The Overnight Report: Making History

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

By Greg Peel

High Tech

It was an extraordinary day yesterday on the local bourse, in many ways – political turmoil, earnings result frenzy, M&S shake-up. The fact the index closed down -18 points, looking like a mildly soggy day, belies all that was going on underneath.

It is as yet unclear whether there’ll be another spill today, but the defeat of Turnbull’s signature corporate tax cut bill in the Senate appears to be simply another nail. While big business will be disappointed, there was never any indication the possibility of tax cuts excited the stock market in the first place, unlike in the US.

The banks continued to bear the brunt of the possibility of a Labor government rising from the chaos. They fell another -1.0% yesterday to be the main drag on the index.

The downstream energy companies continued to slide on energy policy uncertainty, while the upstream specialists looked to a strong oil price. The result was an energy sector, wherein Origin Energy ((ORG)) resides, down -0.3%, while utilities, wherein AGL Energy resides, fell -1.8%, exacerbated by AGL going ex.

The other sectors to post large downside moves included healthcare (-0.7%), which is feeling the pinch as the Aussie rises once more, but which also saw Primary Health Care fall ((PRY)) down another -7.4% as brokers provided their conclusions on the company’s earnings result.

And materials fell -0.9%, following poorly received results from Adelaide Brighton ((ABC)), which fell -7.1%, and Western Areas ((WSA)), which fell -6.1%, to take silver and bronze on the ASX200 losers’ board. There followed Fletcher Building ((FBU)) and Pact Group ((PGH)) which fell -5.4% and -4.8%, which are also in the sector.

It was a materially bad day.

The flipside? Well, welcome to the New World. I don’t remember ever seeing an ASX200 top five leaders board in which a double-digit gain was required to make the cut.

Leading the field was Altium ((ALU)), up 31.7%. Then came WiseTech Global ((WTC)), up 27.2%. In fourth was Appen ((APX)), up 12.0%, followed up by Carsales ((CAR)), up 10.9%. All four companies are in the IT sector, which rose 4.4%. All bar Appen reported yesterday. Appen just went along for the ride.

But 4.4% was still not good enough to be the best sector move on the day. That was reserved for telcos, which jumped a whopping 7.5%.

It was all because of news TPG Telecom ((TPM)) and Hutchison Telecom ((HTA)), owner of Vodafone, are in merger talks. It’s just a chat at this stage, and nothing you can yet hang your hat on.

Really?

TPG jumped 21.6% and Hutchison 51.7%. If the two merge, then the market can no longer fear a fourth player in mobile – we’d be back to the status quo of three. Telstra ((TLS)) jumped 7.2%.

Even Vocus Group ((VOC)) got in on the act, but its 7.4% gain was all about its own earnings result.

One can but imagine where the ASX200 might have been by now, thanks to earnings season, if the idiots in Canberra hadn’t stuffed things up. Again.

Long and Winding Road

Last night Wall Street marked the longest bull market run in history. Or did it?

It is true that for 3,435 days since March 9, 2009, when QE1 went into effect and Wall Street bottomed out of the GFC, there has not been a -20% correction. But last night the S&P500 closed a tick lower. On Tuesday night it hit a new all-time high intraday, but closed below the previous high.

Were the S&P to now fall -20%, the bull market would actually have ended at the all-time high, set back in January. And it would not be a record.

Either way, if we're supposed to be witnessing a momentous occasion, no one told Wall Street. It was dullsville out there.

Trump now wants to put a 25% tariff on European autos. Only recently everyone was upbeat about a pending trade truce with the EU. Maybe Trump’s just trying to hurry things along.

Wall Street shrugged. Negotiations are currently going on with Europe, and Mexico, and China, there are sanctions being placed on Russia, and Iran. Wall Street appears indifferent. The risk of Donald Trump ultimately being impeached has stepped up, particularly given the pollsters have the Democrats taking back the House in November.

Wall Street couldn’t care less.

It is fair to say there is anticipation regarding the specific trade talks with China that are going on at present, but Wall Street has learned not to get either excited or fearful. At the end of the day, an economy growing at 4% and earnings growth of 25%-plus is more than a safety net.

The minutes of the last Fed meeting were out last night and told us nothing new. Next month will bring another rate hike. The FOMC did, nevertheless, give a nod to the risk to the US economy of a trade war.

But the US ten-year yield is going nowhere. The US dollar continues to drift back from its overbought levels. The VIX is at 12, with 20 considered the threshold of concern.

About the only thing exciting the markets last night was a 3.5% jump for the WTI oil price, thanks, as usual, to the weekly lottery on US crude inventories.

The energy sector was the best performer. After a brief period of rotation, investors are also quietly moving back into tech.

Commodities

Outside of the oils, nickel and zinc had good sessions in London.

Gold has gone back to sleep.

The US dollar index was down -0.2% but instead of the Aussie being up a corresponding 0.2%, it too was down -0.2% to US$0.7348.

Trouble in Canberra?

Today

The SPI Overnight closed up 17 points. The oil price move is reflected in there somewhere. While this will boost the gas giants, it remains to be seen whether the downstreamers can regain any ground.

Japan, the eurozone and US will flash August manufacturing PMI estimates today/night.

You thought yesterday was a big day for the local earnings season? As Tojo once said, look out, here comes another one.

The ex-dividends to take note of today include those of JB Hi-Fi ((JBH)), QBE Insurance ((QBE)) and Woodside Petroleum ((WPL)). The latter is an aforementioned gas giant, so any gain on the day will start with a big handicap.

The Australian share market over the past thirty days…

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