The Overnight Report: Not With A Bang

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            [0] => ((WEB))
            [1] => ((NUF))
            [2] => ((ASL))
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            [0] => WEB
            [1] => NUF
            [2] => ASL
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This story features WEB TRAVEL GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: WEB
The company is included in ASX200, ASX300 and ALL-ORDS

Profit-Taking

The ASX200 opened flat yesterday before deciding what to do. The call was up, so the index chopped its way unspectacularly higher to be up 18 points at lunchtime. Then in came the profit-takers as books were squared for quarter-end.

While the quarter itself has been a dud – the index opened July around 6650 and we closed yesterday around 6690 – this did include a foray down to 6400 mid-August, thus the second half of the quarter provided a 4.5% rally. One of most consistent performers in that rally was the financials sector, despite the conundrum of lower rates on the one hand pressuring bank margins while on the other making dividend yields undeniably attractive.

The afternoon sell-off was very much bank-led, with financials closing down -0.7%. IT (-1.3%) topped the percentages, as usual, while discretionary (-0.8%) was impacted by Webjet ((WEB)) topping the losers’ board with a -4.3% drop. All other sectors closed modestly lower, except for industrials (+0.2%) and staples (flat).

Materials (as good as flat) would have shown a worse close if not for Nufarm ((NUF)), which after several profit warnings over the drought-stricken year reported earnings in line with expectation, but shocked the market by announcing it had sold its LatAm business for $1.2bn. Cash. This clearly exceeded analyst valuations of the business. The stock jumped 26.5%, but then as of last week, Nufarm was the most shorted stock on the ASX, at 18%.

Bummer.

Around midday we saw the release of the Chinese PMIs for September. Manufacturing remained in contraction but rose to 49.8 from 49.5 in August. Services remained in expansion but eased to 53.7 from 53.8.

Bit of a mixed message there, and indeed the initial response from the ASX200 was to slip then rally again to the day’s peak. China is on a week-long holiday from today, so September-October data will be a bit messy.

In local economic news, private sector credit grew 0.2% in August for an annual rate of 2.8%. Housing loans grew 0.2% on a split of owner occupier (+0.3%) and investor (-0.1%), while personal loans (-0.2%) offset business loans (+0.2%).

House prices may be on the turn but this is not yet reflected in loan demand, with contrite lenders tightening the eligibility screws. The recent house price bump may well reflect a FOMO trade in light of two RBA rate cuts and perhaps a third today – getting in ahead of the perceived rush to come.

But if we look at personal loans, which have fallen -3.4% year on year amid total loan growth of +2.8%, we can conclude that a “consumer recession” call is not unfounded.

Just Kidding

The White House last night denied there was any consideration of placing financial restrictions on US investment in China, or Chinese listings in the US, calling Friday’s Bloomberg report “highly inaccurate”, without saying why.

So everything that went down on the news on Friday night went back up again last night.

Wall Street also copped a late profit-taking sell-off for quarter-end, albeit mild compared to Australia’s. The Dow topped out up 180 points and closed up 95.

The Dow and S&P both rose 1.2% in the quarter while the Nasdaq fell -0.1%, after the same big dip in August.

The white noise of impeachment proceedings remains shrill as the market looks ahead to the whistle-blower testimony and the Secretary of State’s testimony (he was listening in to the Ukraine call) and whether or not the Ukraine president will release his own transcript of the conversation (he’s not sure), all providing an annoyance but also potential risk as we head into that infamous month of October.

More important to Wall Street are upcoming September quarter earnings results and the trade talks beginning on October 10. Barring anything out of left field, Wall Street is likely to remain poised but little moved this week, particularly with China on hols.

That left field could include Brexit developments ahead of the month’s end deadline, and the belief that Beijing has held off taking any action in Hong Kong because it did not want to sully its 70^th anniversary propaganda extravaganza. Thereafter…

Commodities

Falling inventories held on the LME are behind zinc’s recent surge while other base metals are largely sitting tight ahead of the Chinese holiday and then trade talk resumption.

Gold’s had one of its little turns again, after slumbering for a while near US$1500/oz, with the greenback jumping 0.3%.

No one much believed the Saudis could really get their crude processing plants back in full swing by end-September but they have, so they declare.

The Aussie has matched the greenback in falling -0.3% to US$0.6751.

Today

The SPI Overnight closed up 5 points, not exactly signalling a flying start to October despite yesterday’s late book-squaring rout.

On the subject of Australian house prices, we’ll see September numbers today, along with August building approvals.

And then the biggie – the RBA rate decision.

China is now closed for business until next week.

It’s manufacturing PMI day across the globe, except in New Zealand, where they’re just as slow to collate data as they are to acknowledge offside intercepts.

Ausdrill ((ASL)) holds its AGM today.

It’s October. Be afraid.

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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