The Overnight Report: Not Waiting For The RBA

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            [0] => ((INA))
            [1] => ((BRG))
            [2] => ((IMU))
            [3] => ((MFG))
            [4] => ((GNC))
            [5] => ((ALG))
        )

    [1] => Array
        (
            [0] => INA
            [1] => BRG
            [2] => IMU
            [3] => MFG
            [4] => GNC
            [5] => ALG
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)

This story features INGENIA COMMUNITIES GROUP, and other companies.
For more info SHARE ANALYSIS: INA
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Taking the Punt

The clue was provided on Saturday morning when the SPI futures closed up 96 points, or 1.5%, when the S&P500 had closed up only 1.1%. Typically the ASX is less volatile than Wall Street, not more.

The big move suggested hedging ahead of a big buy order set to hit the market yesterday morning and sure enough, the ASX200 jumped 120 points in the first half hour with all sectors in the green. The index then settled back, but tracked sideways thereafter to a 1.1% close.

A 0.8% gain in the Aussie was also against the run of play, after Friday night’s big drop and another fall in iron ore yesterday, hinting at offshore buying. It was arguably risky buying ahead of today’s RBA meeting, recalling that the index tanked last month when a 50 points hike was announced.

But actually it’s not risky at all, and arguably a binary trade. Since the June hike economists have all assumed another 50 points would be forthcoming today so if it does, no surprise. There’s no chance the RBA will go 75 given little data in between (June quarter CPI out late this month). Lots of chatter they might go 65 points. We'll see.

So no great downside. Given the market spent June pricing in a global recession, and at the very least a local slowdown – again the downside appears limited.

One might ask “why buy?” to which the answer would be “oversold”. Note that the Aussie ten-year yield has now fallen back -50 points from its high over 4%, implying a belief (as is the case regarding the Fed) that the RBA cannot be blindly aggressive lest its own actions are what lead us to recession.

While gains for every sector suggest a market order, gains among sectors were not uniform.

Energy led the market (+2.6%) on a rebound in oil prices. Real estate starred once more (+2.2%) on lower yields, with Ingenia Communities ((INA)) rising 5.3%.

Consumer discretionary was an unlikely outperformer (+1.8%) but for an assumption it has been hit too hard, helped by Breville Group ((BRG)), up 5.1%, Healthcare also gained 1.8%, with rock’n’roller Imugene ((IMU)) jumping 12.8%.

At the other end of the scale, materials managed 0.4% despite further big falls in metal prices, underscoring a Buy Australia assumption. Financials rose 0.9%, with gains in banks offset by falls in insurance companies as they prepare their arks, and another big fall (-9.9%) in Magellan Financial ((MFG)) as the joke wears thin.

Industrials only managed 0.4%.

A -2.4% fall in GrainCorp ((GNC)) against the tide likely also reflects NSW flooding.

So it’s over to Phil, and once that’s out of the way, the US earnings season will be the next major driver of sentiment.

Commodities

A bit of stability for once in base metals but not in iron ore.

Gold does not seem to be able to gain any traction.

Dips in oil prices never last long, and aside from current supply issues in Libya and Norway, there remains the threat Putin will simply turn off the pipelines to Europe, given he can sell plenty of oil to China and India.

As noted, the Aussie is up 0.8% at US$0.6870.

Today

Might be a little quieter today, at least until 2.30pm. The SPI overnight closed up one point.

Global June services PMIs are due today.

Ardent Leisure ((ALG)) goes ex.

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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