The Monday Report – 30 September 2019

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            [1] => ((ALQ))
            [2] => ((NST))
            [3] => ((NUF))
            [4] => ((ALS))
            [5] => ((WES))
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            [3] => NUF
            [4] => ALS
            [5] => WES
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This story features ALS LIMITED, and other companies.
For more info SHARE ANALYSIS: ALQ
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Zero Sum

The fact the ASX200 recovered everything on Friday it lost on Thursday, despite Wall Street being weaker overnight, only adds weight to the assumption Thursday saw a big sell order hit the market against the run of play, sending buyers to the sidelines.

Whether or not it had something to with the looming end of quarter is unclear. Today is month and quarter end, and quite frankly anything could happen without fundamental reason. The futures aren’t giving much away at up 8 points this morning, again despite a drop on Wall Street.

All sectors closed in the green on Friday. The biggest gainers were telcos, utilities and consumer discretionary, all up over 1%, and yes, they were the hardest hit in the selling on Thursday.

Among individual stock moves, Speedcast International ((SDA)) stood out with a 16.9% gain on news of two satellite industry veterans being appointed to the board of the embattled company as it tries to get its act back together. The appointees are clearly well respected, and as of last week the stock was 8.5% shorted.

Otherwise, I think we can just write Thursday-Friday off as being “unch”, prepare for what may be a volatile session today (or not – no guarantees) and look ahead to tomorrow’s RBA meeting, which is now pencilled in as an 80% chance of producing another rate cut.

Just when you thought…

Everything looked to be going swimmingly: tariff concessions were being made on both sides, junior level trade talks were deemed productive and constructive, and a date was set for senior level talks to resume (October 10). Then the White House threw in a new grenade.

The White House is considering a restriction on US investment in China, it was revealed on Friday night, right through to a possible de-listing of Chinese stocks on US exchanges. On that note, what had been a quiet but positive start on Wall Street on Friday night became a -1% drop for the S&P500, and -170 points for the Dow.

Tech stocks led the market lower, including the FANGs, impacting on the Nasdaq and spilling into the S&P.

Given there is nothing more than “consideration” at this time with regard financial restrictions, and no timeline, initial shock subsided, and questions were raised as to whether the White House even has the legal authority to tell exchanges what to do.

By around 3pm the buyers came back in, leading to only a -70 point close for the Dow and -0.5% for the S&P.

Speaking on CNBC on Friday night, leading China expert Kevin Rudd (yes, him) said he had been confident of a deal being struck on trade by the end of this year. Initially it was assumed Beijing would wait it out through to the 2020 election to see whether it might be a new president they’re dealing with, but as time has gone on their confidence has dwindled, leading to a desire to speed things up.

But that all changed again when impeachment proceedings were commenced, Rudd suggested. Now Beijing has reason once more to believe it may not be Trump they have to deal with in 2021. Rudd had assumed, as had most, the whole impeachment thing had fizzled out since 2018 when it was the 2016 election in question and Russia in the frame. But now it’s Ukraine in the frame, regarding the 2020 election. A new ball game.

Rudd is no longer confident of a deal this year.

There was also some disappointing US data released on Friday night.

The US consumer has been the hero of economic growth in 2019 when things could have been much worse, but in August consumer spending rose only 0.1% when 0.3% was expected, and incomes rose 0.4%, suggesting consumers decided to save rather than spend.

Probably because of new tariffs targeting consumer goods.

The Fed’s preferred measure of inflation – personal consumption & expenditure – rose to 1.8% year on year from 1.7%, still short of the 2% goal.

Was the White House simply throwing another threat out there to get Beijing to bite, ahead of next month’s negotiations? That’s the assumption. But in this ever-movable feast that is the ups and downs of trade news, it is hard to blame any investor for being cautious.

Wall Street will wrap up its quarter tonight.

Commodities

Things are set to get rather quiet on the metals front from tomorrow, if they haven’t already, as China heads into a week-long holiday and celebrates 70 year of communism.

One might have expected gold to rally on the back of a new threat but it fell against a greenback that barely moved.

Conflicting news in the oil market conspired to send prices lower on Friday night. Iran claimed the US has offered to lift all sanctions if Tehran resumes negotiations but the White House said that’s rubbish. But Saudi Arabia has declared a cease-fire in Yemen in a hope to end the four-year war, which was enough in itself.

The Aussie is up 0.3% at the familiar level of US$0.6768.

The SPI Overnight closed up 8 points on Saturday morning.

The Week Ahead

It’s a busy week for Australian data with private sector credit out today, building approvals tomorrow, the trade balance on Thursday and retail sales on Friday. However, all that matters right now is whether or not the RBA cuts again tomorrow. If not, the market will be disappointed, but it will put November clearly in the frame. The RBA likes to cut on Cup Day.

China will release its September manufacturing and services PMIs today ahead of its week-long break.

Tomorrow is the first of the month, which means manufacturing PMIs from everyone else, and services PMIs on Thursday.

The US will see trade numbers on Friday but the September jobs report will overrule on the day, with the private sector report out on Wednesday.

ALS ltd ((ALQ)), Northern Star Resources ((NST)) and Nufarm ((NUF)) report earnings today.

Ausdrill ((ALS)) holds its AGM tomorrow and Wesfarmers ((WES)) hosts an investor presentation on Thursday.

The daily list of ex-dividends is now dwindling but bear in mind the actual payment of dividends, which lags the ex dates, currently has plenty of cash floating in the market that needs to be redeployed.

The Australian share market over the past thirty days…

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