The Overnight Report: Incoming

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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

Green on Screen I

And on the ninth day the ASX200 rose again. The scene had been set, following two big falls last Wednesday and Thursday, another big fall from the open on Friday but a recovery through the afternoon, and a flat session on Monday which saw the index hold its ground.

The bounce off 6100, the fact Monday held, and the call from chartists suggesting a healthy pullback that has not upset the upward trend brought investors back to the market.

Still they pile back into Telstra ((TLS)), which had proven mostly to be the go-to stock during the eight-day slide, sending telcos up 2.7%. Energy was the next best performer with a 2.0% gain, likely linked to what’s going on in the Atlantic. More on that below.

Financials posted a solid 0.8% gain despite the shock-horror news that Slater & Gordon ((SGH)) is to lead a class action against wealth managers Colonial Mutual ((CBA)) and AMP ((AMP)). A lot of assumed RC fallout had already been priced into the banks, including likely fines, tighter regulations and, indeed, class actions.

IT rose a further 1.7%. Just follow the Nasdaq.

Seemingly bucking the trend was healthcare, down -0.3%, but CSL ((CSL)) went ex, as did Regis Healthcare ((REG)). Consumer discretionary also fell -0.3%. News Corp ((NWS)) went ex.

NAB’s monthly survey of businesses showed a rebound in current conditions, to 15.2 from 12.6 in July, but still down from the peak seen earlier in the year. Economists point to strong June quarter profits, revealed in August.

More concerning was the confidence number, reflecting a view to the future, with that number falling to a below average 4.4 from 7.0 in July. As to why is unclear, particularly given a strong GDP number, but a dysfunctional government and increasing evidence of a housing market slide would probably be up there.

Now that the market has got that little swoon out of the system, it’s a case of where to from here? Results season is over for another six months, we're into the two worst trading months of the year on average, and the global trade war goes on without resolution.

Wall Street was stronger last night but the local futures are down -14 points.

Green on Screen II

For the first time in two weeks, all four major US indices posted gains last night. The Nasdaq is back in favour despite social media stocks continuing to languish.

Three of the four major indices were boosted last night by Apple rising 2.5% (the Russell small cap being the obvious exception). Only the day before, America’s biggest company saw selling after the president suggested Apple should bring its manufacturing back onshore. But tonight is a big one for Apple.

Just when you thought there were enough iPhones on offer, tonight sees Apple’s annual “here’s another one” event. Last year brought us the 8 and the X. No one’s ever been quite sure whether X means X or 10, but maybe tonight could see a 9, and other variations to boot. There’s also talk of a new iWatch, and Lord knows what else.

The disciples are beside themselves with excitement.

Apple aside, a major driver of the Dow and S&P last night was the energy sector, thanks to a 3.5% pop for WTI crude.

I noted last night the Carolinas are not oil-producing states. There are refineries along the east coast but safely inland, unlike the Gulf refineries. There is nevertheless some concern a major pipeline running through the area could potentially face damage. Otherwise, residents in the area are being ordered to fill up their tanks and get out.

It is typical with regard hurricane events to see a pop in the WTI price ahead of the storm, based on that demand spike, before a reversal thereafter. However, there is also the small matter of another storm – Isaac – now brewing in the the Gulf.

In other news, representatives from both Canada and the EU were in Washington last night for ongoing trade talks. “Ongoing” being the operative word. No progress yet. But Wall Street continues to wear rose-tinted glasses.

Over on the Eastern front, China intends to seek the permission of the WTO to impose sanctions on the US in retaliation for what Beijing deems to have been illegal “dumping duties” imposed on the country. It’s an interesting twist in the trade war – those duties were imposed in 2013.

Commodities

The US dollar was only a tad weaker last night but with the trade war apparently only getting worse, not better, base metal prices took another hit, as did iron ore.

Gold is a little stronger but 1200 appears to be the lid for now.

The Aussie is up 0.1% at US$0.7121.

Today

The SPI Overnight closed down -14 points or -0.2%. The oil price seems to be offering some upside today but maybe we booked that locally yesterday.

Westpac releases its monthly consumer confidence survey today and tonight sees the release of the Fed Beige Book.

There are some sizeable stocks among those going ex-dividend today. They include Brambles ((BXB)), Cimic ((CIM)), Perpetual ((PPT)), Seek ((SEK)) and Sonic Healthcare ((SHL)).

In case you were wondering, a weak start for the SPI futures is not reflective of ex-dividends on the open. The futures do not pay dividends.

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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