Tag Archives: Currencies

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)).
 

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(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: 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

article 3 months old

The Overnight Report: Another Record

By Greg Peel

The Dow closed up 59 points or 0.3% while the S&P gained 0.3% to 2190 and the Nasdaq added 0.6%.

Earnings Driven

In the August earnings season of 2015, the ASX200 fell 8.6% across the month. In the February season before that, the index rose 6.1%. In February this year, the index netted a 2.5% fall but that included a big commodity price-based drop and bounce mid-month. In each case, macro factors impacted on the market’s beta – its movement as a whole.

In this August season, the market as a whole is going nowhere much, as international markets also largely stall. What this means, unlike recent prior seasons, is that earnings results can be clearly reflected in stock price movements on alpha, or individual, stock risk without the overriding macro, or beta movement. Yesterday was a clear example.

The index did little, recovering from a slight dip in the morning to post a slight gain on the close. But under the surface sector moves were more notable, thanks to individual stock moves in those sectors. In short: the beats and misses.

Ansell ((ANN)) was the big winner on the day, rising 18% after posting a “less bad” result and announcing it might toss off its condom business. Short positions had been building in Ansell ahead of the season, and for reasons which continue to confound, JB Hi-FI ((JBH)) has always been popular with the shorters. Yet virtually every season the electronics retailer beats, and yesterday was another win which saw JB shares up 10%.

Packaging company Orora ((ORA)) has been a popular defensive plodder for investor portfolios this year but it still managed a 10% gain on the day. On the other side of the ledger, coal hauler Aurizon missed and suffered a 6% fall, and while Newcrest’s ((NCM)) numbers were not so bad, gold stocks have been bought up in a frenzy this year to stretched valuations. Its shares fell 4%.

Adding to the mix was National Bank ((NAB)), which provided a reasonable quarterly update that had its shares up 1%.

So we don’t need to look far to understand why the big sector movers yesterday were healthcare, up 0.5%, consumer discretionary, up 0.8% and the banks up 0.6%, with materials down 1.5%, and industrials little changed on the balance. We also saw some support returning for two sectors lately sold off to provide rotation funding – telcos and utilities.

On the assumption there are no left of field impacts on global markets for the next two weeks, and that’s always a big assumption to make, the season will continue in the same vein. The difference from here on in is the number of companies reporting each day will grow larger and larger, making it more of a task to unscramble the movements.

Hi, Hi, Hi

A second triple-high for all of the Dow, S&P and Nasdaq within two sessions of the first in sixteen years is a bit like winning the silver, but still more exciting than following Australia’s Olympic campaign. The way things are going these records will become routine, as there seems no reason for Wall Street to go down in any meaningful way at present.

And that’s a fact traders, investors and commentators reluctantly admit. You’d think they’d be thrilled, but they know it’s all just smoke and mirrors. Stock markets have turned into bond markets, offering more investment yield than long term government debt, because central banks across the globe have orchestrated such an investment environment.

It is not how it’s meant to be.

In the meantime, there’s no point in “fighting the tape”. The VIX volatility index suggests a high level of complacency, and that has traders worried. But with central bank safety nets in place, what’s there to worry about? Perhaps the time to worry will be when global economic growth starts to fade away completely, and central banks realise there is no more they can do.

Tech stocks continue to be a significant leader on Wall Street, and here we’re talking both old and new. Developments in areas like the cloud and Big Data, electric cars and the Internet of Things are 21st century growth stories changing the landscape. Meanwhile, 20th century pioneers like Microsoft, Apple and IBM are also in the game as they reinvent themselves.

Oil is a very old story on Wall Street but no less fresh today. The oil price rose another 2% last night, providing extra impetus to hit those new highs. Apparently the Russians are now in the game, reporting to Saudi newspaper they are prepared to talk production cuts. Still no one believes it, but still no one wants to be caught the day there really is a wolf.

Last night’s US data highlight was the housing market sentiment index, which rose to a comfortable 60 (50 neutral) to beat expectations. Housing is as significant and underlying economic driver in the US as it is in Australia at present.

All up it was another summer-quiet session on Wall Street, and another grinding gain. In two weeks we enter September, historically the worst month for stock market performance, followed by October, historically the scariest.

Commodities

West Texas crude is up US$1.02 to US$45.71/bbl.

After some big falls on Friday night, base metals staged a comeback of sorts last night. Nickel rebounded 2.5% and zinc 1%, while aluminium rose 1% and lead 1.5%. Copper stood still.

Iron ore fell US20c to US$60.00/t.

Gold rose US$2.90 to US$1338.60/oz.

Currency was not in play last night, with the US dollar index largely flat at 95.61. Yet the Aussie is up 0.3% at US$0.7674.

