The Overnight Report: Merry Christmas

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

By Greg Peel

Lock it in

We might argue that Thursday’s surprise jobs report was a bit of a pivot for the Australian stock market. There we all were assuming the RBA will cut again in February and baking that into our investment strategies, when now we’re not entirely sure. It’s also difficult to be excited about an approaching year-end amid so much disaster and destruction.

Yesterday inevitably saw selling on the ASX, not that there were too many people around to sell to. The futures called it and sure enough the ASX200 opened lower and ultimately closed lower. There was a lot of chopping around in between nonetheless, indicative of traders trying to square up in a thin market. We can’t much read anything into yesterday other than diminished confidence heading into 2020.

Materials (-1.1%) and healthcare (-0.9%) led the market down, and only two sectors closed in the green. One was IT (+0.4%) and the other was consumer staples (+0.5%), with a little help from Bega Cheese ((BGA)). Bega reaffirmed FY20 guidance yesterday and welcomed back its executive chairman after a round of chemo. The market cheered and the stock rose 4.4% to top the ASX200 leaders’ board.

I must say I made the mistake of the doing the Christmas grocery shopping at my local Colesworth yesterday. I was stuck in a traffic jam in aisle five for hours. The supermarkets can’t be doing too badly, but I suppose that’s every Christmas.

Utilities (-0.6%) and industrials (-0.7%) finally saw some profit-taking after having remained go-to sectors, despite the jobs report, up until last Friday. Other sector moves were modest.

Topping the ASX200 losers’ board was again Jumbo Interactive ((JIN)), which fell a further -6.9% following Friday’s dumping. Another observation: lottery tickets are a popular Christmas gift, as noted when I went to the newsagent to buy the paper and was stuck in queue there for ages as well. I was the only one buying a paper.

A special mention goes to the Aussie, which has done nothing but rally since Thursday irrespective of whatever the US dollar index has done. I’ve noted all year forex traders appear to be perennially short the Aussie, so it’s time to square up.

For those still around today the ASX will close at 2.10pm. Doesn’t look like there’s much more selling to do with the futures closing flat this morning.

Broken Record

Another night, another round of incremental new all-time highs for the Dow, S&P and Nasdaq. Wall Street is heading into the new decade with cautious optimism.

The Australian market largely ignored news out of China yesterday but it was not lost on Wall Street. Beijing announced it would lower tariffs on imports of frozen pork and certain pharmaceuticals and high-tech components. Signs of a further easing in trade tensions? Or just those things China’s short on?

Whichever, it was seen as a positive sign.

US economic data continue to be positive, as well with numbers for both new home sales and the Chicago Fed national index coming in ahead of expectation last night. Durable goods orders fell short, but as always this series is impacted by lumpy aircraft and other transport orders. And aircraft orders are very much distorted at present.

On that subject, Boeing took its CEO up to 30,000 feet last night and pushed him out. The former CEO and chairman lost his chairmanship a few months ago to concentrate on just being CEO, which clearly he has not excelled at either. Boeing shares rallied 3.8% in response, which is why the Dow outperformed on the session.

Otherwise it was a Christmas-thin session on Wall Street as well. Tonight sees the NYSE close at 1.00pm before it’s back to business as usual from Thursday.

Commodities

In times gone by we would expect any easing of global tensions to be negative for gold – the long-time safe haven. But given the Chinese are the world’s biggest buyers of gold in trinket form, it is suggested a reinvigorated Chinese economy should flow through to greater demand for gold.

That’s the explanation for why, amidst nothing much else going on in commodity land, gold suddenly woke up again last night.

The Aussie, as noted, is up another 0.3% at US$0.6923.

Today

The SPI Overnight closed down -2 points.

Well, that’s it from me.

The reality is that many New South Welsh, myself included, will not be where they were planning to be this Christmas, or will have ditched summer holiday plans. Even if the roads are open out of Sydney, the risk remains ever present. I presume that same can be said in Adelaide and parts of Victoria and WA. Even Kangaroo Island.

I despair for those businesses for which this period of the year is critical, and of course I despair for those who no longer have a home in which the family can gather.

I think many have got it right – we don’t need more socks, jocks and X-boxes. Give the money to the RFS and victim support groups instead.

FNArena will close now until January 13, although the website will be accessible as always. I’ll be back shortly after that.

I wish everyone a merry, but most importantly safe, Christmas and New Year.

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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