The Monday Report

Array
(
    [0] => Array
        (
            [0] => ((BHP))
            [1] => ((TWE))
            [2] => ((SYR))
            [3] => ((IGO))
            [4] => ((AQG))
            [5] => ((IFN))
            [6] => ((ORG))
            [7] => ((RRL))
            [8] => ((CCP))
            [9] => ((FLN))
            [10] => ((BWP))
            [11] => ((JHG))
            [12] => ((RIO))
            [13] => ((RMD))
        )

    [1] => Array
        (
            [0] => BHP
            [1] => TWE
            [2] => SYR
            [3] => IGO
            [4] => AQG
            [5] => IFN
            [6] => ORG
            [7] => RRL
            [8] => CCP
            [9] => FLN
            [10] => BWP
            [11] => JHG
            [12] => RIO
            [13] => RMD
        )

)

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

By Greg Peel

Here We Are Again

I doubt there were many who said on Friday morning before the opening bell who said we’ll be back at 6300 today in the ASX200, but that’s exactly what did happen, right from the opening bell.

The impetus, traders suggest, was the much anticipated announcement of the sale of BHP’s ((BHP)) shale assets. BP and Merit Energy will pay US$10.8bn in cash and BHP has promised to give this back to shareholders through buybacks and dividends.

BHP duly rose 2.3% but the impact for the materials sector in general, wherein BHP resides, was only a 0.8% gain, which actually made that sector one of the weaker performers on a day the index rose 0.9%.

The real impact was seen beyond BHP in the energy sector, up 1.6%, given the obvious valuation implication for the sector of the BHP asset sale.

But one company selling one asset is not a story that should move an entire market. Yet that was the case on Friday to tie up a week in which index-based selling and buying made for a choppy period, but ultimately a positive one.

Most sectors rose by a percent or more on Friday, other than materials, healthcare (+0.6% with a currency drag) and consumer staples, which for some reason did not get an invitation to the party. It fell -0.4% as the big supermarkets slipped and Treasury Wine Estates ((TWE)) fell -2.5% on a broker downgrade.

Who knew wine was a staple? Not that you’d get an argument out of me.

So as it was, the market opened with everyone running to the other side of the boat – having run back and forward all week. But once open, the index did not move again for the rest of the session.

Which means it held 6300. Right smack on it in fact.

This is the fourth time in the month the index had tested 6300 – the post GFC high – having failed three times. If we were to get through today it would represent a serious break-out.

But today does not look like the day. Wall Street closed lower on Friday night and the futures are down -26 points. Iron ore is nevertheless up 2.9%.

We can note, however, that the big moves seen last week suggested little correlation, each session, with outside influences.

Social Disease

First came Facebook and then came Twitter. Twitter reported on Friday night and matched Facebook with a -20% drubbing, blamed on a miss on user growth and weaker guidance.

It was another jolt for a tech-led Wall Street that was otherwise focused on the much anticipated first estimate of June quarter GDP. It came in at 4.1%.

Back when Trump was elected he declared the US economy would grow at 4% under his leadership. Everyone fell about at the time. But fast forward to this month, and 4% was in the bag as far as forecasts were concerned, and gosh, 5% is not beyond the realms.

Hence 4.1% was a little disappointing, even though it exactly matched the average of at least one survey of economists conducted last week. The US ten-year yield fell back a couple of basis points to 2.96% and the US dollar dipped -0.1%.

In the US stock markets, the focus was not so much on the GDP but on earnings, and what they are implying after 40% of the S&P500 has so far reported. The conclusion to date is the high flying, high-growth stocks have flown too far and the value-based plodders have been hardly done by.

It wasn’t just Facebook and Twitter, but tech dinosaur Intel (Dow) that disappointed. Intel has enjoyed a new lease of life of late but it fell -8% on Friday night following its report.

The Big Oil companies in the Dow also reported amidst high expectations given the rally in oil prices, but in the end offset. Exxon fell -2.8% and Chevron rose 1.6% to suggest company-specific rather than oi price-based numbers.

Energy is nevertheless a sector many on Wall Street are now keen on, along with the banks and pretty much anything that is not Big Tech or small to medium. The Nasdaq had been the outperformer all year, led by FANG, with the Russel small cap hot on its heels. But the FANGs appear to have had a train crash and the Russell just ran too far.

So while the Dow fell only -0.3% on Friday night, with a bit of help from Intel, the Nasdaq dropped -1.5% and the Russell -1.9%. The S&P split the difference with -0.7%.

Rotation is now rife, with a further 60% of the S&P500 yet to report.

Earnings results continue a-plenty this week but monetary policy will also come back into focus, with all of the Fed, BoJ and BoE holding meetings this week.

Commodities 

Russia has hinted at a bigger increase in oil output than previously suggested which is why WTI was down -1.2% on Friday night, although Brent held its ground.

It was a quiet session on the LME.

Not so the case for iron ore, which had been inching its way higher through the week but on Friday suddenly popped up 2.9%.

The Aussie is 0.3% higher at US$0.7401.

The SPI Overnight closed down -27 points or -0.4% on Saturday morning.

The Week Ahead

The Bank of Japan meets tomorrow, the Fed on Wednesday and the Bank of England on Thursday. No change is expected from the latter two but rumour has it the BoJ is preparing a shift in policy.

Tomorrow is the last day of the month hence Beijing will report Chinese manufacturing and services PMIs, while everyone else reports manufacturing on the first day of the new month and services on the third.

It’s jobs week in the US, with non-farm payrolls due on Friday. Ahead of that the US will see pending homes sales tonight, personal income & spending and the PCE, consumer confidence and Case-Shiller house prices tomorrow and construction spending and the ADP private sector jobs report on Wednesday.

Thursday it’s factory orders and Friday also brings trade numbers.

The eurozone will release its June quarter GDP result tomorrow.

In Australia we have building approvals and private sector credit tomorrow, the trade balance on Thursday and retail sales on Friday.

On the local stock front, the last of the resource sector production reports are out this week to round off the month. Syrah Resources ((SYR)) and Independence Group ((IGO)) report today, while Alacer Gold ((AQG)), Infigen Energy ((IFN)), Origin Energy ((ORG)) and Regis Resources ((RRL)) report tomorrow.

Earnings season is upon us, beginning with a trickle that will soon become a flood. Credit Corp ((CCP)) and Freelancer ((FLN)) report tomorrow, BWP Trust ((BWP)), Janus Henderson ((JHG)) and Rio Tinto ((RIO)) on Wednesday and ResMed ((RMD)) on Friday.

Rudi will not make any media appearances this week as he's attending the AIA's National Conference on the Gold Coast for one Grand Debate and one presentation on stage. By the end of this week he'll be presenting in front of ASA members in Canberra.

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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

Click to view our Glossary of Financial Terms