The Monday Report

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            [7] => ((FAR))
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This story features TELSTRA GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: TLS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Costly Session

I did suggest on Friday morning that an indication from the futures of up 12 points looked “ambitious”, and indeed the ASX200  barely opened higher before trading in a downward trend all session, closing just off the lows.

Kicking off the weakness were the resource sectors, with Materials (-1.3%) and energy (-0.4%) responding to the reality of tariffs going ahead on US$200bn of Chinese imports into the US this week given no progress has been made on trade talks.

Thereafter, the news became more local.

NBN Co revealed its five month HFC sales freeze has cost $200m in remediation and $700m of delayed revenue, but the company was quick to point out this was simply a deferral. The delay impacted on the NBN’s telco partners, and as such Telstra ((TLS)) announced a hit of $735m, up from an original estimate of $700m.

Aside from that news in the sector, the euphoria of the TPG Telecom ((TPM)) merger with Hutchison Telecom ((HTA)) wore off on Friday, sending TPG down -7.2% and Hutchison down -25%. Talk about whiplash. These stocks soared on the rumour, fell back again initially, soared again on the fact and have again dropped back.

In the middle of it all, and the NBN Co news, Telstra fell -4.0% and the telcos sector -3.9% to provide the biggest drag on the session.

Analysts were in for a bit of a shock when the NSW government revealed Transurban ((TCL)) had paid $9.26bn for its 51% share in the WestConnex toll road – a deal allowed to go ahead after the ACCC found no issues. Analysts had pencilled in $5bn.

Transurban fell only -1% as a result, probably because the market is simply relieved the company will not be shut out of future Australian road infrastructure projects on anti-competition grounds. On the flipside, the best performer in the index on the day was operator of foreign toll roads, Atlas Arteria ((ALX)), which kicked on another 3.9% having posted a strong result the day before with a softer than expected distribution guidance.

Result releases on the day included that of Harvey Norman ((HVN)), which fell -4.5% and helped consumer discretionary down -0.3%.

Industrials managed to close just in the green but healthcare was the winner on the day, up 0.4%, as CSL ((CSL)) keeps charging ahead as the Aussie falls.

The Aussie dropped further on Friday night to be down over one percent.

With the local earnings season now ended, focus will swing this week onto the economy locally, with the GDP result due on Wednesday, and trade globally, as NAFTA hangs in the balance and the new US tariffs on China take effect.

Oh Canada

Volumes on Wall Street had been thin all through the August summer holiday period and thinner still on the Friday ahead of a long weekend. By the afternoon there were about four people left at the NYSE.

But their attention was captivated by the news flow coming out of the US-Canada trade talks.

The session started positively but indices dipped on the news an “off the record” remark by the president, not particularly flattering towards Canada, was leaked by a Canadian newspaper. We'll talk about a red rag to the Trump bull.

The president took his usual swipe at the purveyors of “fake news” but didn’t deny the comment, rather lamenting the abused sanctity of “off the record” and basically indicating that the Canadians know where he stands anyway, so no big deal.

Stock markets began to pick up again until news came out of Washington that talks had concluded, and there was no word of a deal being reached. But by very late in the session it turned out that progress had been made but no, a deal was not yet bedded down, hence talks will resume this week.

Washington’s stance is that it will go ahead with a bilateral deal with Mexico regardless, while hoping that a new trilateral NAFTA can be agreed upon shortly. The problem for the president is that the existing NAFTA was legislated by Congress, hence to scrap that deal and legislate a new one, Congress has to approve.

The law states that a 90-day period is required before a deal being announced and signed into law, which means if Canada dawdles any longer, Trump misses the opportunity of getting new NAFTA over the line with a Republican majority in the House ahead of the mid-term elections.

This had analysts all a flutter on Friday night but Wall Street seemed unfazed by it all, thin volumes notwithstanding. Wall Street simply continues to be of the mindset deals will eventually be done, including with China.

Of greater concern to investors is the increasing concentration of technology stock weightings in the indices. The Nasdaq posted its best August since 2000 as trillionaires Apple and Amazon rose 20% and 13% respectively, just in the month. The S&P500 posted its best August in four years.

Here comes September. When Wall Street comes back from vacation – the Labor Day weekend signalling the end of summer – history suggests traders don’t like what they see.

Commodities

The US dollar index rose 0.5% on Friday night as is typically the case when global trade news is not good. In the firing line was nickel, while iron ore saw selling after a week of doing not much.

Most all commodity prices fell but gold hung in there, for now, as we approach the annual period of gold gift-giving in China.

The Aussie was carted -1.1% to US$0.7187 as it always falls when the trade news is not good, often by more than the adverse relationship with the greenback implies.

The SPI Overnight closed up 26 points or 0.4% on Saturday morning. Not sure why.

The Week Ahead

The first trading day of the month always brings manufacturing PMI numbers from across the globe and the third, service PMIs. The US numbers will run a day late this month due to the holiday.

Australian monthly data releases this week include ANZ job ads, retail sales and house price today, the trade balance on Thursday and housing finance on Friday, along with the PMIs.

Australian quarterly data this week include company profits and inventories today and the current account, including terms of trade tomorrow, all of which lead into Wednesday’s GDP result. Economists are forecasting 3.0% annual growth, up from 2.8% in March.

The RBA will meet tomorrow.

US data this week include trade on Wednesday, factory orders and private sector jobs on Thursday, and non-farm payrolls on Friday.

We can pull down the shutters on the local results season, although FAR ltd ((FAR)) reports on Wednesday and Dacian Gold ((DCN)) on Friday.

Otherwise the calendar is completely dominated by stocks going ex-dividend. The entire month will see the ASX200 start the day with at least some level of handicap.

Rudi will appear on Sky Business tonight on Money Talks with Peter Switzer, 7.30-8pm; and again on Tuesday via Skype around 11.15am; again on Thursday from midday 'til 2pm; and again on Friday via Skype, probably around 11.15am.

The Australian share market over the past thirty days…

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