The Overnight Report: Quiet, But Positive

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By Chris Weston, Head of Research, Pepperstone

Good morning.

It won’t surprise too many that our open index calls for Asia are largely unchanged given US cash equities were closed for Labor Day, and we can essentially write the US session off and become re-focused on attacking the real moves ahead.  

US equity futures did trade but closed early and while we did see some weakness, with S&P500 and NAS100 futures trading into 5638 and 19,511 respectively, buyers stepped in through the session and pushed futures to the flatline.

One could argue there was clear buying pressure coming into the market, supporting my view the path of least resistance in these indices is higher – but it wasn’t hard to push the market up when only 107k S&P500 futures contracts traded vs 1.19m on average (15 days).

On the docket Down Under we see Q2 net exports of GDP (due 11:30 AEST), with calls this will add 0.6% to tomorrow’s Q2 GDP calculation.

We also see the Q2 balance of payments (consensus A$5bn), although if either data point is going to move the AUD it’s the net export contribution which could impact the tracking rate, for what is looking like a weak Q2 GDP print (tomorrow 11:30 AEST).  

We should see volumes and price action crank up the price with US ISM Manufacturing (due 00:00 AEST) the risk to be aware of.

The median estimate from economists is for the survey to come in at 47.5 a slight improvement from last month’s survey, or put another way, less bad, and I am not so sure the USD will take too kindly to a weaker read.  

A less bad ISM manufacturing outcome may also see a better tone in crude, which again has traded a shortened session, but has found buying support with front-month +0.7% by the close.

That said, it seems crude has its eyes on the supply dynamic, and while we have seen OPEC output fall by -340k bpd in August, there are renewed calls for OPEC-Plus to lift daily barrels from October.

On the demand side, Chinese growth concerns seemingly outweigh that of US growth dynamics and it’s hard to see crude trending markedly higher unless the market feels more comfortable on China’s economic prospects and that may be a ship that is going to take time to turn around.  

Our Asia opening calls are largely unchanged. The ASX200 is also firmly on the radar, with our opening call of 8,111would be a mere -37 points (or -0.5%) away from the all-time high of 8148 printed on 1 August.

SPI futures closed at 8074 (+4p) and need to find a further 47 points to take out the ATHs.

The tailwinds are there though, notably ASX200 financials are in beast mode and trending beautifully so if the clear love for the banks remains in play, then we should see the ASX200 test 8148 soon enough.

On the calendar today:

-New Zealand 2Q terms of trade

-Australia 2Q net imports

-UK July unemployment

-US ISM manufacturing

-Australian Ethical Investment ((AEF)) ex-div 6c

-Bega Cheese ((BGA)) ex-div 4c (100%)

-Codan ((CDA)) ex-div 12c (100%)

-Coles Group ((COL)) ex-div 32c (100%)

-Endeavour Group ((EDV)) ex-div 7.5c (100%)

-Iluka Resources ((ILU)) ex-div 4c (100%)

-Lynch Group ((LGL)) ex-div 8c (100%)

-Nickel Industries ((NIC)) ex-div 2.5c

-Northern Star ((NST)) ex-div 25c

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-EML Payments ((EML)) has completed the sale of its Sentenial business unit for EUR32.75m to GoCardless with the proceeds to be used to pay down debt

-The AFR reports solar farm owners in south-eastern states are switching off plants to protect their profits as extreme winds, abundant solar generation and low demand create an oversupply

-Woolworths Group ((WOW)) sold its remaining stake in Endeavour Group ((EDV)) for $383m to fully acquire PFD Food Services

-Betashares has entered the superannuation industry by acquiring Bendigo Superannuation ((BEN))

-Qatar Airways is nearing a deal to buy a minority stake in Virgin Australia, pending regulatory approval

-CommBank ((CBA)) is selling its ultra-high-net-worth advice business, with Gresham managing the sale and preparing to solicit bids

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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