The Monday Report – 23 December 2019

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            [1] => ((LLC))
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This story features JUMBO INTERACTIVE LIMITED, and other companies.
For more info SHARE ANALYSIS: JIN
The company is included in ASX300 and ALL-ORDS

By Greg Peel

Holiday Fade

Most Australian market participants were out the door from Friday lunchtime, offering cheery salutations to colleagues who they will not see again until sometime in January. Volumes already began to slip into holiday mode last week and once we got past expiry day Thursday, we hit the thin zone.

It appears the last responsibility before the holiday is to square up positions following a solid year. On Thursday the ASX200 had marked a 21% gain for the year, and from the October 3 low-point, a 6% gain in the quarter. Given the futures closed down -21 points on Saturday morning, with Wall Street modestly higher, we may see the same locking in of profits today.

Volumes will be very thin, and tomorrow is an early close. Short-Straw Friday is a full session, but only the skeletons will be on board.

There wasn’t much of a theme to last Friday’s trade. Utilities won the session with a 0.5% gain and industrials chipped in with 0.3%, but consumer staples fell -0.8% so we can’t specifically point to defensives. Materials rose 0.2% but energy fell a full -0.9% on a slight dip in the oil price.

All other sectors closed modestly in the red.

Lottery company Jumbo Interactive ((JIN)) was the standout individual stock mover on the day, disappointing lofty expectations with a trading update and falling -14.5%. But that still leaves the stock up 120% in the year.

Lendlease ((LLC)) continued its fall on Friday (-4.6%) after Thursday announced sale of its engineering business at a lukewarm price, exclusive of the three large problem projects that have been troubling the business.

There was nothing of note on the upside.

As far as any more company updates are concerned, I’d say we’ve done our dash for the year.

Spending Spree

US consumer spending rose 0.4% in November. While the result was as expected, it was still the fastest pace in four months and included the critical Black Friday period, with Cyber Monday this year spilling into December.

Young Greta may have trumped an indignant Trump for Time Magazine’s person of the year, but if Wall Street had a person of the year it would be The US Consumer. A final revision of US September quarter, released on Friday night, confirmed 2.1% growth and the bulk of it from consumers’ pockets. With unemployment under 4% it’s not so surprising, trade wars be damned.

But strong consumer spending is supposed to imply inflation, yet the core PCE measure of inflation, preferred by the Fed, rose only 0.2% in the month and 1.5% year on year. It’s still a very long way from the Fed’s 2% target, which is why the FOMC will not be looking to hike rates for some time.

And that’s great news for Wall Street.

The S&P500 put on yet another 0.5% on Friday night for yet another all-time high. The Dow was once again handicapped by Boeing.

Just when you thought things could not get any worse for the aerospace company, a trial launch of Boeing’s new reusable space capsule, eight years in the making, failed on Friday night. And to top it off, one US airline said it would not be putting 737 Maxes back in the air until at least June.

Boeing shares only fell -1.7% but as the largest priced stock in the Dow, it still has an impact.

Meanwhile, Friday night was the quadruple witching derivative expiry in the US which likely had some impact on trade, but it was not a volatile session. Leading the S&P were the defensive sectors, albeit all sectors closed in the green.

Stop me if you’ve heard this one before: Having spoken to President Xi, President Trump said on Friday night the signing of the phase one trad deal is “close”.

Friday night would also have been a bit of a wind-down for Wall Street ahead of Christmas, but given it’s just the one day off in the US and not a trigger for annual holidays a la Australia it’s just a matter of setting positions ahead of a quiet one and a half days of trade before Wednesday but leaving the real book-squaring/window dressing for financial year-end to the final week.

We recall that the traditional “Santa Rally” actually occurs, if it is going to, in the week between Christmas and New Year. So we can all watch out for that one, or just watch the cricket instead.

Commodities

Apologies, but at this stage it appears our spot iron ore price source has shut up shop.

Not much action in base metals on Friday night.

The oils slipped however, thanks to the US rig count rising for a second week, up 18 to 685.

The Aussie continues to frustrate the RBA, up 0.2% to US$0.6902 despite the US dollar index rising 0.3%. We’ll need to see some GDP benefit of a US-China trade deal.

The SPI Overnight closed down -21 points or -0.3% on Saturday morning.

The Week Ahead

Full session today on the ASX, early close tomorrow (2.10pm) and then full session on Friday. No economic releases, no scheduled corporate events.

The NYSE closes at 1.00pm on Tuesday night and reopens on Thursday night.

US new home sales numbers are out tonight followed by durable goods orders tomorrow night.

The following week also has the ASX closing early on New Year’s Eve.

Australia will see numbers for private sector credit that week, and PMI numbers from across the globe will be released.

Note that all REITs, infrastructure and similar funds all simultaneously go ex-dividend on December 30.

It appears at this stage brokers have shut up shop, but a Broker Call will be published today (and tomorrow) should any research emerge.

The final Overnight Report for the year will be published tomorrow.

The Australian share market over the past thirty days…

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