The Monday Report

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            [0] => ((CSL))
            [1] => ((MQG))
            [2] => ((CIM))
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    [1] => Array
        (
            [0] => CSL
            [1] => MQG
            [2] => CIM
        )

)

This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Late Selling I

On Friday the ASX200 opened up 17 points, was down -11 at lunchtime, up 13 mid-afternoon and then at 3.30pm it fell off a cliff to close down -20. It was just the sort of action one would expect at the end of the quarter and end of the financial year for most companies and fund managers, but relatively subdued at that.

The weak close had nothing to do with sentiment, and indeed the futures closed up 23 points on Saturday morning, which would take us back to where we were.

The biggest selling was in CSL ((CSL)) and Macquarie Group ((MQG)), for the simple reason both hit new all-time highs earlier in the week. Some nice profits were locked in there. Healthcare was thus down -0.7% to be the worst performing sector on the day, and the banks were down -0.6%.

Energy was up for the month on stronger oil prices, and it fell -0.4% on Friday. Every sector was weaker to some extent bar utilities, up 0.7%, which was one of the worst performers for the quarter on US rate concerns. Telcos might have been another contender for some buying, having also had a dreary sector, but no, telcos fell -0.2%.

Materials closed almost flat despite a strong month.

We will need to wait for today’s session to gauge market sentiment heading into the new year. It’s a busy week for local economic data but activity will be tempered to some extent by the US holiday on Wednesday, which will make for lower volumes through the rest of the US week.

The Aussie jumped back up 0.7% on Friday night but that was all about the US dollar dropping -0.9% after a solid run, which again smacks simply of book-squaring for quarter end.

Late Selling II

The Dow shot up from the open on Friday night to be up almost 300 points by late morning. Aside from yet more strength in the energy sector, following yet another gain in the oil price, a surprisingly positive earnings report complete with buyback announcement from component Nike had that stock up 11%, contributing a lot of the Dow points.

Buyback announcements were also forthcoming from the US banks, along with increased dividends, with all US domiciled banks having passed the Fed’s stress tests. Wells Fargo led the charge given it had been declared most likely to fail. Goldman Sachs and Morgan Stanley were nevertheless unable to join in the capital return feast, as while they passed the stress tests, the Fed told them they could not increase distributions at this time.

The bank rally did not last to through the afternoon nonetheless, and whaddya know, at 3.30pm Wall Street fell off a cliff.

The S&P and Nasdaq closed as good as flat with the Dow a little stronger, given Nike held onto its gains. The Russell small cap closed slightly lower, having been the quarter’s index outperformer.

All four major indices closed down for the week but up for the quarter. Year to date comparisons make for interesting reading. The Nasdaq proved the best performer for the half, up 8.8% led by FANG and friends. The Russell rose 7.0%, mostly in the June quarter. The Dow nevertheless lost -1.8% and netting out, the S&P500 gained 1.7%.

Trade policy uncertainty is writ large in the Dow’s performance. The Russell is mostly immune to international trade. By rights US Big Tech companies should be worried about trade and tariffs as well, but their growth trajectories are just too attractive to ignore.

With each passing quarter, the market cap proportion of tech in the S&P500 grows ever larger. And that’s without consumer discretionary names such as Amazon and Netflix.

It was not only end of quarter that had Wall Street squaring up to the close, but this week’s Independence Day holiday on Wednesday. It will be a week not unlike Christmas to New Year in Australia, with many taking a summer vacation.

Trade fears will nevertheless linger, with Canada over the weekend confirming its own tariffs calculated to match the US tariff impact dollar for dollar, and intended purely as retaliation.

On the other hand, China has reportedly eased restrictions on foreign investment in sectors including agriculture and banking. A glimmer of hope?

In economic news, the Fed’s inflation goal has finally been met after six years. The core personal consumption & expenditure (PCE) for May rose 0.2% to 2.0%. With the US ten-year yield stuck at 2.85%, Friday night saw the yield curve flatten to its tightest level since 2007.

Once again yield curve debate heated up. An inverse yield curve signals a recession ahead. Maybe historically, but not this time. This time it’s all about global yields keeping a lid on the US. How can an economy tipped to have grown 3.5% or better in the June quarter be looking at a recession?

This time it’s different, declare the optimists, a statement that economically is usually the kiss of death. But this time is the first time the world has experienced QE on the widespread scale we have seen in the decade past.

Commodities

There’s no stopping oil, with Brent now staring down US$80/bbl.

A -0.9% pullback for the greenback provided support for commodity prices, including gold, but didn’t really do the base metals much of a favour in the current climate.

The Aussie is up 0.7% at US$0.7402.

The SPI Overnight closed up 23 points or 0.4% on Saturday morning.

Note that on Saturday, China’s official manufacturing PMI was released as 51.5, down from 51.9 in May and below 51.6 forecasts. The services PMI ticked up to 55.0 from 54.9.

The Week Ahead

Everyone else’s manufacturing PMIs will be released across the globe today/night. Services PMIs follow on Wednesday, except in the US, where the holiday pushes it to Thursday.

The US will also see construction spending tonight and factory orders and vehicle sales tomorrow. On Thursday it’s the June private sector jobs report along with the release of the minutes of the June Fed meeting, and on Friday its non-farm payrolls, along with trade numbers.

In Australia we’ll see ANZ job ads today, building approvals tomorrow and retail sales and the trade balance on Wednesday. Tomorrow the RBA meets to leave its cash rate on hold for the 23^rd consecutive month, but it might be interesting to hear what the board thinks about the global trade war and the well-behaving Aussie.

Cimic ((CIM)) releases its earnings report today.

There are quite a lot of ex-divs today, but market cap-wise they’re all tiddlers.

Rudi will appear on Sky Business on Tuesday via Skype around 11.00am; 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…

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