Today

The SPI Overnight closed up 8 points.

The minutes of the August RBA meeting will be released today.

In the eurozone, the ZEW survey will provide an indication of investor sentiment a month after the Brexit result.

The Fed will be talked about again on Wall Street tonight as US numbers for CPI, industrial production and housing starts are released.

On the local stock front, the number of earnings reports will grow today. The highlight is BHP Billiton ((BHP)) but that report is not actually due until 6pm to tie in with London investors.

During the session downunder, Challenger ((CGF)), Domino’s Pizza ((DMP)), G8 Education ((GEM)) Mirvac ((MGR)), and Scentre Group ((SCG)) are among the crowd today.

Rudi will Skype-link up with Sky Business today to chat about broker calls, at around 11.15am.
 

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: Oil Reversal

By Greg Peel

The Dow closed up 117 points or 0.6% while the S&P rose 0.5% to 2185 and the Nasdaq gained 0.5%.

Phone Home

We don’t have to look far to see why the ASX200 closed down 35 points yesterday. The big movers to the downside were telcos and banks.

Telstra ((TLS)) posted a disappointing result and an undercooked dividend increase, sending its shares down 1.6% and the telco sector down 1.3%. Westpac provided a soft quarterly update which renewed the pressure on all bank stocks, sending that index down 1.2%.

Energy was weaker on the fall in the oil price but that will likely reverse with interest today. Materials were also weaker but that includes Rio Tinto going ex.

Elsewhere we saw another 1.1% fall for utilities matched out by a 1.2% gain in consumer discretionary – the rotation trade out of expensive yield and into growth. We must remember that the discretionary sector covers a wide range of companies, not just traditional shop-front retailers. There’s pizza, there’s car parts, there’s classifieds, hotels and vitamin tablets, to name a few.

We also recall that investors shifted into banks early in the week on a good result from Bendelaide and a positive update from ANZ, assuming all boats would float. We’ve since seen a so-so result from CBA and a soft update from Westpac, thus the market has shifted back out again.

We can also note from a technical perspective that while the index traded as low as 5483 yesterday, it closed a little above 5500. We like round numbers. If we can see 5600 reached in the near term the technicals remain bullish. This morning the futures are suggesting we should recover yesterday’s losses but next week will be telling as the earnings season significantly steps up the pace.

Triple Header

All of the Dow, S&P and Nasdaq closed at new all-time highs last night. It has taken until 2016 for the Nasdaq to regain its prior all-time high posted in 2000, just ahead of the tech-wreck. Therefore while it has been common in recent years to see the Dow and S&P both hit new highs in a session, last night was the first time since 1999 all three major indices achieved the feat simultaneously.

There were two major drivers for last night’s strength on Wall Street. The first was a big move up in the consumer discretionary sector, which has distinct importance in America’s consumer-driven economy.

Department store Macy’s posted an earnings beat which took the market by surprise, but the main reason the stock jumped 17% in the session was the announcement Macy’s would close 100 stores across the country. Finally, investors concluded, the old world retailers are realising floor space is but a cost-drag in the online world. Rival Kohls also posted an earnings beat, and its shares jumped 18%.

The other major driver was the oil price, which having fallen on Wednesday night on announced record Saudi production, rebounded over 4% as the shorts scrambled to cover. As to whether such cover is necessary is nevertheless debatable.

I noted yesterday, “OPEC will be meeting shortly for the usual charade of talking production cuts, but it is unlikely Saudi Arabia will do anything other than stay the course”. Well whaddya know, last night the Saudis indicated that in the unofficial OPEC production meeting set for September (the next official one would be December), Saudi Arabia would be open to discussions about production freezes.

They must all fall about over in Riyadh every time they pull this stunt and the oil price stages a Pavlovian surge. OPEC will meet, Iran, if it attends, will say “we’re not freezing” and thus the Saudis will say “well we’re not freezing either”. Then everyone will go home.

But on the Nymex, it would seem it’s safer to be square than caught out.

While such a sharp reversal for oil was interesting last night, it was also interesting to see the US dollar index jump back up 0.4% to 95.93, having fallen on Wednesday night, and the US ten-year yield jump back up 6 basis points to 1.57%, having fallen on Wednesday night. Unusually, stocks are leading bonds on Wall Street at present, traders have noted.

Commodities

West Texas crude is up US$1.92 or 4.6% at US$43.45/bbl.

It was a mixed bag in London, with aluminium, copper and lead all rising 0.5% while zinc fell 0.5% and nickel fell 1%.

Iron ore fell US$1.10 to US$59.60/t.

On dollar strength, gold is down US$7.50 at US$1338.30/oz.

