The Overnight Report: Finding Breadth

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            [1] => ((OSH))
            [2] => ((GXL))
            [3] => ((LNK))
            [4] => ((TPM))
            [5] => ((PDL))
            [6] => ((AMP))
            [7] => ((GNC))
            [8] => ((NWS))
            [9] => ((REA))
            [10] => ((OSH))
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            [1] => OSH
            [2] => GXL
            [3] => LNK
            [4] => TPM
            [5] => PDL
            [6] => AMP
            [7] => GNC
            [8] => NWS
            [9] => REA
            [10] => OSH
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)

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

By Greg Peel

First Sortie

The ASX200 shot out of the blocks yesterday from the open and immediately took out the previous closing high of 6135. It almost reached the previous intraday high of 6149 but there was no momentum – just some computers playing games — and within half an hour the index was back below 6135 once more.

Thereafter saw a downward drift to the close of 6118. Yesterday was not the day – more work needs to be done.

Had it not been for the oil price jumping 3% overnight the index would be back below 6100. Energy rose a standout 2.4% and Woodside Petroleum ((WPL)) and Oil Search ((OSH)) came in second and third on the ASX200 leaders’ board with gains of around 5%.

Materials, healthcare and consumer discretionary all gained 0.9% — the latter case likely a delayed reaction to the budget without Greencross ((GXL)) spoiling the show, although that stock was down another -7% having lost -22% on Wednesday.

One individual budget victim is Link Administration ((LNK)), due to changes to super regulations. It topped the losers’ board with an -8.4% drop.

Cancelling out energy to a large extent were telcos (-2.0%), as TPG Telecom ((TPM)) loudly signalled its intention to disrupt mobile plan pricing.

The winner on the day was Pendal Group ((PDL)), the fund manager formerly known as BT Investment Management, which jumped 6.4% on a strong earnings result.

The financials sector made no impact on the index yesterday. It closed flat despite AMP ((AMP)) dropping another -3% as shareholders voted at the AGM to machine gun the board, or at least, disapprove their pay.

The Australian market has been enjoying the net benefit of a lower Aussie over the past couple of months but last night the US dollar index fell meaningfully for the first time in weeks, and short-covering sent the Aussie up 0.9% to US$0.7531.

This was good for gold. The oil price steadied.

Wall Street kicked on with it last night and the SPI futures are up 13 this morning, which would again put the index near to the previous closing high.

What Inflation?

The US monthly PPI proved to be lower than expected on Wednesday night and last night the CPI played the same tune. It rose 0.2% at the headline against 0.3% forecasts while the core (ex food & energy) rate rose 0.1% against 0.2% forecasts and is unchanged at 2.1% annual.

There continues to be no evidence of inflation suddenly running away. While there are arguments to be made for a structural rebasing of inflation (globalisation, automated workforce etc) economists are still scratching their heads. At 3.9% unemployment, the US is either at “full” employment or now past it, and last night’s weekly new jobless claims (dole) number came in at a 49-year low.

Some believe an inflation spurt cannot be far away but in the meantime, the US dollar index fell back -0.4% last night on profit-taking, having barely stumbled all the way back up from earlier year-lows. The US ten-year yield fell back once more to 2.97%.

With little to worry about on the monetary policy front, US stock markets pushed on again last night to continue the break-out from the prior downtrend. Apple hit a new all-time high, and is again just shy of becoming America’s first trillion dollar company.

The Russel small cap index is very near its all-time high once more. Herein lie mostly domestic-only stocks that are not impacted by trade wars or currency headwinds, but are the greatest beneficiaries of Trump’s tax cuts.

The lower CPI sparked a return to favour of bond-proxy stocks last night that have been under pressure of late due to rising US yields. Utilities and telcos led the S&P500 higher and all sectors closed in the green, suggesting greater breadth in the rally now a technical breakout has been achieved.

With US earnings season now as good as over and a June Fed rate hike all but fully baked in by the market, attention will likely turn towards geopolitics once more. Trump will meet Kim Jong-un on June 12 to talk nuclear deal while proceeding to dismantle the same deal with Iran. Trade negotiations with China are ongoing and yet to make any breakthroughs.

Commodities

With aluminium and copper swapping one percent moves last night, and oil steadying, there was not much of note in commodity land last night, other than a US$9 jump for gold on the weaker greenback.

Today

The SPI Overnight closed up 13 points or 0.2%.

Tradition would suggest Fridays are not the days new highs are seen in markets unless something unusual provides the impetus. This time last week we saw a profit-taking session but that was after a very strong run for the week. This week the index has simply chopped around without achieving much.

Local housing finance numbers are out today.

Graincorp ((GNC)) will report its earnings result while News Corp ((NWS)) and REA Group ((REA)) provide quarterlies.

Oil Search ((OSH)) holds its AGM.

Rudi will appear on Sky Business via Skype, probably around 11am, to discuss share market and broker calls.

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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