Tag Archives: Base Metals and Minerals

article 3 months old

The Overnight Report: Still Fisching

By Greg Peel

The Dow closed down 48 points or 0.3% while the S&P lost 0.2% to 2176 and the Nasdaq fell 0.2%.

Surf’s Down

SurfStich ((SRF)) floated not quite two years ago at a dollar, hit two dollars at the beginning of this year, and proceeded to step-jump down on a series of profit warnings before losing half its value yesterday in one fell swoop, to now be trading at ten cents. Echoes of another well-known surf wear company.

It doesn’t pay to miss guidance in this market.

The bigger story yesterday on the local market was a case of another one bites the dust. Gateway Lifestyle ((GTY)) became another member of the fledgling residential aged care sub-sector to disappoint with its result, sending its shares down 13%. Having already dropped 17% the day before for the same reason, peer Estia Health ((EHE)) copped another 15% beating, while Japara Healthcare ((JHC)) and Regis Healthcare ((REG)) rounded out the sub-sector whitewash with 3.5% falls.

It was a great story – ageing population, lack of affordable housing, longer time spent in retirement – and initially analysts were very keen on these names. That is until share prices started to run ahead of value. It’s still a great story, but not at any price.

It was left to healthcare stalwart Ramsay Health Care ((RHC)) to right the sector ship, rising 8% on a strong result despite having already rallied 34% from its February low. Hospitals are safer than retirement villages it would seem.

It’s been a difficult year for financier FlexiGroup ((FXL)) but a good result saw its shares up 8%. The winner on the day was nevertheless naval boat builder Austal ((ASB)), which had a torrid year and having popped 13% on its result on Tuesday, kicked another 14% yesterday.

Beyond yesterday’s round of alpha moves was the underlying beta story of an ASX200 trying to get back to 5500 on a strong lead from Wall Street. It did, for a heartbeat on the open, before drifting back again all day. Sector moves were mixed and showed little coherence.

Today is effectively the last day of the result season. From here on it’s mostly penny dreadfuls reporting before we hit a few out-of-cycle larger name reporters next month. Then it will be back to focusing on the macro, which simply means central bank watching.

United We Stand

There’s a photo doing the rounds that has Wall Street’s attention. It shows the three top-end Fedheads – chair Janet Yellen, vice chair Stanley Fischer and New York Fed president William Dudley -- sharing a drink and a joke before a backdrop of Wyoming pasture at Jackson Hole. A typical happy snap from one of those annoying photographers ever present at conference drinkies?

No, say commentators. It represents a staged attempt to convey unity. And therefore it is an implicit indication that what Stanley Fischer said on Friday about the possibility of two rates hikes, and his suggestion that Janet Yellen’s speech backed up this possibility, is real. Fischer spoke again last night, effectively reiterating his comments by suggesting it is impossible to say the next Fed rate hike would be “one and done”.

Markets are beginning to pay attention. The US dollar index jumped another 0.5% to 96.05 last night and, finally, gold responded, falling US$12.70 to US$1310.50/oz. Only the bond market remains unconvinced, with the ten-year yield unmoved at 1.57%.

For stock markets it’s really a case of “25 basis points, so what?” Wall Street has had all year to prepare for this minor tightening that’s never come. But maybe 50 basis points might be a different story. The biggest movers up over 2016 have been the US yield stocks, particularly utilities and telcos.

And tomorrow is September – historically the worst month of the year for stocks. The next FOMC decision will be released on September 22 and being a quarterly meeting, will also feature a press conference from Janet Yellen. These relatively new press conferences are seen as the perfect opportunity to make a policy change and then explain it. If Friday night’s US jobs report is a biggie, things could get interesting.

But it wasn’t really the Fed that spooked Wall Street into some mild selling last night, again on negligible volume. The biggest influence was the US$14.5bn tax battle between Apple, Ireland and EU. Apple shares fell and dragged down other Big Tech names as tax fears flooded Silicon Valley.

Then there was that US dollar jump, which sent commodity prices south and thus prompted falls in the energy and material sectors.

Commodities

West Texas crude is down US69c at US$46.26/bbl.

Base metal traders had their first real chance to respond to Jackson Hole last night given the LME was closed on Monday night, but price falls were relatively mild.

Iron ore rose US20c to US$59.00/t.

It was left to gold to post the bigger fall.

The Aussie is pleasingly down 0.8% to US$0.7510 on greenback strength.

Today

Those US resource sector falls will likely flow over into the local market today, with the Big Two miners being sold heavily overnight. However, the SPI Overnight closed up 6 points.

Private sector credit data for July are due locally today while the ADP private sector jobs report in the US will provide a precursor for Friday’s non-farm payrolls.

The results season wraps up today with last hurrah reports from Adelaide Brighton ((ABC)), Harvey Norman ((HVN)) and Independence Group ((IGO)) among a handful of others.

Rudi's weekly appearance on Sky Business has been pulled forward by 24 hours. Watch him on the channel today, 12.30-2.30pm.
 

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

(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 in the Cockpit 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

article 3 months old

The Monday Report

Wrap of events affecting the market on Friday night and the weekend and a preview of the week ahead.

By Greg Peel

Testing Support

For the last three weeks, which have been dominated by result season, the ASX200 has traded largely sideways. On a couple of occasions the index has had a good look at the 5500 support level on the downside but quickly recovered back into the range.

After two consecutive sessions on the weaker side, the index is now sitting at 5515 with the futures showing down 4 points this morning, suggesting, today’s earnings reports notwithstanding, that 5500 level is chance of coming into play. A breach would be short- term bearish.

The 26 point fall for the index on Friday was mostly to do with the banks. Over the last couple of weeks the big banks have seen some buying, despite three of them not participating in the August round of August reports, and late last week they were sold again, taking the financials index down 0.8% on Friday. Investors possibly decided it best to take profits in case Janet Yellen confirmed a rate hike at Jackson Hole on Friday night.

Yet we didn’t see the same reaction in the other yield sectors, with utilities flat and telcos actually the best performer on the day, rising 0.7%. Meanwhile, industrials posted the biggest percentage fall of the session in dropping 1.0%.