The Aussie is a tad lower and sitting smack on US$0.77.

Today

The SPI Overnight closed up 33 points or 0.6%.

Following the strong department store numbers overnight, Wall Street will be looking tonight to see whether this is matched in July retail sales figures.

Ahead of that release we see a data dump from China today, featuring July retail sales, industrial production and fixed asset investment numbers.

James Hardie ((JHX)) is among those reporting earnings today while Suncorp ((SUN)) will go ex.
 

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: Oil Pressure

By Greg Peel

The Dow closed down 37 points or 0.2% while the S&P lost 0.3% to 2175 and the Nasdaq fell 0.4%.

More Alpha

Once again no lead from offshore, so once again the opportunity for the local market to focus solely on earnings results yesterday. The biggie was of course Commonwealth Bank ((CBA)).

CBA was always at risk of a sell-off on any result that was not a clear beat given bank stocks had been bought up in prior sessions thanks to positive numbers out of Bendigo & Adelaide and ANZ. As it was, CBA’s result was solid enough but the shares copped a 1.3% drop. The bank sector as a whole nevertheless fell only 0.2%.

The big sector mover on the day was little info tech, which rose 3.7% thanks to a good result from its dominant component Computershare ((CPU)). Its shares jumped 9%. And it was clear the market was ready to buy up healthcare favourite Cochlear ((COH)) on any dip in price. Having initially dropped on its result the day before, Cochlear rose 7.6% and the healthcare sector gained 1.4%.

These two sectors balanced out falls across the board otherwise, although the index did manage to turn around from an ominous 30 point loss late morning to post a fairly benign close.

With Australia’s economic transition currently hinged very much on the housing market, yesterday’s June housing finance numbers were a positive influence. Total lending rose 2.3% in the month, reflecting the impact of the May RBA rate cut. The balance retained the prevailing trend nonetheless – loans to owner occupiers rose and are higher over a year and loans to investors rose but are 13% lower over a year.

Glenn Stevens was likely comfortable with the figures, but was probably polishing his nine iron as the data hit the screen. The outgoing RBA governor took the opportunity of his final public speech yesterday to drop the usual vague central bank rhetoric and tell it like it is.

The more central banks throw stimulus at an economy, the less effective each incremental action becomes, Stevens said (I’m paraphrasing). Don’t think the Australian economy can simply be supported by further rate cuts. It is time (indeed it’s long been time) for the government to play its fiscal part.

The government, or any Australian government, is terrified of increasing the budget deficit, so Glenn is of course talking to a brick wall. Borrowing rates have never been so low in history. But heaven forbid, Australia might lose its AAA rating were it to borrow further to provide economic stimulus. And we can’t afford to do that, because then it would cost more to borrow. The confounded logic of this argument I find exquisite.

Defiant Saudis

Venezuela – an OPEC member currently on its economic knees – has called for oil production cuts. Saudi Arabia, the world’s biggest producer, posted record production in July. OPEC will be meeting shortly for the usual charade of talking production cuts, but it is unlikely Saudi Arabia will do anything other than stay the course.

Weekly US oil inventories also came in higher than expected last night so the WTI crude price is down 2.9%. The US energy sector was a leader on the downside last night. The other downside leader was financials.

Prior to the release of the weak US June quarter GDP number, a regular auction of US Treasuries saw surprisingly little demand. The market, globally, had decided a Fed rate hike was not too far off. Last night’s auction of US ten-years, on the other hand, saw a stampede of demand, mostly from offshore, being central banks, sovereign wealth funds and and big pension funds.

The world has now decided there won’t be a Fed rate hike anytime soon. US markets knew that already, but it didn’t stop the US ten-year yield falling 4 basis points to 1.51 and the US dollar index dropping 0.5% to 95.60. No rate hikes means no joy for US banks, so they were sold off.

Otherwise Wall Street remained resilient once more. Discretionary retailers were in the frame on the earnings front last night, but results were both good and bad among them.

Prior to the strong US jobs number for July, the S&P500 had been stuck in a range of 2165-75 for an historical length of time. The jobs number sparked a step-jump before Wall Street stalled once more. Last night’s selling took the S&P back to 2175, which now becomes the bottom of the range.

Commodities

West Texas crude is down US$1.22 at US$41.53/bbl, defying the support otherwise offered by the drop in the greenback, suggesting the fall could have been even more significant.

The dollar drop provided some support for base metal prices in London but while all moves were positive, none exceeded 1%.

Iron ore fell US70c to US$60.70/t.

A half percent drop in the dollar is positive for gold, which rose US$5.20 to US$1345.80/oz.

The dollar fall was matched by a 0.5% rise in the Aussie to US$0.7709.

