for the March quarter. It’s old news.
An extensive list of stocks going ex-div today on the local market includes quite a number of REIT/infra fund names.
March quarter options on individual stocks expire on the ASX today.
The Australian share market over the past thirty days…
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