The Overnight Report: Too Soon?

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This story features ACCENT GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: AX1
The company is included in ALL-ORDS

By Greg Peel

Retail Relief

The ASX200 continued to consolidate and plateau at the rebound high yesterday as we approach the end of what will likely be the worst month in the worst quarter of the year economically. Stock markets are forward-looking, hence the index will have enjoyed its best month in decades.

The ASX200 gave away a 50 point first hour gain to be down -50 with an hour to go, before recovering to the close. A wild day at any other time.

All hangs on the diminishing daily case-count and the tentative reopening of state economies by varying degrees. Any hint of life returning to normal is good news for the hard-hit retail sector, and yesterday we saw the likes of shoe retailer Accent Group ((AX1)) rise 11.5% in the wake of a positive update and bling retailer Lovisa Holdings ((LOV)) rise 5.7% in sympathy.

Such relief flows into advertising, and one particularly trashed stock was outdoor advertiser oOh!media ((OML)), which yesterday topped the boards with a 10.4% gain. The consumer discretionary sector won the day in rising 1.7%, followed by IT on 1.2%, as many a component is retail-exposed.

Worst performing sector was energy, down -1.2% on another -20% fall in the WTI price overnight, with resource partner materials chiming in with -0.5% as the USD gold price fell and the Aussie surged.

Smarting from Monday's scene-stealing early result release from National Bank ((NAB)), Westpac ((WBC)) got in early yesterday to at least get the bad and good news out of the way, now NAB has spooked the market, ahead of its official result release next Monday.

The bank announced it would take -$2.2bn in provisions against potential bad debts, well topping NAB's -$1.3bn. There was no mention of a raising, which might be good news, although this may yet come on Monday, along with an inevitable dividend cut.

The market was slightly relieved the provision wasn't greater, thus sending Westpac up 1.8% following Monday's pre-emptive -4.4% fall, while NAB came back on boards and fell -2.8%, including the dilution effect of new shares. The financials sector closed down -0.2%.

Speaking of raisings, Lendlease ((LLC)) joined the queue yesterday in announcing a $1.15bn placement and SPP. The property developer also withdrew the guidance it had provided with its interim result in February, back when we all lived on a different planet.

Worst individual performer on the day was Mesoblast ((MSB)), which unsurprisingly pulled back -16.8% after having all but doubled in the prior two sessions.

Investors were unsure what to do with Wesfarmers ((WES)), which yesterday reported strong sales at Bunnings (might as well put those shelves up while stuck at home) and Officeworks (better upgrade my comms if I'm working from home) offset by weak sales at K-Mart and Target (stores closed). Perennial trouble child Target has really hit the skids. Lord knows why Wesfarmers has persisted with these two lookalike franchises all this time.

Target US in the meantime has been going gangbusters, alongside peer Walmart, as it sells groceries as well as discretionary items.

Google It

It was a similar story on Wall Street last night as the Dow gave up a near 400 point early gain to close relatively flat. The mood of the day has since been brightened by Google's (Alphabet) aftermarket result release.

The trend that began on Monday night continued into last night as investors took profits on the high-flying Big Tech names that have driven the rebound, and switched into beaten-down sectors, with Big Tech earnings results looming. Google is a bellwether for advertising, given searches for everything from travel sites to restaurants and movie reviews, all of which are currently in suspended animation. Wall Street had expected bad news.

The company beat on revenue, and as I write the stock is up 8%. Bear in mind this is a March quarter result, but the likes of Twitter and Facebook also gained after hours. Facebook and Microsoft report tonight and Amazon and Apple on Thursday.

During the session, initial strength was driven by the ongoing rush amongst states to lift restrictions. Ohio and Pennsylvania have now joined in, along with an early virus hot-spot — Washington State which will reopen for huntin', shootin' an' fishin'.

And golf.

But the mood was darkened when the now infamous Dr Fauci warned that reopening the states ahead of a treatment being found for the virus meant the US "could be in for a bad fall". Presumably this is a reference to the economy, given it's not even summer yet.

The US case-count has now reached one million, out of three million globally.

There was also some consternation over the Conference Board's monthly consumer confidence survey, despite it being obvious April would look a lot worse than March, and a long way below February. The index came in at 86.9, down from 118.8.

Meanwhile, a bunch of other notable stocks reported earnings last night to mixed responses. The results themselves were too stale to be of use so it was June quarter trading updates and outlooks, without actual guidance, that drove share prices. With China reopening the likes of Dow names Caterpillar and 3M came up as winners, while Merck was a loser, having been an outperforming healthcare stock.

And there was some relief on the potential food shortage front. President Trump has used his executive (war-time) powers to force abattoirs to remain in operation, with many having already shut down due to health fears. Workers are "shoulder to shoulder" on processing lines, one industry insider has noted, so how they're going to pull off social distancing is unclear.

Fortunately it appears the virus cannot be passed by food consumption. Funny, I thought that's how this all started.

Commodities

The WTI price fell another -20% last night, then bounced back.

The RBA must be starting to get a bit miffed that Australia's relative success in containing the virus, certainly compared to the US, means the Aussie is now almost ten cents up from its March low. It's up another 0.4% overnight to US$0.6490.

Today

The SPI Overnight closed up 20 points.

Our March quarter CPI numbers are out today, for what they're worth.

The first estimate of US March quarter GDP might be more interesting, but it is unlikely the Fed policy statement due tonight can offer anything new.

Coles ((COL)) reports March quarter sales today while Iluka Resources ((ILU)) and Regis Resources ((RRL)) provide production reports.

The Australian share market over the past thirty days

For more detail go to FNArena's Australian Broker CallReport, which is updated each morning, Mon-Fri.

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