Today

The SPI Overnight closed down 5 points.

The RBNZ this morning again cut its cash rate, by 25bps to 2.00%. No surprises there.

Another benign offering from offshore suggests another day of concentrating on earnings results in the local market today, with the exception of the weaker oil price and the impact that will have on the local energy sector.

Today’s reporters include Telstra ((TLS)) and Goodman Group ((GMG)) among some smaller names. James Hardie ((JHX)) will hold its AGM.

And note Rio Tinto ((RIO)) goes ex-dividend today, which will impact the materials sector’s apparent move.

Rudi will be interviewed on Switzer TV between 7-8pm tonight, on Sky Business.
 

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: Going Nowhere

By Greg Peel

Alpha

It seemed like a quiet session in the local market yesterday as the index grafted slowly to a small gain following no real lead from offshore and minimal change in commodity prices. As calm descends on offshore markets, the local market is able to focus more specifically on earnings season.

The result is a lot going on under the surface of the index move, within sectors and individual stocks – the latter known as “alpha” movement which is not related to the market as a whole. Here there were some noteworthy moves yesterday.

Following on from Bendigo & Adelaide Bank’s ((BEN)) well-received profit result on Monday, yesterday ANZ Bank ((ANZ)) provided a quarterly update that was also well-received, mostly as it appears the bank may not be forced to raise new capital. Again all the banks were sought after, to provide a 1% gain for the financials sector and the bulk of index upside.

I have highlighted an apparent theme lately of rotating out of expensive defensives and into cheaper cyclicals, but perhaps this theme is a more simple one of rotating out of anything expensive into anything cheap. As market commentators have observed, results in line with expectation are evoking selling in a stock while even not so good results are encouraging buying as long as that stock was considered cheap beforehand.

The banks are a case in point – neither Bendelaide’s nor ANZ’s reports were anything to be too excited about, but buying has followed. Fund manager IOOF Holdings ((IFL)) copped a 7% trashing for a benign result, while market darlings in utilities and healthcare – Transurban ((TCL)) and Cochlear ((COH)), also saw selling following their results.

Sector moves were therefore a bit of a mish-mash yesterday. The result season is very much in its infancy, so really the games have only just begun. Woe betide any expensive stock that posts a miss.

And returning to the “China? Who Cares?” theme, yesterday we saw the Chinese headline CPI come in at a 1.8% annual rate for July, representing the third straight month of easing inflation. The PPI fell 1.7% to continue its unbroken four-year deflation trajectory, although the pace of deflation appears now to be slowing.

While slowing Chinese inflation should be bad news from an economic perspective, the fact it provides scope for further PBoC action is the countering good news.

Unproductive

Last night saw the release of June quarter productivity numbers in the US. Productivity (GDP per man hours worked) fell 0.5% when a 0.3% gain was expected.

This represents not only a big surprise, but the third straight quarter of productivity reductions. The only times a three-quarter decline has been booked in recent decades were in recessions. There are plenty of economists who have been warning for a while that the US is at risk of falling into recession.

The very weak June quarter GDP result gave weight to such an argument, and now this productivity number has provided a red flag. It is anticipated the relatively strong run of jobs numbers is soon to come to an end.

But does Wall Street care? Clearly not. If jobs numbers start to fade and/or the US falls into recession, there will be no Fed rate hike. And perhaps, if the situation warrants, QE will be reintroduced. The downside, therefore, is limited. And the need for yield is further underscored.

Markets that can’t seem to go up will typically go down instead. However this is not the case on Wall Street at the moment. Rather, the market has gone up and everyone’s happy for now, leaving volumes to drop away during the holiday period. It is not advisable to sell into a market when no one’s around.  A market rising on low volatility is considered bullish, despite being boring.

Commodities

There was not much going on in commodity markets last night either.

Base metal price moves were again mixed and minimal.

Iron ore is unchanged at US$61.40/t.

West Texas crude is down US10c to US$42.75/bbl.

The US dollar index is down 0.3% at 96.10 and gold is up US$5.60 at US$1340.60/oz.

The Aussie is up 0.2% at US$0.7668.

Today

The SPI Overnight closed up 10 points or 0.2%.

Westpac will release its monthly consumer confidence survey today while June housing finance numbers are also due. RBA governor Glenn Stevens will be making a speech today.

The biggest stock on the market will release its earnings result today, being Commonwealth Bank ((CBA)). The banks have seen some buying these past couple of days so CBA will not want to disappoint.

AGL Energy ((AGL)), Fairfax Media ((FXJ)) and OZ Minerals ((OZL)) are among others reporting today.
 

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article 3 months old

The Overnight Report: And Pause

By Greg Peel

The Dow closed down 14 points or 0.1% while the S&P fell 0.1% to 2180 and the Nasdaq lost 0.2%.