Among the stocks reporting on Friday, the biggest winner was Super Retail ((SUL)) with a 6% jump while Coca-Cola Amatil ((CCL)) featured on the downside with a 4% fall and Select Harvests ((SHV)) was the biggest loser on the day with a 7% drop. Otherwise, the tables of biggest gainers and decliners were dominated by moves in stocks that had already reported over the week.

It reminds us that reporting season is not just a one day picnic for reporting companies.

With 250 of the 300-odd August reporting stocks covered by FNArena database brokers now having reported, it is notable that the percentage of beats (on FNArena’s assessment) has slipped back to 31% from having run at a consistent 36% ahead of last week. Misses remain fairly stable on 25%.

We also note that recommendation upgrades from brokers have made up a little bit of ground against downgrades, with the up/down ratio slipping to 1.7 from above 2.0 a week ago.

There are three more days to go in the season, but we are very much in wind-down mode such that the volume of companies reporting drops way down from the dramatic peaks of late last week. We’ve also seen almost all of the bigger names now done and dusted.

As the week progresses, economic data will again begin to take centre stage.

Fisching

Fed chair Janet Yellen declared in Jackson Hole on Friday night the case for a Fed rate hike is “strengthening”. As such, a move to normalisation would be “appropriate” but any move would be “gradual” and, of course, dependent on the data.

Wall Street yawned. Nothing new here, as expected. There might be a rate hike in December. But then…

Speaking in a TV interview following Yellen’s speech, Fed vice chair Stanley Fischer suggested Yellen’s remarks were consistent with the chance of two rate hikes this year, in September and December.

Nobody saw that coming. In response, the US dollar index shot up 0.8% and the US ten-year bond yield jumped 6 basis points to 1.63%, leaving behind the range in the 1.50s it’s held for about a month. The Dow closed down 53 points or 0.3% and the S&P -0.2% to 2169 while the Nasdaq rose 0.1%.

Not that anyone really believes Stanley Fischer. The prevailing view is that it’s better to talk up a rate hike to ensure Wall Street is prepared for one when it comes, even if that’s not until December. There remains a lot of talk in the market about there not being a rate hike in 2016 at all, and that’s even the view of at least one rogue FOMC member.

But it’s jobs week in the US this week. On the strength of Fischer’s comments, if Friday night’s non-farm payroll number proves to be a solid or better than expected result, Wall Street will likely prepare for a September rate hike just in case.

Interestingly, Fischer’s comments were also made in the context of the first revision of US June quarter GDP, released on Friday night, which showed a dip to 1.1% from an initial 1.2% estimate. If the Fed is data-dependent… But in the same interview, Fischer dismissed the June quarter GDP as being too long ago to be relevant.

Commodities

An 0.8% jump in the US dollar index to 95.48 was always going to be a big headwind for commodity prices on Friday night, and the prospect of two rate hikes a more medium term breeze. But as it was, commodity prices fell by very little.

West Texas crude fell US9c to US$47.29/bbl.

Base metal prices were mostly weaker, but not by much.

Iron ore did fall US$2.00 to US$59.10/t, but iron ore tends to play its own game.

The interesting one is gold, which only fell a dollar to US$1320.50/oz. By rights it should have fallen a lot more, but watch gold tonight. It has a habit of waiting an extra day to respond.

The Aussie’s fall of 0.7% to US$0.7560 matched the greenback’s gain.

The SPI Overnight closed down 4 points on Saturday morning.

The Week Ahead

It will be a big week in the US for a data dependent Fed.

Tonight sees personal income & spending, and the Fed’s preferred PCE measure of inflation. Tuesday it’s house prices and consumer confidence, Wednesday the Chicago PMI, pending home sales and the private sector jobs report, and Thursday sees construction spending, chain store sales, vehicle sales and the manufacturing PMI.

Friday it’s that all-important jobs number, alongside factory orders and trade. There follows the Labor Day long weekend in the US, unofficially signalling the end of the summer holidays.

Thursday is the first of the month so it’s manufacturing PMI day across the globe, as well as both manufacturing and the services PMI from China.

In Australia we’ll see building approvals tomorrow and private sector credit On Wednesday. On Thursday, June quarter private sector capex will have the RBA’s attention alongside retail sales, house prices and the manufacturing PMI.

On Friday S&P/ASX will announce pending quarterly changes to the components of the ASX200 and other indices, ahead of the changes becoming effective two weeks hence.

In the last three days of result season, numbers are due from the likes of Beach Energy ((BPT)), Macquarie Atlas ((MQA)), Ramsay Health Care ((RHC)) and Adelaide Brighton ((ABC)) amidst many more small names.

Investors should otherwise be aware we will now hit a heavy period of stocks going ex-dividend, and that index handicap will extend all the way through September.

Wesfarmers ((WES)) and Woodside Petroleum ((WPL)) will go ex today and BHP Billiton ((BHP)) on Thursday, alongside many more this week.

Rudi will appear on Sky Business on Tuesday morning 11.15am, via Skype-link, to discuss broker calls. He'll re-appear on Thursday between 12.30pm-2.30pm and again on Friday, via Skype-link, at around 11.05am.
 

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

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

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

article 3 months old

The Overnight Report: All Eyes On The Hole

By Greg Peel

The Dow closed down 33 points or 0.2% while the S&P lost 0.1% to 2172 and the Nasdaq fell 0.1%.

Another Mixed Bag

A fall of 21 points represents one of the big moves for the ASX200 over the course of this result season but the market started with a handicap yesterday of lower oil and metals prices. The banks also saw some selling after having been bought up this week. Outside of these influences, it was another familiar day of sharp moves both up and down amongst the day’s individual earnings reporters.

The biggest sector fall on the day was registered by the smallest of all sectors, info tech. It fell 2.0% thanks to a miss from accounting software company MYOB ((MYO)) and a subsequent 10% share price drop.

The biggest move up was registered by consumer staples. It rose 2.4% thanks to a 4% gain for big cap Woolworths ((WOW)). Woolies actually missed consensus but did show signs of some sales improvement, which was enough to worry the many shorters of the stock. Woolies is the most heavily shorted Top 20 stock by a margin.

Western Areas ((WSA)) picked a bad day to disappoint given nickel prices were also down 3% overnight. The stock has flown these past months on the nickel price recovery and thus fell 13% yesterday. The biggest fall was reserved for oil explorer AWE ((AWE)), down 15%.

Education provider 3P Learning ((3PL)) has been sold down all year so a beat was worth a 15% pop, while Southern Cross Media ((SXL)) has traded sideways all year but jumped 12%.

Other notable moves among the big boys were a 4% gain for perpetual performer Amcor ((AMC)) and a 4% gain for underperformer Perpetual ((PPT)).

No macro themes amongst the results, and no sector themes either. Although we should acknowledge a sector theme that has been emerging all year and has perhaps now caught the attention of those who hadn’t been paying much up to now. Software is the new black.

Discounting MYOB, which has been around for as long as we’ve all had to do a BAS, we note two stocks that took off on their results on Wednesday kicked on with it yesterday. Altium ((ALU)) gained another 8% and iSentia ((ISD)) 5%.

Watch the weather, it’s clouding over.

Tell us about it Janet

Wall Street is setting itself up for disappointment, and knows it.

Tonight Fed chair Janet Yellen will deliver a prepared speech on the subject of the policy tools available to central banks and whether or not they remain relevant in today’s world. She is not there to make a policy commitment. The Jackson Hole symposium is academic in nature. It’s not an FOMC meeting.

The problem is former chair Ben Bernanke used Jackson Hole as means of flagging major, experimental policy changes to give markets a heads-up and to dampen volatility. A rate hike is not QE. The fact that Janet Yellen is attending the symposium this year when she doesn’t have to, and didn’t in her first year, has led Wall Street to believe she’s there to make a definitive statement on interest rates.

Yet no one really believes she will actually do so.

If she says nothing, or simply bangs out the same old line, there will be much frustration. There was much frustration last night when two Fedheads individually popped up to support a rate rise sooner rather than later. They are known hawks, and the market just really wishes Fedheads would just shut the hell up. They are part of the problem, not the solution.

The Fed is data-dependent, it so it endlessly tells us. Last night’s data released showed that having fallen for the prior two months, durable goods orders rebounded a better than expected 4.4%. Okay then, let’s have a rate rise.

The feeling now on Wall Street is that the Fed won’t raise in September, but will raise in December, simply because it’s been telling us all year that rate rises are planned and December’s the Last Chance Hotel. If not, they will look like idiots, if they don’t already.

On a side note, there was much hope in the wake of the Brexit rebound and reasonable data out of Europe lately that the closely watched German IFO survey of business sentiment would show improvement this month. Instead the index fell to 106.2 from 108.3, which is considered a sharp drop.

Commodities

West Texas crude bounced back last night, up US58c to US$47.38/bbl.

Other than a 1% gain for zinc, base metal prices barely moved.

Currency played its part. The US dollar index was unmoved at 94.73 and ditto the Aussie at US$0.7615.

Iron ore fell US40c to US$61.10/t.

Gold is slightly lower at US$1323.80/oz.

Today

The SPI Overnight closed up 5 points.

It’s been quiet all week on Wall Street in the summer heat, with the long countdown to Jackson Hole soon to end. The first revision of US June quarter GDP is also due tonight.

We have now struggled over the very steep hill that was the past two days of the earnings season. From today, the number of companies reporting each day begins to drop off as we head towards the end of the month.

Today’s highlights include Coca-Cola Amatil ((CCL)), Cabcharge ((CAB)) and Super Retail ((SUL)).

Rudi will Skype-link up with Sky Business to talk broker calls at around 11.05am.
 

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

(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 in the Cockpit 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

article 3 months old

The Overnight Report: Off The Highs

By Greg Peel

The Dow closed down 65 points or 0.4% while the S&P fell 0.5% to 2175 and the Nasdaq lost 0.8%.

As You Were

After Tuesday’s brief interruption to normal service, in which it appears a sizeable index buy order hit the market, it was back to the familiar theme on the local bourse yesterday as a small change in the index at the close masked a lot of individual stock movement underneath.

We are now past halfway in the results season in terms of number of companies reporting. On FNArena’s assessment, beats are running at a fairly steady 36% to misses of 25% but broker downgrades are outpacing upgrades by 2.4 to one – a number that has quietly increased as the season has progressed.

The vast bulk of those downgrades are due to over-valuation calls, and to a great extent brokers have almost been apologetic in downgrading what they think are terrific companies that have simply been bought up too far by the market.

This theme has extended into stock movements on the day that have accompanied beats or misses. High flyers who miss even by a slim margin have been slaughtered, while former unloved try-hards who show signs of improvement have been leapt upon. Yesterday was no different.

Snake oil peddler Blackmores ((BKL)) down 20% on weak FY17 guidance. Another Chinese favourite – a2 Milk Company ((A2M)) – down 6%. Yet another Chinese favourite, Australian Agricultural Company ((AAC)), down 5%. FBT dodger McMillan Shakespeare ((MMS)), having seen a solid rebound since Joe Hockey left the country, down 10%.

On the other side of the ledger: software company iSentia ((ISD)) having had a weak year to date, up 17%. It’s been a tough year also for Ardent Leisure ((AAD)), up 14% and for Sirtex Medical ((SRX)), up 12%, and a very bad year for Spotless Group ((SPO)), up 7%.

Yesterday also saw ongoing selling in Tuesday’s disappointers, with Aconex, Greencross and APN Outdoor all suffering further.

There was also disappointment from Wesfarmers ((WES)), despite reporting in line with forecasts. Its shares fell 2% because it has been a popular investment of late and Coles is losing its lustre.

To have a rule you must have an exception, and that came from another software company, Altium ((ALU)). It’s had a solid run all year and yesterday popped 13%.

On a sector basis, if we ignore the 3% fall in telcos due to Telstra’s dividend and 0.3% for utilities due to AGL Energy’s dividend we see consumer staples having suffered the most, down 1.4% thanks to Wesfarmers, industrials closing flat on the above-noted mix of results, and every other sector rising on the day.

Including the banks, which kicked on with another 0.6% gain.

Yesterday’s local data release was June quarter construction work done, which plays into GDP. Overall construction fell 3.7% to be 10.6% lower over twelve months. But it’s not all bad.

The big drag was engineering, down 9% and 25% for the year, largely reflecting the number of big LNG projects reaching completion. As we move ahead from such completions, year on year declines will bottom out. Housing construction is still leading building, up 1.2% and 6% for the year, and governments are doing the right thing in pushing ahead with infrastructure, sending public sector spending up 5.3% for 15% annual.

Unhealthy

Wall Street came off near all-time highs last night but a hundred point Dow fall was pared back late in the afternoon. Aside from another drop in the oil price, the US healthcare sector has been the focus of weakness this week.

On the one hand we’ve seen outrage as drug-maker Mylan announced it would double the price of its ubiquitous Epipen, which so many across the globe carry around as a potential lifesaver. The Epipen represents only one of Mylan’s significant price hikes, and investors have bailed out of the stock fearing government intervention.

On the other, we’ve seen Pfizer (Dow) making two big acquisition announcements in one week and subsequently making investors nervous.

A little bit of a rally in the US dollar overnight, up 0.2% on its index to 94.78, sent commodity prices into a bit of a tailspin as markets look ahead to tomorrow night’s speech by Janet Yellen at Jackson Hole. The fear is Yellen will use the symposium as the forum to confirm a rate hike. I say fear, because no one really believes she’s going to say anything new. But better to be safe…

Otherwise it was still a case of more of the same as the US reaches the “dog days of summer”, as commentators seem to enjoy saying. Volumes remain thin and volatility low.

Bring on Janet.

Commodities

West Texas crude is down US77c at US$46.80/bbl on last night’s weekly US inventory data, which overwhelmed a suggestion Iran may be prepared to talk production freeze after all. I’ll believe that when I see it.

Base metal prices tumbled in London led by nickel, down 3%, with copper and aluminium each falling 1.5%.

Iron ore fell US10c to US$61.50/t.

Gold was shaken out of its slumber and fell US$13.10 to US$1323.80/oz.

The Aussie is steady at US$0.7614.

Today

Tonight sees the release of German IFO investor sentiment index for August which should be interesting in the wake of the surprise eurozone PMI result this week.

Wall Street will see durable goods.

Otherwise, yesterday was the biggest day on the local reporting calendar by number of companies and today sees fewer by only a whisker.

Woolworths ((WOW)) is among the bigger names today and is carrying a big short position, along with very heavily shorted Flight Centre ((FLT)). We’ll also see Amcor ((AMC)), Nine Entertainment ((NEC)), Perpetual ((PPT)), Ramsay Health Care ((RHC)) and  South32 ((S32)), along with many, many more.

Rudi should appear on Switzer TV tonight, Sky Business, 7-8pm.
 

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

(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 in the Cockpit 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

article 3 months old

The Overnight Report: Eying The Highs

By Greg Peel

The Dow closed up 17 points or 0.1% while the S&P gained 0.2% to 2186 and the Nasdaq rose 0.3%.

Surprise Surge

Now where did that come from? There we were, happily cruising along sideways in the local market as share price responses to the beats and misses of earnings reports largely cancelled each other out. Then suddenly the index is up almost 60 points.

We faded to the close for only a 38 point gain but still we bucked the trend of the month of very low market volatility masking plenty of movement in individual stocks. I’d like to say the gain was all about a day when all the earnings reports lined up together to spark share price jumps but that was not the case.

On the upside, we did see some positive moves from the reporters on the day such as Charter Hall Group ((CHC)), Virtus Health ((VRT)) and Vocus Communications ((VOC)) but at the top of the leader board were stocks having already reported over recent sessions, including IPH, Bellamy’s, Whitehaven Coal and BlueScope Steel.

On the downside, the biggest loser on the day was Monadelphous ((MND)) with an 18% plunge, which dragged down energy services peer WorleyParsons ((WOR)) by 6% ahead of its own result today. Also high on the loser board were previous reporters Bapcor, Cover-More and aged care names Japara and Estia.

So it was still very much a cancel-out day as far as earnings were involved. Yet if we look at the sector moves, they line up fairly evenly to the upside other than energy, which suffered from the lower oil price. The banks rose 0.9%, despite nothing new. Healthcare rose 1.0% thanks to some buying in heavyweight CSL. A 0.9% gain for the telcos included buying in Telstra. All the big caps, it seems, copped a bid.

Someone was executing a Buy Australia trade. At least that’s my assessment.

The index futures are pointing to another decent opening today, but overnight we did actually have some positive macro influences to play off. And one London broker’s upgrade to Glencore and peer BHP Billiton ((BHP)) should also provide a boost.

Otherwise, today is the biggest day of this result season in terms of number of companies reporting.

Shrugged Off

There were grave fears for a struggling European economy when the UK surprisingly voted to jump ship. Last night a flash estimate of eurozone composite (manufacturing and services) PMI for August suggested a level of 53.3, up from 53.2 in July, being the month in which the Brexit vote was held.

While a 0.1 gain is hardly shooting the lights out, the point is economists had forecast a drop in the gauge on the assumption Brexit would have impacted on business and consumer confidence. The PMI helped boost European stock markets, sending Germany up 0.9% and France up 0.7%, while the UK market rose 0.6% in sympathy.

The Dow subsequently opened up almost a hundred points from the bell, before quietly fading as the day progressed. A similar flash PMI estimate for the US was not quite as flash, but that didn’t matter as Wall Street cheered on new home sales.

Sales of new homes in the US jumped 12.4% in July to be 31% higher than a year ago, marking their highest level in eight years. Eight years ago the US housing bubble was about to burst.

Thriving new home sales is great news for an economy as domestically-focused as the US. Aside from the implications for builders, new homes mean a flow-on into sales of furniture and appliances and everything else one fills a house with. Indeed, the Australian market has been witnessing exactly that for the past few years.

Of course, strong US economic data also brings the elephant back into the room. We might consider Wall Street’s all-day drift off from the opening peak to reflect Fed rate rise speculation. The Nasdaq moved into new blue sky territory before closing under, and the S&P500 went very close before slipping away. The Dow remains around a hundred points shy of its recent all-time high.

There is unlikely to be too much speculation regarding Fed policy for the rest of the week given Janet Yellen will speak in Jackson Hole on Friday and then presumably more will be known. Otherwise, why is she there?

Mind you, it would be classic Yellen to turn up and say absolutely nothing of substance.

Commodities

West Texas crude was up around a percent during last night’s session in the new October delivery contract which does rather support my suggestion yesterday that Monday night’s drop was simply an expiry thing. WTI has since faded nonetheless to be up US16c at US$47.57/bbl.

