The Overnight Report: And We’re Back

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

By Greg Peel

Breakout

Well that’s what happens when there’s no one around to stop it. The ASX200 ran riot yesterday, enjoying an early boost from strong oil prices and then kicking on after the 6300 level was breached. I’d wager there were more computers on the job than people.

The futures had suggested some pent up demand last week when they closed up 26 points on Good Friday morning despite only a 0.2% gain for the S&P500 on Thursday night. The S&P closed flat on Monday night, but oil prices jumped 2%.

Energy stocks thus flew out of the blocks yesterday, and the sector ultimately closed up 2.5%. Forty-five minutes into the session, the ASX200 hit 6300. This could have been a trigger to take profits, but in thin trading, the opposite was true. Momentum continued to carry the index higher.

Every sector closed in the green. The banks gained a full 1.0% and the consumer sectors fired up, with staples up 1.2% and discretionary 1.9%, possibly on reflection of Thursday’s strong jobs numbers.

Utilities gained 1.6%, but that was all about a 1.8% gain for AGL Energy ((AGL)). Telcos sat on the bench for the whole game, closing slightly positive, but Telstra ((TLS)) had had a solid run all last week in defiance.

Individual stock moves within the index were nothing overly significant. The big oil names all gained 2-3% but did not make it on to the top five leaders’ board, which represented a hotchpotch of sectors. Three “battery miners”, to coin a phrase, featured on the losers’ board yet the materials rose 0.5% with some help from iron ore.

How “real” can we trust that rally to be? We still have two more holiday-impacted sessions to get through this week. Wall Street regained all-time highs last night and our futures are up 14 points this morning.

We see March quarter CPI numbers today. Given the faith built into our market that the RBA is close to cutting, a “hot” number might trigger disappointment.

A weak number could kick us on further, which would bring the previous high (6373) into view. The Aussie has just slipped under 71, which is also providing support.

Earnings Thrust

Last night the S&P500 closed at 2933, above last year’s all-time closing high of 2931. Next stop is the all-time intraday high of 2940. Above that, blue sky. The Nasdaq also closed at a new closing high last night.

It was all about earnings reports. Not everyone was a winner, but those who weren’t had for the most part already run hard into their releases.

Among the Dow stocks, positive moves were booked by Coke, United Technologies and Johnson & Johnson. Proctor & Gamble and Verizon each fell, despite beating on both earnings and guidance. P&G, for one, had rallied 40% since December.

Earnings beats were well received but taken in the context of forecasts that had been overly clipped during the December rout. More encouraging for Wall Street has been June quarter guidance, which has been surprising to the upside in many cases.

Such as: Lockheed Martin, up 5.7%, Hasbro, up 14%, and Twitter, up 16%. After the bell we saw Snap, up 4%, and Texas Instruments, up 1.2%.

So far there appear to have been no abject failures, at least among the bigger names.

The ongoing rally comes as the US dollar creeps ever higher, and oil prices continue their rally – good for the energy sector and bad for everyone else, including the consumer. If the trend in earnings reports stays true throughout this, the biggest week of the reporting calendar, then one would assume its blue skies ahead.

On the subject of blue skies, the Dow is still around half a percent shy of its all-time high, largely due to the drag from Boeing.

And then on Friday it’s the first estimate of March quarter GDP. And we’re still waiting for news on trade. Can the rally that began over a decade ago just keep going?

Commodities

While markets are cheering indications the Chinese economy may have bottomed out thanks to government stimulus, fears are creeping in Beijing may now start to wind back that stimulus. At least that was the chatter on the LME last night, along with the stronger greenback.

Hence base metal weakness.

The oils kicked on with it after Monday night’s big rally.

Strong oil and iron ore prices should lead to a strong Aussie, but US dollar strength is mercifully winning out, reflecting the outperformance of the US economy compared to Europe et al. The Aussie is down -0.5% at US$7099.

Today

The SPI Overnight closed up 14 points or 0.2%.

Local inflation numbers today.

Northern Star ((NST)) provides its production report today and Atlas Arteria ((ALX)) delivers quarterly traffic numbers.

Lest we forget, the market is closed tomorrow.

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.)

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