Step-Jump

It was actually a very dull day on the local bourse yesterday. The index opened up 40-odd points and that was the end of that. Among the sectors, yesterday’s 40 point rally for the ASX200 looked very similar to Friday’s 20 point gain. Again we saw cyclicals in favour and defensives not so.

Energy was again the winner on the day with a 1.5% gain despite only a slight tick up in the oil price, while materials traded off a big jump in the iron ore price against a big drop in the gold price to rise 0.7%. Telcos were again sold off and utilities slightly, while consumer staples managed only a minimal gain as consumer discretionary jumped a further 0.9%.

The most notable sector on the day was financials, which as I have oft suggested straddle the line between defensive (yield) and cyclical (economic growth). A 1.1% jump was largely due to a surprisingly good result from Bendigo & Adelaide Bank ((BEN)) despite a further squeeze on margins. Bendelaide rose 4% and provided impetus for gains amongst the Big Four as well.

ANZ Bank ((ANZ)) will provide a trading update today and Commonwealth Bank ((CBA)) will publish its profit result tomorrow.

We can put the rally on the day down to the solid US jobs number, and its implications for an improving US economy. But does China’s economy not matter to us anymore? Yesterday Beijing published weak trade data for July and the Australian market shrugged.

Imports to China fell 4.4% year on year in July when a 3% fall was forecast, marking 21 consecutive months of declines. Exports from China fell 12.5% when a 7% fall was forecast, marking twelve months of declines in thirteen.

The data suggest China’s economy continues to slow. Once upon a time the Australian market would have reacted poorly to such numbers, but now we seem to take it in our stride. Why? Well, central banks again. Weaker data simply reinforce the assumption the PBoC and the Chinese government will up the ante on monetary and fiscal stimulus.

At 5537, the ASX200 is still 50 points shy of the end-July high which was followed by a sudden plunge at the start of August when, among other things, the oil price looked to have broken down. Another 2% jump for oil overnight suggests that was just a mirage, and the futures are suggesting further gains for the index today.

Summer Returns

Having recovered from the Brexit scare, Wall Street proceeded to spend a long period in the doldrums just under fresh highs as it traded sideways for a couple of weeks. While the extent of the tight range broke records, traders were not too surprised given it is the height of summer in the US and participation is at a low ebb.

We then saw the brief oil scare followed by Friday night’s rally on strong jobs numbers. Having set new highs, last night Wall Street went back to the beach.

With the earnings season now tailing off and another month’s job numbers in the bag, Wall Street is bereft of further impetus. Traders continue to point to a historically long period without any decent sized pullback which suggests, given new highs, that one must soon be nigh, but this is now a long held assumption with so far no result.

Traders thus concede it is the TINA factor preventing meaningful downside. Yes, stocks might be on the expensive side, particularly where yield is the attraction, but in the unprecedented low interest rate world there is no alternative investment and historical comparisons of PE have to be rethought.

So the general feeling is the market will probably finish the year higher than it is now. We have to get through the historically volatile months of September and October nonetheless, and maybe, just maybe, that’s when the pullback will finally materialise. But there is still plenty of cash on the sidelines, and traders are only praying for a pullback so they can pick up favoured stocks at more attractive prices.

Another constant talking point is the VIX volatility index, the one month benchmark measure for which is sitting at the very low end of its range. This suggests complacency via a lack of demand for put option protection. The contrarian trade is to sell when the market reaches its greatest level of complacency. The VIX is currently at 11.5 and a level of 10.5 is considered the trigger point for this play.

Commodities

If they were yawning on Wall Street they were seriously nodding off on the LME last night. Base metal price movements were all positive but minimal.

There was more excitement on the Nymex as West Texas crude rose US88c to US$42.85/bbl.

Iron ore rose US70c to US$61.40/t.

The US dollar index ticked up 0.1% to 96.34 and gold is steady, after Friday’s night’s drop, at US$1335.00/oz.

Forex was another market to ignore weak Chinese data yesterday given the Aussie is up another 0.5% at US$0.7654. Glenn must be looking forward to passing the baton on that little “complication”.

Today

The SPI Overnight closed up 11 points or 0.2%.

China will release July inflation data today and locally, NAB’s monthly business confidence survey is due – the first to really have taken in the new gridlock parliament.

ANZ will provide an update today as noted and on the earnings front, we have reports due today from Cochlear ((COH)), Carsales.com ((CAR)), REA Group ((REA)), IOOF Holdings ((IFL)) and Transurban ((TCL)) among others.
 