The positive eurozone news did little to fire up London metal markets. Zinc jumped 1% but copper fell 1% and the others moved little in either direction.

Iron ore rose US50c to US$61.60/t.

The US dollar index is flat at 94.55 and gold is just a tad lower at US$1336.90/oz.

The Aussie is 0.3% lower at US$0.7612.

Today

Tonight Wall Street will see whether existing home sales can match new home sales but before that we’ll see Australian June quarter construction work done.

And then there are all those reporters.

They include Blackmores ((BKL)), Boral ((BLD)), MG Unit Trust ((MGC)) (aka Murray Goulburn, that’ll be interesting), Qantas ((QAN)), Qube ((QUB)), Spotless ((SPO)), Wesfarmers ((WES)) Westfield ((WFD)) and the aforementioned WorleyParsons, among many, many more.

Also note Telstra ((TLS)) goes ex today.
 

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

(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 in the Cockpit 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.

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article 3 months old

The Overnight Report: I’m Going To Jackson

By Greg Peel

The Dow closed down 23 points or 0.1% while the S&P fell a point to 2182 and the Nasdaq rose 0.1%.

Over-Valuation

I noted yesterday that to date in the local reporting season, broker ratings downgrades in response to earnings results have been outstripping upgrades by two to one while earnings beats are ahead of misses by (as of Friday’s results) 43% to 28%. The underlying theme is one of stocks that have simply run too far.

Enter APN Outdoor ((APO)). This stock has doubled in value over the course of twelve months, supported by positive analyst views on the growth available for digital outdoor advertising. Well, yesterday APN missed, and its shares plummeted 35%.

When your share price is overinflated you cannot afford to miss. APN’s partner in crime in the space with the ridiculous name ((OML)) dropped 15% in sympathy ahead of its result today.

By contrast, if you’ve been a serial disappointer who just can’t seem to catch a break, leading to shareholders giving up on you, then a return to form with an earnings beat will be well rewarded. Enter GWA Group ((GWA)), distributor of kitchen and bathroom fittings and garage doors, which enjoyed a 15% pop in its share price yesterday.

These were the standout individual results in another session yesterday that featured no macro theme, and really no sector themes either. The resources sectors were mostly responsible for the index finishing lower, with ongoing selling in Santos ((STO)) most notable.

And there would have been a few heads being scratched given a weak day for the materials sector included a 2.3% fall for Fortescue Metals ((FMG)). Twiggy completely knocked it out of the park, yet the stock price fell in response. See: APN Outdoor.

Another popular theme of late has been aged care. There have been some ups and downs in this sector amongst the recent newcomers and yesterday Japara Healthcare ((JHC)) suffered a down with its result, sending its shares -9% and dragging peer Estia Health ((EHE)) down -5% with it.

The next three days see more companies reporting than on any other day of this results season. No doubt there will be more stories to tell tomorrow.

Oil Slips

The annual Jackson Hole gathering of Fedheads and invited central bank types never used to draw much attention until then Fed chairman Ben Bernanke started using the symposium as the forum for unofficially announcing his various QE programs post-GFC. Once they were up and running, Bernanke stopped attending, and in her first year in the chair Janet Yellen gave it a miss as well.

But this year Yellen is attending. The assumption, given recent history, is that the Fed chair would not bother attending unless he/she actually has something important to say. Yellen will not be speaking until Friday, so Wall Street has a whole week to speculate about just what might be in store and reason not to do anything too dramatic on the trading front until more is known.

And reason to stay on the beach. The new week has started as it left off – thin volumes, low volatility, and a general lack of interest.

The only real interest last night was in the oil market. After rebounding solidly for seven sessions straight on the possibility of a Saudi production freeze, sending Brent back up over US$50/bbl and WTI not far off it, oil prices fell by 3% last night.

Fundamentally, there are signs of improving production out of the likes of Iraq and Nigeria. Technically, to see some selling after such a sharp rise is hardly surprising. But at the end of the day, we can probably put this slip down mostly to the fact the September delivery contract in WTI expired last night and tomorrow October will be the new front month.

So commentators are blaming oil for the Dow being lower last night but let’s face it, earlier this year a 3% drop in oil would have been worth at least a hundred Dow points to the downside, but these days traders just shrug.

Commodities

West Texas crude is down US$1.48 at US$47.05/bbl on expiry and Brent is down US$1.67 at US$49.16/bbl.

The US dollar index is flat this morning at 94.50 but it was a weak night in London for base metal prices, with copper and nickel down 1% and lead down 1.5%.

Iron ore rose US10c to US$61.10/t.

Gold is relatively steady at US$1338.60/oz.

The Aussie is also steady at US$0.7632.

Today

The SPI Overnight closed up 3 points.

Shopping centre REIT Scentre Group ((SCG)) is the big cap name reporting today while Oil Search ((OSH)) will wrap up results for the big gas producers. Otherwise today’s reporters represent a spread of diversified smaller names including energy sector service providers, retailers, REITs, telcos, Caltex ((CTX)), and the aforementioned other outdoor advertising company.

Things that make you go ooh.
 

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

(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 in the Cockpit 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.

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article 3 months old

The Monday Report

By Greg Peel

More of the Same

Behind the scenes of Friday’s modest gain for the ASX200 we saw the same alpha impact of winners and losers among stocks posting earnings results which to a great extent cancelled each other out. The bulk of the ultimate gain was provided by materials (+1.2%), telcos (+1.1%) and utilities (+1.8%), the latter featuring a solid report from DUET Group ((DUE)).

For materials, a significant influence is BHP Billiton ((BHP)) which continues to see buying post-result on the belief the worst is now behind the company, Samarco notwithstanding. Buying in the yield stocks also likely reflects an assumption the Fed will not be raising in September.

Among other reporters, sector heavyweight Woodside Petroleum ((WPL)) rose over 1% following its result while Santos ((STO)) went the other way in falling 2% and Origin Energy ((ORG)) saw ongoing selling, leading energy to a net -0.6% to post the only sector fall of the session.

Standout winners elsewhere included Cleanaway Waste Management ((CWY)) and Tassal Group ((TGR)) while among the losers were Medibank Private ((MPL)) and Mantra Group ((MTR)).

