The Overnight Report: Looking For Clues

Array
(
    [0] => Array
        (
            [0] => ((ASK))
            [1] => ((CGF))
            [2] => ((CPU))
            [3] => ((CSL))
            [4] => ((NWL))
            [5] => ((RGN))
            [6] => ((SEK))
            [7] => ((SGM))
            [8] => ((IGO))
        )

    [1] => Array
        (
            [0] => ASK
            [1] => CGF
            [2] => CPU
            [3] => CSL
            [4] => NWL
            [5] => RGN
            [6] => SEK
            [7] => SGM
            [8] => IGO
        )

)

This story features ABACUS STORAGE KING, and other companies.
For more info SHARE ANALYSIS: ASK
The company is included in ASX300 and ALL-ORDS

By Chris Weston, Head of Research, Pepperstone

Good morning.

As the various market players await the start of this week’s US economic data run, starting with US PPI in the session ahead, a calm has descended on equity markets, with the more upbeat flows seen in commodity markets, with Brent (+3%) and WTI crude finding solid buying activity, and gold following in alignment for a new closing high.

Increased focus falls on the US lifting its military presence in the Middle East, ahead of a potential reprisal by Iran. Many also monitor headlines around the flow of gas between Russia and Ukraine to Europe, with EU Nat gas at one stage rising 6% to EUR42.90, before coming off -7% into the close, as headlines made their way around the floors that both Ukraine and Russia have limited intensions to halt their gas flows.

While EU gas price tailed off into the close, Brent crude maintained its bid through US trade, and subsequently closed above the recent downtrend (drawn from the 5 July high) and now eyes a move into the 200-day MA (US$82.56). One considers then how much of the move was technical in nature, with the upside then exacerbated driven by low positioning – where gross long positions in Brent futures had heavily reduced of late to sit at multi-year lows.

Gold has printed a new all-time closing high of US$2472.90/oz, absorbing tailwinds from both the crude move, and buying across the US Treasury curve, and US 5yr real rates -5bp to 1.75%. While we see some buying of gold as a geopolitical hedge, a weaker US CPI print tomorrow, and a below consensus read on US retail sales would likely be the kicker to take us to a new all-time high, and possibly a test of US$2500/oz.

We may have seen crude, gold and possibly US Treasuries finding buyers on geopolitical news flow, but this hasn’t resonated in FX or equity markets. Granted, we have seen US small caps close lower, with the Russell 2k -0.9%, but S&P500 cyclical stocks have outperformed defensive plays, high beta stocks have worked well vs low volatility beneficiaries and S&P500 momentum names have seen reasonable buyers.

One could argue that equity is still in recovery mode after last week’s shake out, and holding out from really putting money to work until we get the key US data this week, where pricing US growth is still the main game in town. This may explain the poor volumes, with S&P500 volumes some -19% below the 30-day average.

The intraday chart of the S&P500 was whippy, to say the least, with the index chopping around between 5371 and 5324. Given we’ve seen the S&P500 cash index trade in 200-plus handle high-low ranges in the prior three sessions, a 46-handle high-low range on the day feels incredibly quiet.

Turning to Asia our calls suggest that we see the NKY225 fire up and outperform in the region, with calm opens expected in HK and Australia.

By way of event risk, in the session ahead we see the Aussie Wage Price Index (11:30 AEST), and while an important input for the RBA, it shouldn’t move the AUD too intently. In the UK we see the jobs and wages report, which may result in some moves in the GBP, while in the US we get PPI inflation a key gauge to help economists price the all-important US core PCE inflation due on 30 August.

On the earnings side, we see numbers today from CSL (ASX200), and Home Depot (S&P500).

On the calendar today:

-Australia 2Q Wage prices

-NAB business confidence

-Abacus Storage King ((ASK)) earnings report

-Challenger ((CGF)) earnings report

-Computershare ((CPU)) earnings report

-CSL ((CSL)) earnings report

-Netwealth ((NWL)) earnings report

-Region Group ((RGN)) earnings report

-Seek ((SEK)) earnings report

-Japan July PPI

-UK June Unemployment rate

-US July NFIB

-US July PPI

Corporate news in Australia:

-Sims ((SGM)) has sold $435m in assets, including its UK metal recycling business and a stake in CLP Circular Services

-Albemarle may sell its 49% stake in the Greenbushes lithium mine to IGO Ltd ((IGO)), The Australian reports

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms