The Overnight Report: Return To Sender

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This story features BENDIGO & ADELAIDE BANK LIMITED, and other companies.
For more info SHARE ANALYSIS: BEN
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Size Matters

At the end of the first two weeks of August, FNArena’s Corporate Results Monitor has recorded results from a total of 55 stocks providing a beat/miss ratio of over two to one – well above average. But what that ratio doesn’t doesn’t discern is just how big those beats/misses were vis a vis just how big those companies are in the index.

For that is what determines the impact on the ASX300 (there will be over 300 stocks recorded by the monitor by end-August), macro influences aside.

It must be remembered that not every beat drives a positive share price response and vice versa. And we note broker downgrades are running ahead of upgrades.

The most influential result yesterday was that of Bendigo & Adelaide Bank ((BEN)). A miss had that stock down -6.6% and a deferred dividend had the big banks running scared. Bendalaide itself is not a market cap heavyweight but the big banks are. The financials sector fell -1.7% to be the worst performer and biggest negative influence on the ASX200 on the day.

Another point to note in result season is day-one share price responses are never the end of it. Telstra ((TLS)) reported last week, copped two FNArena broker downgrades and fell another -1.9% yesterday to take telcos down -1.6%.

Kitchen & bathroom company GWA Holdings ((GWA)) posted a miss yesterday and fell -10.5% to be the worst performing index stock. Industrials fell -1.4%. Looks like our at-home renovations didn’t extend much past new furniture, and new construction is on hold.

IT was next worst at -1.3% but does not much influence the index (growing fast nonetheless) while both consumer staples and discretionary each fell -0.7%. JB Hi-Fi ((JBH)) did its best to prop up discretionary, rising 4.8% on its release (has JB ever missed?), while Kogan ((KGN)), which is not in the index, increased its profit by 56% and the stock fell -6.1%.

Beach Energy ((BPT)) topped the index with a 7.1% gain on its result, but is not big enough to take on the big boys in the sector. Energy fell -0.8%.

Healthcare and utilities were the only sectors to manage (small) gains, while materials only slipped slightly.

Interestingly, the futures had suggested, on Saturday morning, a -58 point fall from the open despite a flat Wall Street and were pretty spot on in the first hour as the result releases flowed. With Wall Street again flat last night the futures are up 31 points this morning. Funny old market.

Election Farce

While there is still no movement on the fiscal stimulus front, Democrat House leader Nancy Pelosi is calling the House back this Saturday for an emergency vote on a funding boost for the US Postal Service. It is anticipated that in this election, the majority of votes will be by mail, with some states already mandating mail-in only.

Fresh funding is needed to counter the winding back of services and the slowing down of delivery times by the USPS CEO – a Trump supporter and donor. The service has warned it may not be able to deliver all mail votes on time, and thus they will not all be counted. Republican voters are expected to turn up to polling booths, maskless, as an act of defiance. Democrat voters are not.

Trump is doing everything he can, it is alleged, to win the election even if he doesn’t. The White House does not believe the postal service needs any funding but will pledge a bit anyway if necessary, while some Republicans support funding as they would rather win a fair fight.

What does this all mean for the stock market? Not a lot. History shows markets go up or down irrespective of which party’s in power. Those who believe Biden will be bad for the market suggest any fallout will nevertheless likely be short-lived. But what markets don’t like is uncertainty. If the election result is not known for weeks, that would not be positive.

That is the risk Wall Street is now pondering, while still in limbo just below the all-time high (S&P500). And when risk is building, one heads for the safety of bonds, gold and Big Tech.

The US ten-year yield fell back -3 basis points to 0.68% last night, gold jumped up 2% and the Nasdaq gained 1.0% into further blue sky thanks to the usual suspects. The Dow was more representative of wider sentiment, and the S&P split the difference, still failing to make a new high.

In economic news, the Empire State (New York Fed) activity index has fallen back to 3.7 (zero-neutral) from 17.2 last month having been negative since March. Forecasts were for a slip to 17. Is the US recovering faltering?

Not in housing. This month’s housing sentiment index has risen to a record high 78 (50-neutral) as low rates drive housing demand. As we all know from history, US housing is always very safe.

Commodities

While a weaker US dollar played its part, strength in base metal prices was put down to Friday’s Chinese data which showed a big jump in auto demand.

It was a spike up in US bond yields that sent gold plunging -US$100 last week, so as yields fall back, gold recovers.

A report last night suggested OPEC-Plus largely complied with production cuts last month.

We presumably can put a 0.5% gain for the Aussie to US$0.7216 down to commodities.

Today

The SPI Overnight closed up 31 points or 0.5%. The big miners saw some big gains in offshore markets last night following BHP Group’s ((BHP)) result release in London.

The minutes of the August RBA meeting are out today.

Amcor ((AMC)) is among today’s reporters, as is Cochlear ((COH)) and Coles ((COL)) among many, many more.

Westpac ((WBC)) has already provided quarterly numbers. No interim dividend.

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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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