The Overnight Report: Poised

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This story features STAR ENTERTAINMENT GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: SGR
The company is included in ALL-ORDS

By Greg Peel

Dull & Duller

Another day, another flat session on the ASX. It didn’t start that way – the computers responded to a mild pullback on Wall Street and sold the ASX200 down -20 points from the open, but at 6200 support the index bounced hard to be up 10 at lunchtime, before closing with a yawn.

The flat session on Tuesday at least featured some decent-sized moves among sectors to ponder, netting each other out, but while the ups and downs again netted each other out yesterday, the moves were less significant. Volume was low.

The story of the day was once more that of Crown Resorts ((CWN)), following the sensational overnight walk-out of suitor Wynn Resorts. Having jumped 20% on Tuesday, Crown fell -9% yesterday. Who said the stock market is just a gamble? Crown did not come all the way back given Jamie has now inadvertently revealed his toy is on the market.

Rival Star Entertainment ((SGR)) fell back only -1.6% having jumped 5% in sympathy on Tuesday. Seems a premium for foreign interest is now built into the casino space.

Another loser on the day was Sims Metal Management ((SGM)), which announced a bold new longer term strategy to expand into energy production from recycled waste. Given the parlous state of recycling in Australia since China shut its doors, one might have thought this was a good idea. Sims shares fell -4.1%.

On the flipside, Seven West Media ((SWM)) announced the sale of its Yahoo!7 business to US telco Verizon, having jumped on that bandwagon many moons ago just before Google took over the world. That deal was worth a session-winning 6.2% pop.

Among the sectors, profit-taking in materials and energy on weaker iron ore and oil prices was countered by some newfound buying in the banks, but that’s about all that was notable among other minimal sector moves.

More notable is a 0.7% jump for the Aussie over 24 hours in two steps – one in our time and one in US time.

Aside from the fact forex traders always seem to play the currency short, such that these spikes are all too familiar, perhaps yesterday’s tick up to 100.7 for the Westpac consumer confidence index, into optimistic territory, helped things along. I pondered yesterday whether the survey was conducted post-budget, and it turns out the budget came in the middle of the survey period.

Thus while the 1.9% net gain in confidence was nothing too remarkable, it required a 7.7% increase in responses from those surveyed after the budget to counter what were clearly weaker responses beforehand. ScoMo will be well pleased.

May 18 by the way, in case you missed it.

The second step up for the Aussie appeared to coincide with the release of the Fed minutes, albeit the US dollar index is only down -0.1%.

Only a Flesh Wound

The end of Wall Street’s persistent but incremental eight-day rally on Tuesday night may have been the harbinger of something more substantial, given the extent of the sharp comeback rally all the way from December, with no news yet on trade and an earnings season about to begin. But no, it was just a blip.

Helping to reassure investors was this:

“A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year”.

We sort of knew that, but the Fed minutes provided comforting confirmation.

There might have been some concern over the US March CPI data, which showed a 0.4% jump at the headline – the biggest in 14 months. The Fed is, after all, able to be on hold due to no sign of inflation. But it was all about higher energy (oil, electricity) costs, which don’t count in the core inflation measure.

The core CPI rose only 0.1%, and the annual rate fell to 2.0% from 2.1% in February.

The ECB met last night and it, too, confirmed a (negative) cash rate on hold through end-2019.

Otherwise it was a mildly positive session on Wall Street, with tech leading the Nasdaq higher, Boeing still dragging on the Dow, and the S&P splitting the difference.

Anticipation is focused on the earnings season which kicks off tomorrow night. There is a growing consensus analyst downgrades to earnings forecasts as the March quarter progressed have been too severe, such that the forecast -4% decline for the S&P500 will likely be less and perhaps even slightly positive.

The banks lead the charge, and last night saw a marathon seven hour session of big bank CEOs being grilled by a Congressional committee. Despite the length of the inquisition, and variety of questions, all agreed the CEOs would have come out feeling as if they’d been proverbially hit over the head with a wet newspaper.

More about headlines, observers suggested, less about substance.

Commodities

Still no major action in base metals prices, if you consider lead can be quite volatile.

The US weekly crude inventory lottery came up with a drop.

The Aussie is up 0.7% at US$0.7168.

Today

The SPI Overnight closed down -14 points or -0.2%. Not out of the woods yet. But notwithstanding the long wait for trade news and US earnings season about to commence, the UK is due to crash out of the EU tomorrow night, unless another extension is granted today.

China releases March inflation data today.

Bank of Queensland ((BOQ)) releases its earnings report.

Cimic ((CIM)) holds its AGM.

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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