It was another relatively quiet session on Wall Street on Friday night and with the index futures showing down 6 points this morning, we’re no doubt in for another day of sole focus on company reports.

We are now three weeks into the August reporting season with one and a half weeks to go. Yet to date only a third of the companies covered by brokers on the FNArena database have reported and the vast bulk of the remaining two-thirds will report between now and Friday. Suffice to say, it will be a busy week.

One third in, beats are running at 36% and misses at 25% and ratings downgrades from brokers are outpacing upgrades by 2 to 1. We have to go back to the February 2015 season to find a similar breakdown – back then beats totalled 36% and misses 26% and downgrades outnumbered 3 to 1. In both cases the overriding theme was not one of poor performance but one of share price over-valuation.

In April 2015, the ASX200 peaked at 6000. In February this year it reached 4800. You have been warned.

Mind you, over the course of February 2015 the index rallied 6%. Over August 2016, the index has gone nowhere.

More of the Same

At least the local market has earnings season to focus on. With the US earnings season now all but over, Wall Street has nothing to focus on.

Friday night did see another Fedhead talk up a possible Fed rate hike and that’s likely why the Dow was down a hundred points early in the session. Overall, Wall Street is affording little credence to Fedspeak and as such Wall Street closed mildly lower on the session, likely reflecting no more than a typical Friday square-up.

The Dow closed down 45 points or 0.2% while the S&P lost 0.1% to 2183 and the Nasdaq was flat.

There is nonetheless a reasonable amount of economic data due this week for Wall Street to contemplate and at week’s end, the infamous Jackson Hole symposium will feature a speech from Janet Yellen. This gathering of central bankers in recent years provided the unofficial announcements of Ben Bernanke’s various QE programs.

Commodities

West Texas crude ticked up another US19c to US$48.52 on Friday night and talk now is of 50 being regained. The recent bounce has been all about speculation Saudi Arabia may be able to put together an agreement on a production freeze and the relevant OPEC meeting is still a month off, so there is time.

No one really believes a freeze will happen.

The US dollar index was up 0.3% to 94.50 and nickel was the only base metal not to post a fall in London, albeit no move exceeded -1%.

Iron ore rose US20c to US$61.00/t.

Having spent the week grafting incrementally higher, gold fell US$11.00 to US$1341,10/oz.

The Aussie saw a welcome drop of 0.7% to US$0.7634 by Saturday morning but there is growing talk of 80c being retested.

The SPI Overnight closed down 6 points on Saturday morning.

The Week Ahead

US data releases this week include the Chicago Fed national index tonight, the Richmond Fed index and new home sales tomorrow and existing home sales and FHFA house prices on Wednesday. Thursday it’s durable goods and on Friday it’s consumer sentiment alongside the first revision of June quarter GDP and Yellen’s speech at the Hole.

We’ll also see flash estimates of manufacturing PMIs for Japan, the eurozone and US across the week and Germany’s IFO business sentiment index will be closely watched on Thursday.

The only Australian data release of note this week is June quarter construction work done, due on Wednesday, which reminds us our own June quarter GDP result is due in a couple of weeks.

Otherwise, it’s all about earnings.

Today’s highlights include BlueScope Steel ((BSL)), Fortescue Metals ((FMG)) and Seek ((SEK)). There are simply too many companies reporting this week to highlight a full week’s results.

Please refer to the FNArena calendar (link below).

Rudi will appear on Sky Business on Tuesday, via Skype-link to discuss broker calls at 11.15am, then again on Thursday between 7-8pm for the Switzer Report and a third time, again via Skype-link, on Friday around 11.05am.

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

(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)

For further global economic release dates and local company events please refer to the FNArena Calendar.

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

article 3 months old

The Overnight Report: Oiled Up

By Greg Peel

The Dow closed up 23 points or 0.1% while the S&P gained 0.2% to 2187 and the Nasdaq rose 0.2%.

Amped Down

To date the local earnings season has featured plenty of ups and downs among individual reporting stocks that have largely netted out to leave the ASX200 in sideways mode. Yesterday we saw more downs than ups, or more specifically, more influential downs than ups, to provide a 0.5% index drop.

AMP ((AMP)) posted a miss that largely came down to weakness in its wealth protection business – a business also conducted by the banks. We thus saw AMP shares down 5% and a flow-through to general financials sector softness in falling 0.9% and proving a major drag on the index.

Heathcare heavyweight CSL ((CSL)) saw ongoing selling following its miss on Wednesday, falling another 3%, While Primary Health Care ((PRY)), having jumped up following its release on Wednesday, jumped straight back down again by 5% yesterday to help take that sector down 1.9%.

This harks back to what I was saying yesterday – first responses to result announcements are not always definitive indicators. And on that point I note Domino’s Pizza ((DMP)) was back amongst the losers yesterday in falling 4%. Down, up, down -- the market really cannot come to a conclusion on that company.

Consumer discretionary fell 0.5% yesterday but it was a very mixed bag for a very diverse sector. Treasury Wine Estates ((TWE)) won the day with an 11% gain for example, and auto parts dealer BapCor ((BAP)), formerly Burson, jumped 6%.

It was left to the resource sectors and consumer staples to provide some offset yesterday, given the telcos and utilities saw a return to weakness.

Speaking of weakness, the monthly Australian jobs lottery surprised as usual yesterday, not because the ABS website managed to stay up for the release but because 26,200 jobs were added in July when 10,000 were forecast. The unemployment rate ticked down to 5.7%.

Oh no, there goes the rate cut, said forex traders, and the Aussie duly shot up over 77c. However, the breakdown revealed 45,400 full time jobs were actually lost during the month, offset by the addition of 71,600 part time jobs. “Underemployment” is the new buzz word. There are plenty of people who would dearly like to work more hours, and the preponderance of part time-only work is why Australia’s wage growth is currently so anaemic.

So as you were, no reason to see the RBA changing its mind on the strength of this particular jobs report. The Aussie subsequently dropped back below 77 before running into US dollar weakness overnight, and is currently up 0.4% over 24 hours at US$0.7685.

It was likely the misleading jobs report that sparked selling in the yield sectors yesterday.

Another Shrimp?