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

Rotation

5500 has become the new barrier for the ASX200 as the local market continues to show signs of wanting to push higher. On Friday, a steady morning rally took the index up 37 points to 5512 but a drift-back in the afternoon meant a close of only up 21, at 5497.

There was, of course, Friday night’s US jobs report to consider and it was a Friday, so no doubt there was some typical squaring up ahead of the weekend.

Looking at the sector moves however, Friday’s action screamed rotation. The best performing sectors were energy, up 1.1% on a small move up in the oil price, Materials, up 1.7% despite lower metals prices, and consumer discretionary, up 0.7% having been sold down over the week.

The only sectors to post losses were utilities, telcos and consumer staples, while all other sectors posted small gains. This sector spread screams rotation, from defensives to cyclicals. This is not the first time we’ve seen such action in the local market lately and often the defensives come roaring back, but at elevated levels, we may be reaching the point where reliable yield is just too expensive.

If cyclicals are now going to take the baton, they’ll still need some incentive to do so. Results season will provide some individual direction.

Good is Good

The US added 255,000 jobs in July, seasonally adjusted, smashing expectations of 180,000. The unemployment rate was unchanged at 4.9% despite an increase in the participation rate, suggesting those coming back to look for work found it. Wages increased by a healthy 0.3%.

It was the jobs report of an economy in good shape. But in the upside-down world in which we currently reside, tipping what Wall Street’s response to the report might be is not straightforward. Stocks could have risen on the good news is good news assumption or fallen on the good news is bad news assumption of a Fed rate rise being back on the cards. Either response was going to be explainable.

As it was, Wall Street liked it. The Dow closed up 191 points or 0.1%, the S&P rose 0.9% to a new all-time high 2182 and the Nasdaq also reached a new all-time high in gaining 1.1%.

Perhaps the reason why Wall Street chose “good news is good news” over “good news is bad news” is evident in the move in the Fed funds futures, which is cited as representing the chance of a Fed rate rise. The chance of a September hike moved up to a mere 18% from 9%, while December rose to 46% from 32%.

Great jobs report or not, virtually no one is expecting a September rate rise. And even December is yet to reach a 50/50 bet. Aside from all other data, there will be another jobs report before the September meeting. The general belief is that the US economy is beginning to look healthier – certainly healthy enough to justify a rate rise – but that the Fed will simply remain too timid to do so.

There is also the matter of what other central banks are up to. The BoE just delivered a substantial easing. The BoJ disappointed but eased further nevertheless. The RBA cut its rate. China is pursuing various measures. Around the globe, major economies are in easing mode. That, by default, is as good as a Fed rate rise.

And there’s the matter of the US dollar. It jumped 0.5% on Friday night to take its index to 96.24. A rising dollar will dampen the still “modest” US recovery. The Fed should not, by rights, pay attention to exchange rates but in the increasingly “globalised” world, of course it does.

The chance of a September rate rise may still be low but other markets were making adjustments on Friday night. Aside from the stronger greenback, the US ten-year bond yield rose 8 basis points to 1.58% and gold fell US$25.00 to US$1335.40/oz.

With the US results season now in its tail end, and everyone happy that was another not-as-bad-as-feared quarter, attention will now once again shift to central banks and economic data.

Commodities

A strong US jobs number also creates a push-pull for commodity prices. Gold aside, given its not a commodity per se, a healthy US economy is good for commodities but the stronger greenback offsets.

On Friday night we saw West Texas crude up US16c to US$41.97/bbl.

Nickel and zinc rose 0.5% and aluminium 1.5% while copper fell 1% and lead 0.5%.

Iron ore jumped US$2.00 to US$60.70/t.

Alas, despite the stronger greenback, the Aussie is only 0.1% weaker at US$0.7618.

The Week Ahead

The SPI Overnight closed up 31 points or 0.6%.

China will be back in the frame this week. Today sees July trade numbers, Tuesday inflation and Friday the monthly dump of industrial production, retail sales and fixed asset investment data.

On the central bank rounds, it’s over to the RBNZ to cut its rate on Thursday, as is expected.

It’s a quiet week for data in the US until week’s end. Tuesday sees June quarter productivity ahead of Friday’s retail sales, inventories, PPI and consumer sentiment.

In Australia we’ll see ANZ job ads today, NAB business confidence on Tuesday and Westpac consumer confidence on Wednesday. Wednesday also brings the critical monthly housing finance numbers.

The local results season steps up a gear this week.

Highlights will come from among the banks, with Bendigo & Adelaide ((BEN)) reporting today and Commonwealth Bank ((CBA)) on Wednesday, with ANZ Bank ((ANZ) offering a quarterly update tomorrow.

Classifieds will also feature, thanks to reports from Carsales.com ((CAR)) and REA Group ((REA)) tomorrow and Fairfax Media ((FXJ)) on Wednesday.

Other results of interest among the many this week include Transurban ((TCL)) and Cochlear ((COH)) tomorrow, OZ Minerals ((OZL)) and AGL Energy ((AGL)) on Wednesday and Goodman Group ((GMG)) and Telstra ((TLS)) on Thursday.

Rudi is attending and presenting at the AIA National Conference this week and will appear on Sky Business on Thursday between 7-8pm for the Switzer Report and again on Friday, through Skype-link, at around 11.05am to discuss broker calls.
 

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

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article 3 months old

The Overnight Report: Awaiting Jobs

By Greg Peel

The Dow closed down 2 points while the S&P closed flat at 2164 and the Nasdaq rose 0.1%.

Dead Cat

Yesterday saw yet another session on the local market in which the index took off sharply in one direction on the opening rotation, only to reverse steadily throughout the day. Yesterday the ASX200 shot up 44 points from the open before managing a mere 10 point gain by the close.

It seems the computers decided early that all would be forgiven following Wednesday’s steep falls and we’d be back on track towards the highs once more, but investors had other ideas. It is interesting to note, as revealed in yesterday’s Short Report, that the prior rally up to 5600 featured widespread reductions in short positions across the market, suggesting once the nervous shorters were cleaned out, there was no real reason to be there.

Hence we saw the plunge on Wednesday to more realistic valuations and hence yesterday’s attempts at a rapid reversal were thwarted. The futures are stronger again this morning but it would appear, as results season begins to unfold, the market is where it wants to be.

The bulk of the index gain yesterday came down to a 2% jump for energy following oil’s recovery off the US$40/bbl mark. Volatility ensures energy could just as easily be down by as much in coming sessions. Healthcare was the big underperformer yesterday, falling 1.2% as investors took profits on CSL ((CSL)) in particular. Having been slammed these past few sessions, consumer discretionary managed a 0.4% gain.

Which was counter to the data released yesterday. Consumer staples also rose 0.5% despite June retail sales managing only a 0.1% gain to take annual growth down to a tepid 2.8%.

The result provides justification for the RBA’s rate cut decision but there is nevertheless a misleading element to the low number. Low dollar value of sales is a result of two main factors – very low wages growth and discounting. But given low wages growth, consumers are benefitting from discount wars as an offset, particularly in supermarkets.

There was also good news among the data yesterday, with figures showing inbound tourism to Australia is up a significant 12% year to date. The number of Chinese tourists reached an all-time high. Presumably the number of Poms amidst that total will start to decline given the drop in the pound but hey, who are we to complain?

Fight them on the beaches

Markets were set for an expected rate cut from the Bank of England last night but there was still some nervousness that guvna Mark Carney would not act, having declined to do so at the last meeting immediately after the Brexit vote. As it was, the opposite proved true.

Not only did Carney cut the BoE cash rate for the first time in seven years, to 0.25% from 0.50%, representing the lowest level since 1694, he expanded the bank’s government bond purchase program (QE) and introduced corporate bond purchases as well. And he also introduced an exemption for banks on a long criticised reserve requirement that effectively amounts to double-counting of safe assets.

The extent of the package surprised markets. The FTSE jumped 1.6%, the pound fell once more, and the UK ten-year yield fell to an historically low 0.6%. The German equivalent fell further into the negative and the US equivalent fell 4 basis points to 1.50%.

Wall Street rose from the open on the news but quickly fell again, before posting a very typical pre jobs reports, middle of summer session. Ostensibly no one was quite inspired to do anything much.

Commentators agree that if tonight’s jobs number comes in close to expected, around about 160-180,000, not a lot will happen then either. The number will have to be either as shockingly low as the May number or as surprisingly high as the June number to spark a reaction, and even then, another wild number is going to leave Wall Street doubting the veracity of the data.

Commodities

The drop in the pound saw the US dollar index up 0.3% to 95.81 but unfortunately on the cross-rates, the Aussie is up 0.5% at US$0.7627. It’s all very well to cut the cash rate, but the impact is lost if everyone else does too.

Strength in the greenback helped base metal prices lower, with all of aluminium, copper and nickel falling over 1%.

Iron ore fell US$1.80 to US$58.90/t.

West Texas crude ignored the dollar, and rose US66c to US$41.81/bbl.

Given QE in any major economy is supportive of gold, it also ignored the dollar in moving slightly higher to US$1360.40/oz.

Today

The SPI Overnight closed up 17 points or 0.3%.

The RBA will issue a quarterly Statement on Monetary Policy today, ahead of tonight’s US jobs report.

Capilano Honey ((CZZ)) may buzz in with an earnings report today although I have conflicting dates from different brokers.

