The Monday Report

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            [7] => ((AZJ))
            [8] => ((BDR))
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This story features ANZ GROUP HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: ANZ
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Buyback

There was every reason to expect the ASX200 to close lower than it did on Friday. The index had run up close to 140 points in the week, Friday is a typical profit-taking day ahead of the weekend, Wall Street was weak overnight and the futures were showing down -30.

Had it not been for ANZ Bank ((ANZ)), the index would have closed lower than it did. Every sector finished in the red bar one – the banks – thanks to ANZ announcing a doubling of its share buyback program to $3bn. ANZ rose 2.9% to take second on the ASX200 leaders’ board, and the bank sector gained 1.0% as a whole.

By contrast, energy fell -1.8% on OPEC nerves, consumer discretionary fell -1.2% as a couple of recent stars, the form of Bellamy’s ((BAL)) and Seven West Media ((SWM)), had weak sessions, and IT fell -1.4% as WiseTech Global ((WTC)) finally saw some profit-taking. Telcos fell -1.4% because the lights are still on.

The individual train wreck of the day was billing system software creator Hansen Technologies ((HSN)), not in the ASX200,  which made the mistake of guiding to slightly lower revenues in FY19 and got walloped -28%.

So, saved by the bank. But the index closed up 131 points for the week, and is up a solid 8% for the quarter, which ends this Friday.

That fact means this week may see some volatility related only to approaching books-close for financial year-end for most companies and fund managers. The profit-takers will fight the window dressers. But to kick things off it looks like a solid start this morning.

Oil was up 5.5% on Friday night. Nickel gained 2%. We should see a rebound today in energy and some support from materials. The Aussie is the offset – it’s bounced up 0.9% on the oil price and a rare fall in the US dollar of -0.4%.

The futures are nevertheless suggesting a 24 point gain.

Rotation

There was a slight glimmer of hope for Europe on Friday night after a flash estimate of eurozone June composite (manufacturing plus services) PMI suggested 54.8, up from May’s 18-month low 54.1. At 54, growth is still reasonable, but much stronger numbers were being booked earlier in the year.

The US manufacturing estimate came in at 54.6, down from 56.4, and services down to 56.5 from 56.8. The numbers aren’t that much better than in Europe despite the US economy being seen as particularly strong of late.

Throwing the usual spanner in the works last night was Mr Trump, who threatened a 20% tariff on European cars imported into the US. The big German carmakers all have factories in the US for lower end vehicles but top shelf vehicles, at top dollar, are imported, leading to a big auto trade surplus for the Germans.

I imagine the real issue behind the surplus is Europeans having little incentive to buy US imports, and GM sold Opel so no longer a connection there. Fiat owns Chrysler.

So the usual trade jitters were apparent once more on Friday night but this was offset by the big jump in the oil price, and thus the energy sector.

Banks were the weakest sector on the night, thanks to the first stage of Fed stress tests. All the majors exceeded new capital requirements, but JP Morgan and Goldman Sachs were seen to be a bit tight in certain sub-measures. This week we’ll see the actual “pass” or “fail” results.

Otherwise, the Dow managed not to take its losing streak to nine days – something not seen in 40 years. All week the Dow had been drifting lower while tech and small caps pushed to new high after new high. Friday saw a rotation, as the Dow closed up 0.5% while the Nasdaq and Russell indices showed small losses.

We’re also approaching end of quarter for the US, but the bulk of US companies is operating on a calendar financial year.

Commodities

The fear had been that OPEC, and the other ten oil producers, including Russia, which have been maintaining lower production quotas, would decide to increase production by a million barrels per day to counter lost exports from Iran and Venezuela. Friday night’s OPEC meeting started badly, but eventually an agreement was reached.

The problem is, the result is not entirely clear cut, as it involves different measures applied to different OPEC members. But analysts suggest 600,000-800,000 bpd will re-enter the global market. Notably, some members said they didn’t actually have the capacity to provide an increase at all.

The oil market had been playing it safe throughout the weak, with oil prices falling on the risk 1mbpd or more would be announced. The lower figure was clearly well received, as WTI jumped 5.5%.

Brent only jumped 3.5%, so the spread has again come in fast and is now only US$7/bbl.

The weaker US dollar should have provided some relief for the metals, but only nickel took advantage.

The Aussie is op 0.9% at US$0.7440.

The SPI Overnight closed up 24 points or 0.4%.

The Week Ahead

The US will see new home sales data tonight, Case-Shiller house prices, monthly consumer confidence and the Richmond Fed index tomorrow. Wednesday it’s pending home sales, trade and durable goods, while on Thursday, the first estimate of March quarter GDP will be revised.

Friday it’s fortnightly consumer sentiment, the Chicago PMI and personal income & spending, including the Fed’s preferred PCE measure of inflation. All up, quite a lot of important data this week.

Less so in Australia, although Friday’s private sector credit numbers will be closely watched.

More notable is the corporate calendar this week.

Metcash ((MTS)) releases earnings today and Collins Foods ((CKF)) tomorrow. Aurizon ((AZJ)) holds an investor day on Wednesday. Beadell Resources ((BDR)) has an EGM today and CSR ((CSR)) holds its AGM on Wednesday.

On Thursday, ASX individual stock options expire. More influentially, the bulk of the bond-proxy sector – REITs, developers, infra funds and the like – go ex-div all on the same day, which will lead to a big index handicap from the opening bell.

Rudi will appear on Sky Business on Tuesday via Skype around 11.15am; again on Thursday from midday 'til 2pm; and again on Friday via Skype, probably around 11am.

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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