The Overnight Report: Steady As She Goes

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

By Greg Peel

Consolidation

The ASX200 cut a saw-tooth on its graph yesterday, gradually drifting lower after crossing the 6350 mark from the open. It was a tight range and sector moves were divergent.

From the technical perspective, having broken out into post-GFC blue sky the index will probably need to consolidate before punching higher once more, notwithstanding the impact of earnings results, the bulk of which come out this week.

From the macro perspective, the only story yesterday was that of further detail on US-China trade talks, with this week’s low level discussions intended to lay a road map towards high level discussions between the presidents in November. This news was good for a 1.1% gain in materials.

From the micro level, the focus was on earnings.

Train wreck of the day was Ansell ((ANN)), which fell -7.2% on its result and might have impacted on the healthcare sector were it not for CSL ((CSL)) catching a bid once more. Healthcare rose 0.7%.

Woolworths ((WOW)) disappointed but a -0.9% drop in consumer staples was largely the result of Wesfarmers ((WES)) going ex.

Beach Energy ((BPT)) fell -4.6% post result, keeping the energy sector’s gain down to 0.3%.

IOOF ((IOF)) also went ex but the -0.5% fall in financials probably represents a reverse of the recent trade buy banks, sell resources. The financials sector is also wherein lies EclipX ((ECX)), which announced it had rejected an approach by rival SG Fleet ((SGF)). EclipX jumped 16.4%.

It was a move analysts have been touting ever since EclipX tumbled -40% earlier in the month. Investors clearly expect SG Fleet will come back for another bite.

If there was any concern regarding the possibility of the revolving door to the prime minister’s office spinning once more, it was not apparent. But those companies which stand to be impacted by policies the Opposition has been pushing may be starting to feel nervous.

Today’s solid earnings result calendar includes the likes of Amcor ((AMC)), BHP ((BHP)), Healthscope ((HSO)), Oil Search ((OSH)), Scentre Group ((SCG)) and  WorleyParsons ((WOR)) among many others.

Positively Dull

The Dow opened up around 100 points last night and stayed there. Traders could have left for the beach at 10am.

The themes remained the same – some hope on US-China trade, Turkish lira stabilised, earnings results good – and the strategy remained the same – the Dow again outperformed the Nasdaq.

A couple of big M&A deals added to the positive tone. Pepsico is looking to acquire SodaStream for US$3.2bn and Tyson Foods will acquire Keystone Foods for US$US$2.2bn.

M&A always cheers up Wall Street, and in this case we see real evidence of companies trying to do something meaningful with their tax cut cash.

Traders were also buoyed by the news Nike (Dow) has signed up some fashion designer or other to design the outfits for Serena Williams to debut at the upcoming US Open. Nike rose 3%, and is up 30% year to date.

While there is a glimmer of hope for trade, this week actually sees the low level discussions coincide with the imposition of 25% tariffs on another US$16bn of Chinese imports. Beijing had previously threatened to retaliate.

And souring the mood just a little right at the death were headlines out of a Reuters interview with the president who reiterated his stance on the Fed, suggesting he doesn’t like higher interest rates.

Well of course not – he’s a property developer.

While airing of such views does lead to concerns as to whether the Fed’s independence is safe under the Trump Administration, the president also reiterated that he’ll let the Fed do what it sees as best.

The US dollar index was already weaker last night, reflecting diminishing fear over Turkey and emerging markets, but fell a little more on Trump’s remarks.

Commodities

Base metals put on a strong showing in London last night but we were expecting that. The LME closed on Friday night before news of the “road map to November” emerged.

The weaker dollar supported prices in general across the spectrum, with gold seemingly now intent on getting back to 1200.

The Aussie is up 0.6% at US$0.7343.

Today

The SPI Overnight closed down -3 points.

The minutes of the August RBA meeting are out today and the governor is giving a speech at a breakfast gathering this morning.

I have already rattled off today’s earnings result highlights but note too that ex-dividends continue to impact, and will only pick up pace through and beyond the results season. Today’s exes include Computershare ((CPU)), Insurance Australia Group ((IAG)) and REA Group ((REA)).

Rudi will connect with Sky News Business via Skype around 10.30am this morning to talk about the reporting season, share markets 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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