The nightmare of any overnight reporter is that nothing actually happens, leaving nothing to report. Wall Street is offering up just that scenario at present. The US indices bungled a long last night in thin trade once again, reminding us that August in the US is January in Australia and everyone’s having a barbie after a dip rather than trading stocks.

We did see WalMart (Dow), the world’s largest retailer, post a surprisingly good result and oil prices continued to run higher. Brent rose 2% to surge through the US$50/bbl mark while WTI closed some of the gap with a 3% gain to over 48.

And Fedspeak raised its increasingly ugly head again. Following on from no less than three Fedheads suggesting this week a rate hike is either likely or at least needed, St Louis Fed president James Bullard, he of “new regime” fame, last night reiterated his prediction that there won’t be a rate hike until 2018.

What is an investor to think?

Commodities

The US dollar index fell 0.6% to 94.18 last night, probably because the market believes the Bullard camp holds more sway over the FOMC than anyone pushing for a hike. This provided some support for commodity prices.

West Texas crude rose US$1.40 to US$48.34/bbl and Brent rose US$1.07 to US$50.92/bbl.

Aluminium bucked the trend on the LME by falling slightly while the other metals jumped 1-1.5%.

Iron ore fell US30c to US$60.80/t.

Gold continues to graft higher, rising US$3.70 to US$1352.10/oz.

Today

Following yesterday’s local market weakness, the SPI Overnight closed up 15 points or 0.3%.

The index futures are a difficult game to play at the moment nonetheless, given index movements this month have been almost entirely driven by individual company earnings and not by any macro influence. So each day is a bit of a lottery on who might beat and who might miss.

Woodside Petroleum ((WPL)) and Santos ((STO)) are in the frame today, as are Insurance Australia Group ((IAG)), Lend Lease ((LLC)), Medibank Private ((MPL)), and a couple of popular smaller names in the form of Automotive Holdings Group ((AHG)) and Bellamy’s Australia ((BAL)). The latter is quite heavily shorted.

Rudi will appear twice on Sky Business today. First via Skype-link to discuss broker calls, at around 11.05am, and later on Mark Todd's Fixed Interest version of Your Money, Your Call with co-guest Roger Montgomery, 7-8pm.
 

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

(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 in the Cockpit 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

article 3 months old

The Overnight Report: Minutes Of Dispute

By Greg Peel

The Dow closed up 21 points or 0.1% while the S&P gained 0.2% to 2182 and the Nasdaq was flat.

Knee Jerk

Another day, another flat close for the ASX200 belying all that was going on underneath amongst individual stocks. The index did open around 20 points lower but a lot of that was Commonwealth Bank ((CBA)) going ex.

The financials sector was quite the mixed bag yesterday as it contains insurers as well as banks. Take out CBA’s dividend and the banks did well yesterday, but QBE Insurance ((QBE)) disappointed with its result and fell 8%. The sector was down 0.3% on the day.

The hardest hit sector was healthcare, thanks to a miss from market darling and sector heavyweight CSL ((CSL)). It fell 5%. But in contrast, the regulated health care names Sonic ((SHL)) and Primary ((PRY)) both reported well and rose 6% and 2% respectively. The sector fell 1.9%.

The resource sectors were strong again yesterday on higher commodity prices while the consumer sectors also had a solid session and utilities finally found some buyers.

The fact that the index as a whole has barely moved this week, given a lack of macro influence, allows us to witness the machinations of a reporting season in this era of high speed trading. Quant analysts will tell you the response to the result on the day is not as important, ultimately, as where a stock ends up a month later.

Once investors have had a proper chance to dig through the details of a report, and stock analysts have offered their assessments, the concept of headline profit as the immediate gauge can prove misleading. Fully valued Domino’s Pizza ((DMP)) dropped 4% when it reported on Tuesday but rallied 8% yesterday. The market initially saw a miss but analysts liked the numbers.

By contrast, stocks such as Newcrest Mining ((NCM)), G8 Education ((GEM)) and InvoCare ((IVC)) posted weak results which saw falls on the day and further falls since, while Ansell ((ANN)) shot up 18% on the day and has managed to hold onto that gain.

High frequency computers don’t have time to do the analysis when a result release hits the wires. They just respond to headline numbers and trigger words. Those who actually do the analysis, or at least take on board stockbroker analysis, have the chance to decide whether the initial response was justified or not.

Earnings results aside, there actually were some macro data to consider yesterday. It didn’t much impact the stock market but the fact the Aussie is 0.6% lower this morning at US$0.7652 is the result of June quarter wage index showing a mere 0.5% gain. This is in line with expectation but at 2.1% annual, wage growth remains at its slowest pace since numbers began being recorded in 1998.

Forex traders saw the release and immediately said “RBA rate cut”.

You Say Tomato

The Dow was down over 80 points from the open last night but ahead of the release of the July Fed meeting, had rallied back to square. On that release the market initially dropped sharply (computers) before bouncing straight back to a mildly positive close.

The FOMC is split. Some members just want to get on and lift rates while others remain cautious and would rather keep watching for more clues in the data. One gets the feeling they could do this forever. The Big Kahunas in the committee, such as Yellen, are on the dovish side so on the release of the minutes, the Fed funds futures priced in even less of a chance of a September hike and trimmed December’s chance as well.

Wall Street just scratched its head. Is this new era of Fed transparency, such that the world is witness to the internal squabbles, beneficial for markets? Or would we all be better off if the only time we ever heard from the Fed is via the official statement released after each meeting? Oh no, that might spark volatility. But all the Fed is managing to spark at the moment is confusion, frustration and criticism.

Speaking of confusion, the key driver of the US economy is domestic consumption which is why so much attention is paid to retail sales figures and retailer earnings results. Over the past week we’ve seen surprisingly good results from US department stores such as JC Penney, then a weak retail sales numbers after three months of very good numbers, and last night weak results from discount chain Target and hardware chain Lowe’s.

Wall Street is finding it difficult to get a handle on the US consumer.

It’s not hard to get a handle on oil, however. WTI is up another percent and Brent is very close to regaining the US$50/bbl mark. What will happen when Saudi Arabia walks away from next month’s OPEC meeting declaring no agreement?

Commodities

West Texas crude is up US53c at US$46.94/bbl. Brent is up US80c at US$49.85/bbl and the gap again begins to widen.

