The Overnight Report: Rest Day

Array
(
    [0] => Array
        (
            [0] => ((STO))
            [1] => ((WOR))
            [2] => ((CTX))
            [3] => ((TPG))
            [4] => ((HTA))
            [5] => ((TLS))
            [6] => ((SDA))
            [7] => ((BKL))
            [8] => ((APX))
            [9] => ((BAL))
            [10] => ((CAB))
            [11] => ((IGO))
            [12] => ((DOW))
            [13] => ((SGR))
            [14] => ((SUL))
        )

    [1] => Array
        (
            [0] => STO
            [1] => WOR
            [2] => CTX
            [3] => TPG
            [4] => HTA
            [5] => TLS
            [6] => SDA
            [7] => BKL
            [8] => APX
            [9] => BAL
            [10] => CAB
            [11] => IGO
            [12] => DOW
            [13] => SGR
            [14] => SUL
        )

)

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

By Greg Peel

Think Globally

Now that the political turmoil has subsided and like it or not, we have a new prime minster, stock market attention can return to the current issues of global macro influences and the local earnings season.

The domestic-based relief rally was aided yesterday by the news form Washington that a trade deal had been reached with Mexico, if only an understanding at this stage, and that China had stabilised its currency, possibly hinting at a white flag.

Understandably, materials had a strong session, posting a 1.1% gain. Energy (+0.2%) might have joined in but for both Santos ((STO)) and WorleyParsons ((WOR)) going ex and Caltex ((CTX)) posting a disappointing result, subsequently falling -7.9%.

Leading Wall Street on Monday night were industrials and financials, and sure enough yesterday saw our industrials and financials up 0.8% each.

On the other side of the ledger, the initial enthusiasm regarding a possible merger between TPG Telecom ((TPG)) and Vodafone, ie Hutchison Telecom ((HTA)), continues to fade in the vacuum of no new news. Telstra ((TLS)) fell -1.6% to lead the telco sector down -2.6% and Hutchison fell -14%. Hutchison is not in the ASX200 but satellite services company Speedcast International ((SDA)) is, and it helped the telco sector down by falling -37.4% post result.

Another new world high flyer re-enters the atmosphere.

Positive moves post results yesterday were topped by Blackmores ((BKL)), which jumped 11.5%, and AI specialist Appen ((APX)), which rose 6.2%.

We might call it a case of “just as bloody well” for Appen given the stock had already jumped 30% in a week, rising on the coat tails of strong results and even stronger rallies for the likes of WiseTech and Altium, and the Nasdaq. Anything other than a “beat” may have seen Appen looking more like a Speedcast yesterday.

On that note, milk product company Bellamy’s ((BAL)) rose 8.0% yesterday, and it reports today.

With Wall Street taking a breather last night our futures are down -6 points this morning. Today will be another in which earnings reports provide most of the action, except that there are no particularly big names on today’s calendar.

Note that Telstra goes ex this morning, among others.

Feeling Good Louis

Last night’s monthly survey from the Conference Board showed US consumer confidence has reached its highest level since 2000, clocking in at 133.4 on the index. That’s up from 127.9 last month and exceeding the prior post-GFC high of 130 hit in February.

Great news? Well it surely must be in a consumer-driven economy. But what happened in February? Wall Street saw the first correction in the Trump rally. And what happened in 2000? Don’t ask.

While confidence would be high among the cohort of Americans who thinks Trump walks on water, commentators point to historically low levels of US household debt. This despite a long period of a zero cash rate that must surely have tempted excessive debt accumulation. But if a mortgage is the bulk of most household debt, we note that for some time Americans were able to obtain or refinance a mortgage at 4% or less for thirty years fixed.

Makes you cry. In Australia mortgage rates, for some reason no one ever has explained to me, are set off the overnight cash rate. The only viable reason is “so the banks make lots of money”. Okay, we don’t have a thirty year bond, and no current politician would ever dream of issuing one (deficit), and US house prices completely collapsed in the GFC while ours hiccupped. But it still makes you cry.

Beyond jubilation and fear over the confidence numbers, little else happened on Wall Street last night. It was a hundred degrees outside in New York and trading inside reflected summer lethargy. After a strong run-up the night before, Wall Street stalled.

Small moves up nevertheless meant new new highs for the S&P and Nasdaq.

An interesting piece of trivia for those who like their technicals very technical:

From February to March the Dow fell -10% — technically deemed a “correction”. Last night the Dow surpassed a 10% move back up from that low. This is then, technically, a break out of correction territory, even though 10% back from 10% down doesn’t get you back where you started. At six months, it has taken the Dow the longest time to do this since 1961.

There’s one for your dinner party on the weekend. Knock ‘em dead.

Commodities

Given the UK was closed on Monday night, last night the LME had its first chance to respond to the Mexico trade news. Base metals were mostly higher, but didn’t quite shoot the lights out.

The break-out above 1200 for gold has lost momentum.

Despite the US dollar index dipping a tad last night, the Aussie is down -0.2% at US$0.7336.

Today

The SPI Overnight closed down -6 points this morning.

The June quarter GDP first estimate will be revised tonight. Forecasts are for 4.0%, down from 4.1%.

Result reporters today include Bellamy’s, Cabcharge ((CAB)) and Independence Group ((IGO)), among another dozen or so, while Telstra, Downer EDI ((DOW)), Star Entertainment ((SGR)) and Super Retail ((SUL)) are among those stocks going ex.

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