The Monday Report

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            [3] => ((SYR))
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This story features RIO TINTO LIMITED, and other companies.
For more info SHARE ANALYSIS: RIO
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Books Squared

Thursday on the ASX saw a solid rally at the death which may have been a result of stock options expiry or may have been a window-dressing exercise a day ahead of the quarter-end, given there seemed little other reason. Friday’s trade looked like a typical push and shove ahead of books-close between those trying to push prices higher for the sake of their published returns and those looking to lock in profits.

The futures had suggested down one point ahead of the open but the index shot up 25 points from the bell, drifted back to lunchtime, was up almost 40 points mid-afternoon and then gave almost all of that back to the close.

Nothing to read into it, I’d suggest. The quarter produced a 9.5% gain.

The Chinese premier was out and about on Friday talking up the Chinese economy, suggesting it is now stronger than expected and tax cuts are working. This provided further fuel for the iron ore miner fire, with the three biggies all having yet another strong session. Rio Tinto ((RIO)) has hit a new post-GFC high.

The materials sector (+0.3%) copped some drag from further gold stock weakness while energy (-0.5%) suffered a lower oil price, which also spilt into utilities (-0.8%).

The banks closed up 0.1% after a surprise announcement that Macquarie Group ((MQG)), which is only a relative newcomer to the home mortgage market, had cut its fixed rates by up to -60 basis points into an attempt to rekindle buyer interest. The announcement came following Labor’s pledge to change negative gearing and capital gains tax laws from January 1, 2020.

Throwing down the gauntlet? Macquarie is likely pre-empting one if not two RBA rate cuts in the not too distant future.

Healthcare (+0.7%) and telcos (+0.5%) provided solid market cap gains while IT (+0.7%) actually won the day.

But as I suggest, it was mostly a session of argy-bargy for the end of the March quarter.

The futures closed up 18 points on Saturday morning on Wall Street strength but that was ahead of yesterday’s official releases of Chinese PMIs for March.

China’s manufacturing PMI rebounded back into expansion territory, marking 50.5 up from February’s 49.2. The services index rose to 54.8 from 54.3.

Seems the Chinese premier was right.

Those numbers may nevertheless add an extra premium to the prior futures prediction this morning.

Full Steam Ahead

The S&P500 closed the quarter up 13.1% — its biggest gain since September 2009 when the QE-fuelled rebound out of the GFC was hitting its straps.

It seems Wall Street is pricing in a positive trade deal as a fait accompli.

There was no new news on the trade front on Friday night other than the hackneyed “progress is being made” and tweets from the delegation in Beijing suggesting talks have been “constructive”. One might have thought the best quarter in a decade might have suggested locking in profits would be the smart move but no, indices closed on their highs. The window-dressers won out.

Adding to the euphoria late in the session was a comment on CNBC by chief White House economic advisor Larry Kudlow that he (and the president of course) would like to see a -50 point Fed rate cut. Kudlow had just finished talking up a US economy successfully reengineered by Trump, hence he qualified the suggestion as not reflecting an “emergency”.

Veteran CNBC watchers might remember back in 2007 when Kudlow had his own show on the network and called for a -50 point cut as the global Credit Crunch took hold, describing such a move then as “shock and awe”.

The implication, thus, is not so much one of more shock and awe being required but a suggestion the Fed went too far last year, to the point of hindering an economy Kudlow believes will grow at 3%.

Wall Street loved it of course, and indeed the Fed futures are pricing in at least one rate cut by year’s end.

Supporting such an expectation was Friday’s delayed release of the January personal consumption & expenditure (PCE) inflation measure, which the Fed prefers over the CPI. It rose only 0.1% in the month, taking the annual headline rate down to 1.4% from 1.8%.

The other focus of attention on Friday night was the IPO of Lyft, which closed up 8.7% on the day. Lyft is the first of a large slew of similar twenty-first century companies that are planning IPOs shortly, including rival Uber and Airbnb. Most of these companies, the three above certainly included, have never made a profit. Lyft is now valued by the market at around US$25bn.

Shades of the late nineties.

Commodities

The Chinese premier’s assurances fired up metals markets on Friday and we can see why the big iron ore miners had a solid session. Both the iron ore and LME base metal markets are yet to respond to yesterday’s Chinese PMIs.

The oils managed to bounce back.

The US dollar did little but the Aussie is up 0.3% at US$0.7099. If the forex traders are playing the short side as usual, this might reflect some squaring up ahead of tomorrow night’s federal budget.

The SPI Overnight closed up 18 points or 0.3%.

The Week Ahead

Josh Frydenberg will no doubt have a few rabbits in his hat ready for tomorrow night. Desperate times…

Everyone else releases manufacturing PMIs today, including Caixin’s independent Chinese number, and services PMIs on Wednesday.

US data releases through the week are still a “maybe” in some cases. I doubt we’ll see the February PCE tonight but retail sales should be okay and ditto durable goods tomorrow night. We will definitely see the US PMIs, the ADP private sector jobs report on Wednesday and non-farm payrolls on Friday.

The latter will be interesting, given the shock result for February.

Australian data include building approvals tomorrow and retail sales and the trade balance on Wednesday, along with the PMIs, including the construction PMI on Friday.

The RBA meets tomorrow ahead of the budget speech and ahead of the pending election so there’s not likely to be any major change of tone.

The flow of ex-divs on the local market is now becoming more of a trickle but there are still a few big names yet to go ex, including Suncorp ((SUN)) today.

The most shorted stock on the market — Syrah Resources ((SYR)) – will release its earnings result on Wednesday.

Scentre Group ((SCG)) holds its AGM on Thursday as a signal the round of calendar-reporting company AGMs is about to hit this month.

Rudi will appear on Your Money today, noon-2pm.

The Australian share market over the past thirty days…

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