The US dollar index is flat at 94.73 and base metals played their own games last night. Copper and zinc rose 0.5%, aluminium and lead rose 1.5%, and nickel fell 3%.

Iron ore fell US70c to US$61.10/t.

Gold is relatively steady at US$1348.40/oz.

Today

The SPI Overnight closed up 3 points. Looks like we’re in for yet another day in which full attention will be paid to earnings.

We do, however, have the July jobs numbers out today but as each month passes, the market pays less heed given the volatility and often sheer incredibility of the results. Well, the numbers are delivered by the ABS.

It’s the biggest day yet for the earnings season in terms of volume of reports. Highlights today include AMP ((AMP)), ASX ((ASX)), Brambles ((BXB)), Origin Energy ((ORG)), Whitehaven Coal ((WHC)) and Western Areas ((WSA)).
 

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

(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 in the Cockpit 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

article 3 months old

The Overnight Report: Fedspeak Returns

By Greg Peel

The Dow closed down 84 points or 0.5% while the S&P lost 0.6% to 2178 and the Nasdaq fell 0.7%.

The Big Loser

The mass media, it seemed, was prepared to call a state of emergency last night after BHP Billiton ((BHP)) posted its biggest loss in history and slashed its dividend. Of course the market has had plenty of time to anticipate such a result, and as such BHP shares closed up 0.5% yesterday.

Much was also made of the massive write-down of US shale oil assets bought, it can now be said with hindsight, at the top of the market. It may be the Not-So-Big Australian’s biggest ever loss but it’s certainly not the first time the company has spent big on expansion and subsequently crashed and burned.

Yesterday saw another session in which the macro played very little part, leaving individual stock moves on earnings results to dominate proceedings. Domino’s Pizza ((DMP)) underscored the reality that when you’re priced for perfection, you’ll be punished for falling short. The market sliced 4% off Domino’s but saved the big selling for another popular growth stock, G8 Education ((GEM)). It lost 12%.

InvoCare ((IVC)) is as about as defensive as a stock can be and hence is subject to overpricing in today’s low interest rate world, so no one sent flowers as its shares fell 4%.

On the winners’ side of the ledger, Challenger ((CGF)) showed retirees are prepared to lock in low interest rates for their lifetime and as such its shares rose 1.5%, while apartment builder Mirvac ((MGR)) gained 3% on its earnings beat.

The ASX200 hovered around the flatline for most of yesterday’s session but there was a bit of a stumble when the minutes of the August RBA meeting were released.

“In coming to their policy decision, members noted that the recent CPI data had confirmed that inflation was likely to remain low for some time. They also observed that while prospects for growth were positive, there was room for stronger growth, which could be assisted by lower interest rates.”

This excerpt from the minutes is the nutshell explanation of why the board cut the cash rate to 1.50%. There was nevertheless nothing in the minutes to suggest the RBA will be cutting again in a hurry, nor any suggestion otherwise. Investors in yield stocks were likely hoping for a hint of the next rate cut, and subsequently we saw telcos down 1.1% and utilities down 0.8% in the session.

These were the biggest sector falls on the day, other than consumer discretionary which fell 1.1%. Misses from both Domino’s and G8 had investors reassessing other high-flying names in the sector trading at elevated PEs.

Providing the balance to the upside were the resource sectors, thanks to ongoing oil price strength and a rebound in base metal prices. Energy rose 1.1% and materials 0.8%.

Hawks Fly

A new triple-high for arguably the most unloved bull market in the history of Wall Street will always represent a point at which downside risk becomes elevated, and likely to manifest in the slightest little thing. Of particular note is the fact the consistent leaders in the US market over the course of 2016 have been the yield plays, particularly telcos and utilities.

At historically rich PEs, yield plays are very much open to interest rate scares so when New York Fed president and FOMC member William Dudley said last night said he thinks a September Fed rate hike is a possibility, nervous investors bailed.

Wall Street is relatively inured to Fedheads babbling on and making suggestions that never come to pass, or at the very least are ultimately overridden by queen of the doves, Janet Yellen. But just as oil prices have been rising on the potential no one gives any credit to, of Saudi production cuts, yield stocks fell last night on the potential of a September rate hike no one believes will happen.

Certainly there was nothing in last night’s July CPI release to suggest a rate hike is imminent. The headline CPI rose by only 0.1% to be up a mere 0.8% for the year, still impacted by low oil prices and food deflation. Take these out, and the annual core rate fell to 2.2% from 2.3% in June.

The Fed prefers the PCE measure of inflation to the CPI, but the CPI suggests little inflation-based support for a rate hike nonetheless.

That said, US industrial production rose 0.7% in July to mark its biggest gain in 20 months and housing starts rose by 2.1% to the second highest rate since the GFC.

The drop in yield stocks overwhelmed yet another strong night for the energy sector as the rally in the oil price continued. Another 1.5% gain suggests perhaps the shorts are not yet out of the market. But then there was the small matter of the US dollar to impact on commodity prices last night.

On Fedspeak, stocks fell and bonds rose a couple of basis points but the US dollar index did completely the opposite of what a rate hike suggests in falling 0.9% to 94.79. The reason for the counter-intuitive drop was a sharp rally in the pound.

US inflation may be benign but a surprise jump up in the UK CPI brought into question the scope the BoE may have of further combatting Brexit fallout with monetary easing.

Commodities

West Texas crude is up US70c at US$46.41/bbl.

The US dollar drop provided no support for base metals. Copper stood still again but lead, nickel and zinc all fell close to 1%.

Iron ore rose US$1.80 to US$61.80/t.

The dollar certainly impacted on gold, given it rose US$7.00 to US$1345.60/oz when a rate rise would have it going the other way.

Today

The SPI Overnight closed down 6 points.

Australia’s June quarter wage price index is out today and will be watched closely in the context of possible further RBA rate cuts.

The minutes of the July Fed meeting are out tonight.

Locally, today is the biggest day in the earnings season so far in terms of volume of stocks, and tomorrow will be that much bigger. Highlights today include CSL ((CSL)), QBE Insurance ((QBE)), Stockland ((SGP)) And Health Cares Primary ((PRY)) and Sonic ((SHL)).

Note that Commonwealth Bank ((CBA)) goes ex today.
 

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

(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 in the Cockpit 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