Rudi will link up with Sky Business at around 11.05am, through Skype, to discuss broker calls.
 

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: Fightback

By Greg Peel

The Dow closed up 41 points or 0.2% while the S&P gained 0.3% to 2163 and the Nasdaq added 0.4%.

Bashed

Well the pitchforks are certainly raised and blood is being spat. It was heartening to see respected CLSA bank analyst Brian Johnson on the ABC news last night pointing out that what may be lost on the mortgage swings of less-than-the-RBA rate cuts has been gained on the retiree roundabout of increased term deposit rates. But who’s going to listen?

Retiree enclaves don’t win elections, mortgage belts do. So we’ll overlook the retirees and just go for the politically popular with the great unwashed. Bash, bash, bash. If capitalism isn’t working, perhaps the government could re-nationalise CBA. And on the former RBA governor’s not unreasonable call to investigate bank funds management divisions, he may be proved redundant. Analysts suspect the banks will be looking to offload these divisions in their desperate attempts to meet stricter capital requirements in the low growth environment.

The 2% fall in the financials sector yesterday provided the bulk of the index plunge. We can cite several reasons for bank selling – they were bought up ahead of the rate cut, their mortgage “repricing” measures are insufficient to overcome margin pressure, European banks posted some woeful results the night before, and the pitchforks are out.

Thereafter, the biggest falls were posted by the other sectors that were heavily bought ahead of the rate cut – consumer discretionary and utilities. Lesser falls were posted elsewhere and the resource sectors proved largely resilient.

It was somewhat of a capitulation trade, and as I suggested yesterday, it’s not unhealthy ahead of reporting season proper to rebase below inflated levels that might otherwise have led to small “misses” on earnings leading to panic stock-dumping. The trend, according to the chartists, remains bullish. There may also have been some fear yesterday that Wall Street’s apparent breakdown the night before might be the start of something bigger. Last night’s trade suggests otherwise, and the local futures are looking positive this morning.

Just a Blip

On Tuesday night the S&P broke down from its lengthy 2165-75 trading range which technically seemed onerous but in summer-thin, lackadaisical Wall Street trade in which central banks provide the safety net, not fundamentally significant. Suffice to say, the S&P is back at 2163 this morning and the Dow has reversed a seven-day losing streak.

Oil had a lot to do with it, or more specifically, gasoline. The weekly US inventory numbers came out last night and showed less of a build in gasoline stocks than was feared, hence WTI crude rebounded 3.6% with a bit of help, one assumes, from short-covering.

There was also mildly positive news on the data front, with ADP’s private sector jobs report showing a better than forecast 179,000 additions. Wall Street is pencilling in 185,000 for Friday night’s non-farm payrolls. We do need to bear in mind, however, that (a) the ADP report has a poor correlation record and (b) economists have been way off the mark with their forecasts these past couple of months.

A result of 185,000 would be fair to muddling – enough to restore some hope in the US economy following the weak GDP report but not enough to reignite Fed rate hike fears. On that subject, two Fedheads last night individually suggested at least one rate hike is still possible for 2016, although one is hard pressed to find anyone on Wall Street agreeing.

But if it is another number closer to 300k than 200k, as it was in June, there could be some mild panic. The ADP number was nevertheless enough to send the US dollar index up 0.5% overnight and force some consolidation in gold, which is down five bucks.

Aside from Friday night’s US jobs report, markets are looking to tonight’s Bank of England meeting. Immediately after the surprise Brexit vote result the BoE assured a rate cut would follow if necessary, but at the subsequent scheduled meeting the BoE did nothing. The post-Brexit bounce allowed more time to assess the issue.

The governor did, nonetheless, hint a rate cut was probably still likely, and that’s what the market has priced in for tonight. Volatility may transpire if one is not forthcoming.

Commodities

West Texas crude is up US$1.43 at US$41.15/bbl.

Base metals continue to move back and forth but aren’t making any headway. Only lead posted a move in excess of 1% last night, to the downside, while the others posted gains.

Iron ore is unchanged at US$60.70/t.

Gold is down US$5.10 at US$1357.70/oz, with the US dollar index up 0.5% at 95.53.

The Aussie is down 0.2% at US$0.7588.

Today

The SPI Overnight closed up 27 points or 0.5%.

Rio Tinto ((RIO)) reported after the bell last night and while in the interim the media has made much of the 50% profit decline, the result met expectations.

Earnings reports are due today from Downer EDI ((DOW)), Suncorp ((SUN)) and Tabcorp ((TAH)), among others.

June retail sales numbers are out locally today and tonight the focus will be on the BoE.

Rudi will make his weekly appearance on Sky Business 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.

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