The Overnight Report: What Protests?

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This story features RAMSAY HEALTH CARE LIMITED, and other companies.
For more info SHARE ANALYSIS: RHC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Stimulating

When in doubt, throw money at it. Beijing moved in swiftly yesterday to shut down the prospect of any further protests, moved to wipe any evidence of the protest out of existence (a la Tiananmen) and fired up the old economic stimulator as a distraction.

Beijing lifted a ban on equity financing for property that had been put in place in 2009 to combat surging house prices. The property sector is 25% of Chinese GDP. Property stocks took off.

The Shanghai index subsequently bounced back 2.3% yesterday, and the Hang Seng shot up 5.2%, after steep falls on Monday.

The ASX200 turned a -29 point opening loss into a 24 closing gain.

The news from China may have saved the index’s bacon, as the opening drop had it sitting right on 7200 support. A break down would have been bad news.

Materials took the ball and ran with it, up 1.7% as commodity prices rebounded. The next best performer was healthcare (+0.6%) after investors liked what they heard at Ramsay Health Care’s ((RHC)) AGM (+0.9%).

Real estate was the worst performer (-0.8%), after the Aussie ten-year jumped up 9 points to 3.60%, which also took its toll on discretionary (-0.5%).

Utilities fell -0.3%, which seems underdone given government moves to cap gas prices, although those have been a long time coming.

The other sectors were all wallflowers.

In a tale of two earnings results, Fisher & Paykel Healthcare ((FPH)) rose 9.8% to top the index winners and Collins Foods ((CKF)) fell -19.8% to top the losers. The Colonel was not amused.

The Kiwi respiratory company performed better than expected against tough covid comparables, while inflation has bitten too hard at KFC, forcing a price rise. Apparently the price of grease is through the roof.

So it was a case of down on China and then up on China to be about where we left off last week. The futures had suggested a gain of 2 points yesterday despite a fall on Wall Street and ended up with a 50 point round trip.

The futures are suggesting down -1 this morning.

This time Wall Street was rather quiet overnight, but the small move likely reflects nervous anticipation of today’s local CPI data.

Either that of futures traders have already shut up shop for Christmas.

All Hail

The Big Kahuna speaks tonight. All month we’ve had Fedhead after Fedhead popping up to give their views on monetary policy – collectively hawkish – but we haven’t heard from Jerome Powell since the last FOMC meeting. His view is the only one that really matters, and he’ll also be taking a Q&A tonight.

Wall Street was thus relatively quiet last night although the Dow was down close to -190 early on before grinding back.

The US ten-year yield rose 5 points to 3.75%, which weighed on the Nasdaq to some extent, although it was yet another weak day for Apple (-2.1%) that did the real damage.

Aside from property sector stimulus, yesterday Beijing announced it would ramp up vaccinations for the elderly (only 40% of over-80s vaccinated to date, being clearly expendable), which is about as close as you could get to a “we were wrong” out of China.

Talk on Wall Street is this implies a first step towards relaxing zero-covid restrictions. Wishful thinking I’d say. If China ever drops zero-covid it will be through steps so incremental and glacial no one will ever notice, and Xi will save face.

Chinese stocks listed in the US all shot up anyway.

The data has Americans having spent US$11.3bn on Cyber Monday, compared to US$10.7bn, so big applause. Except that in real terms that’s a drop.

Consumer confidence has also fell to a four-month low, following a brief respite when US petrol prices came down a bit. The Conference Board’s index fell to 102.2 from 104.2 a month ago.

US house prices fell for the third straight month in September. The Case-Shiller twenty-city index dropped -1.2%, although prices are still up 10.4% year on year so as is the case in Australia, there’s a long way to fall before there’s real trouble.

However it does mean rents have begun to ease. PCE inflation is due on Thursday night.

Commodities

Spot iron ore actually hit US$100/t yesterday but the futures market is always less volatile.

Otherwise support for the Chinese property market is about as good as it gets for commodities.

Oil traders are also anticipating another OPEC-Plus production cut following this Sunday’s meeting.

The Aussie is up 0.6% at US$0.6686.

Today

The SPI Overnight closed down -1 point.

It’s a big 24 hours ahead economically.

Locally we’ll see the first component of September quarter GDP today – construction work done.

We’ll also see October numbers for building approvals, private sector credit and importantly, the CPI.

China will release November PMIs.

The US will see another revision of September quarter GDP, as well as November private sector jobs numbers.

Powell speaks.

Aristocrat Leisure ((ALL)) goes ex.

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