The Monday Report

Array
(
    [0] => Array
        (
            [0] => ((ANZ))
            [1] => ((FMG))
            [2] => ((NWH))
            [3] => ((SBM))
            [4] => ((ELD))
            [5] => ((IPL))
            [6] => ((RSG))
            [7] => ((SDA))
            [8] => ((SYD))
        )

    [1] => Array
        (
            [0] => ANZ
            [1] => FMG
            [2] => NWH
            [3] => SBM
            [4] => ELD
            [5] => IPL
            [6] => RSG
            [7] => SDA
            [8] => SYD
        )

)

This story features ANZ GROUP HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: ANZ
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

What Now?

In the first half an hour of trade on Friday morning the ASX200 was up 70 points. Did no one realise there was an election on Saturday? At that point the index stalled just shy of 6400 – a new post-GFC high – before drifting back to the close of up 37.

That drift likely did reflect election risk, but by Friday the bookies had Bill as a shoe-in. If the market was fearing a Labor government, and specifically its policy on franking credits, then it’s not exactly evident from an index that rallied 165 points to Friday from its Tuesday low.

Which begs the question: How do we respond to the “miracle” victory?

Wall Street fell -0.6% on Friday night so that has to be taken into account, but our futures closed up 5 points on Saturday morning before the polls opened. So the answer to the question is unclear.

Friday’s trade was a case of buy everything, except the banks. The banks would have otherwise joined in, one assumes, and that 6400 mark would have been cracked, but not for developments in New Zealand.

ANZ Bank ((ANZ)) has had its accreditation to model its own risk capital position revoked by the RBNZ due to “persistent failure”. The bank will now have to adopt a standardised risk model, which is estimated will increase ANZ’s risk capital requirement by 60% or some NZ$760m. ANZ shares fell -3% and the other banks fell in sympathy, taking financials down -0.9%.

Every other sector rallied between 0.5% (utilities) and 1.8% (staples).

News from Brazil that Vale has cautioned another one of its dams may be on the verge of rupturing sent the iron ore miners flying again. Fortescue Metals ((FMG)) was up yet another 6.5%. Winning the day (+10.6%) was engineering contractor NRW Holdings ((NWH)) which has won a new rail contract with Rio Tinto.

Losing the day (-9.5%) was gold miner St Barbara ((SBM)) as the brief spurt in the gold price comes to an end. ANZ came in next.

Clearly the local market was in a very buoyant mood on Friday. Presumably a Coalition victory is not going to upset that. So the focus remains on global trade, in which developments tack backwards and forwards nightly.

Pincer Movement

On Thursday night Wall Street appeared to shrug off news of a ban imposed by the government on foreign companies being involved in US telecoms, Huawei being one of them, and further specific restrictions on Huawei directly. Instead, traders focused on talk from the White House that another delegation would be shortly heading to Beijing to get the trade deal sorted.

But by the time Asian markets were trading on Friday, the mood changed. The Dow futures began to head south, driven by fear Beijing would retaliate on the trade front to the Huawei issue.

The Dow duly opened down -200 points on Friday night. But by 11am, it was up 90.

News broke that the US and Canada had reached a deal which would see tariffs on steel and aluminium on both sides removed. The two sides also agreed to take measures to prevent the importation of subsidised steel and aluminium, or product sold at “dump” prices, and thus prevent the trans-shipment of such product through to the other country. Mexico is involved too.

Hello China.

This news came in a week that also saw a US decision on tariff increases for imported European cars postponed until at least November.

It is evident that Trump has now changed tactics. Rather than try to take on all the world at once, the failure thus far to reach a deal with China has the White House now concentrating on one target only, and focusing on a joint effort by allies to put pressure on China.

Everything looked dandy till 3pm, when news from the White House was that there would be no delegation heading to Beijing in the near term. Trade talks with China had “stalled”. The two sides could not agree on what would specifically be discussed in further talks, as the two sides refused to back down on the positions they held previously.

This was the retaliation.

The Dow closed -100 points. The S&P copped more of the brunt in closing down -0.6%.

So we’re back to stalemate.

Commodities

Iron ore has cracked the ton once more, thanks to the news from Brazil.

One might have expected aluminium to get a boost from the US-Canada-Mexico deal, but not so. Indeed, all base metals were lower on Friday night with commentary suggesting “trade fears” were the reason. And the LME closed before the news from the White House that talks had stalled.

The trade situation, the rising greenback and the fact oil prices had rallied all week on increased US-Iran tensions meant profits were taken in oil on Friday night.

Gold continues to bow to a rising dollar.

The Aussie had traded as low as 68.66 but has popped on the election result to be up 0.1% at US$0.6900.

The SPI Overnight closed up 5 points on Saturday morning.

The Week Ahead

The count continues. Will ScoMo get over the line?

Japan reports March quarter GDP today.

US economic highlights this week include new home sales on Thursday and durable goods orders on Friday. The minutes of the last Fed meeting are out on Wednesday night.

The minutes of the RBA meeting are out tomorrow. NAB economists are the latest to join the rate cut chorus. Philip Lowe will also speak tomorrow.

There is a slew of earnings result releases due in the local market over the week, and the AGM list continues to build.

Note that Fortescue Metals will go ex its big dividend on Wednesday, but for now, today’s calendar includes earnings results from Elders ((ELD)) and Incitec Pivot ((IPL)), AGMs for Resolute Mining ((RSG)) and SpeedCast International ((SDA)) and monthly traffic stats from Sydney Airport ((SYD)).

Rudi won't be appearing on Your Money today. There is no more Your Money. He will be presenting in Toowoomba instead.

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.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms