Tag Archives: Europe & UK

article 3 months old

The Overnight Report: Happy Birthday Mister President

By Greg Peel

Wall Street was closed last night for the Presidents’ Day holiday.

Local Bounce

Despite signs of near term overvaluation, the Australian market seems in no mood to go down, recovering yesterday from a late morning dip. It is of little surprise the ASX200 was trimmed by 36 points before lunchtime given Friday’s 130 point surge, but the buyers just weren’t having it.

Energy (+0.9%) and materials (+0.5%) again led the charge while utilities (-0.9%) took a hit for the yield stocks for a close of up 11 points.

Japan Disappoints

After two consecutive quarters of economic contraction, Japan’s GDP grew by an annual rate of 2.2% in the December quarter to drag the country out of recession. This seems like a good result, except that economists were forecasting 3.6%.

The big “miss” underscores the conundrum facing Shinzo Abe, being how to tackle Japan’s mountainous debt while still providing economic stimulus. It’s the sort of stuff that keeps Joe Hockey awake at night. The Bank of Japan is pumping trillions of yen into the Japanese economy yet the fiscal drag from last year’s sales tax hike – the measure imposed to allow for debt reduction – still lingers as the hike’s anniversary approaches. Abe had planned for another hike this April but last year scrapped that idea.

Still, the big drop in the yen over 2014 has served to boost Japanese exports, particularly to the world’s largest consumer economy, the US. But aside from being caught between a fiscal rock and a monetary hard place, Japan also has to deal with the global “race to the bottom” of monetary policy in which “beggar they neighbour” tactics cancel out the benefits of currency devaluation.

It is for this reason the RBA has been forced to cut, and will probably have to cut again.

Beware of Greeks

On February 28, Greece’s E240bn bail-out program will end. The bail-out program to date has come with the imposition of strict austerity measures as a cost. Greece is near broke and needs to extend the bail-out but the new government wants to lift the austerity measures which are preventing any possibility of a Greek economic recovery. Three words come to mind here: eat, cake and too.

The EU finance ministers gathered in Brussels last night for meetings intended to thrash out a solution. Were the EU to refuse to provide concessions and cut Greece loose, the risk is the collapse of Greece’s banks and financial reverberations throughout Europe and the global market, perhaps even contagion that spreads to other struggling eurozone economies.

Were the EU to bow to Greece and water down its austerity requirements while still handing out the euros, the rest of southern Europe would be queuing up for their own concessions and more governments would likely fall to anti-austerity parties, right up to France.

Good luck ministers.

Oh and how’s the ceasefire coming along?

Quiet Markets

With Wall Street closed and China winding down it was quiet across financial markets last night.

The oils, for once, were as good as unchanged. West Texas is trading electronically at US$52.70/bbl and Brent, which only trades electronically, is at US$61.58/bbl.

Base metals all moved less than 1% on the LME, in either direction, with copper up 0.6%.

But hold the phone. With only one more session of trade before the Chinese bundy off, iron ore is up US$1.80 to US$65.10/t.

The US dollar index is up 0.3% to 94.37 on yen weakness while gold is relatively steady at US$1230.80/oz. The Aussie is also steady at US$0.7772.

Today

The SPI Overnight closed up 11 points or 0.2%.

The minutes of this month’s RBA meeting are due out today. They will explain why the central bank chose to cut its cash rate when six months ago many an economist was convinced we’d be going up by now. And the market will be looking closely for clues as to whether the RBA might go it again next month.

The influential ZEW investor sentiment index is out in Europe tonight while Wall Street will be back to assess housing market sentiment and the Empire State manufacturing index.

The US earnings season is winding down but the local season is winding up. Today’s raft of reports include those from Amcor ((AMC)), Coca-Cola Amatil ((CCL)) and Fortescue Metals ((FMG)) while ANZ Bank ((ANZ)) and Macquarie Group ((MQG)) will provide trading updates. Commonwealth Bank ((CBA)) goes ex today so don’t panic when a big share price drop seems apparent.
 

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

By Greg Peel

Local Flyer

“So we have oil up, base metals up, iron ore up, and Wall Street up. How will we fare today?” I asked in Friday’s Overnight Report. 134 points later I had my answer. Energy and materials each up 4%, banks, industrials and the telco each up 2%, and otherwise consistent green on screen. Quite a session.

The Aussie also jumped on the day, before falling back again afterward. This might imply some foreign buying being unleashed on Friday in a blanket Buy Australia trade. But the question now is: have we gotten a bit ahead of ourselves?

From a stock analyst standpoint, that’s a conclusion we may be able to draw from the earnings season to date. Of around 400 stocks covered by FNArena database brokers (not all of which report on a February-August cycle), 54 have posted earnings results, hence we’ve only just begun. But the early stats are interesting, as evident in FNArena’s Reporting Season Monitor.

Of those 54 companies, 28 have beaten estimates and only 9 have missed, which is a much higher beat ratio than previous seasons (so far). But the response from analysts has been to upgrade their Buy-Hold-Sell ratings in only 5 cases, while on the other hand downgrading their ratings in no less than 32 cases. That is one hell of a bias. The great majority of the downgrades reflect perceived overvaluation.

We are now entering the bulk of the reporting season this next two weeks, so it will be interesting to see if this theme continues.

Hail Germany

Friday night saw the release of the first estimate of eurozone December quarter GDP. It rose 0.3% from the previous quarter, beating expectations of 0.2%, to provide 1.4% annual growth in 2014. But the heavy lifting was all done by Germany, which saw its annual GDP rise to 1.6% in 2014 from a mere 0.1% in 2014, despite the impact of sanctions against Russia.

France managed only 0.4% annual growth, and some members – Greece, understandably but also Finland, for one – went backwards again. Germany accounted for 30% of output from 18 member countries, which has become 19 in 2015 as Lithuania comes on board. Economists are hoping for further net improvement in the March quarter as lower energy prices assist and ECB stimulus kicks in. Greece, however, may yet upset the apple cart, or at least keep Europeans worrying.

High Tide on Wall Street

Overvaluation is not just a potential issue in Australia, but it is a point of discussion on Wall Street as well. It was a quieter session on Friday night which closed modestly positive, but the S&P500 closed just below its all-time intraday high. The Dow is back over the 18k mark for the first time in 2015, having closed up 46 points or 0.3%, while the S&P rose 0.4% to 2096 and a 0.8% gain for the Nasdaq took the tech-heavy index to a new post tech-wreck high. The small cap Russell 2000 also posted a new all-time record.

Wall Street ignored a drop in the fortnightly Michigan Uni consumer sentiment index. It fell to 93.6 from 98.1 at end-January to mark a three month low. However, given January’s result was an 11-year high, and petrol prices have bounced back a little this month, traders were unperturbed.

Oil Rigged

The wild ride that is the rebound in oil prices continued on Friday night, with prices closing at their highest level in 2015. A report suggested the oil and gas rig count has fallen by 406 rigs to 1368 over twelve months to a five-year low. West Texas rose US$1.22 to US$52.68/bbl while Brent rolled over into the new March delivery front month, and jumped US$2.17 to US$61.44.

Have we seen the last of oil in the forties? Some commentators are not so certain.

Base metals were quiet on Friday night ahead of the Chinese New Year break beginning on Wednesday. Only tin moved the dial much with a 1% gain. The US dollar index was flat on Friday at 94.12 but gold managed to add US$5.40 to US$1228.20/oz.

Iron ore rose US50c to US$63.30/t.

On Saturday morning the Aussie was up 0.3% at US$0.7765 over 24 hours, having traded close to 78 during Friday’s stock market buying spree.

It’s also worth noting that a 3 basis point rise in the US ten-year bond yield has now returned the global benchmark to above 2%.

The ever exuberant SPI Overnight closed up 32 points or 0.6% on Saturday morning.

The Week Ahead

It’s Presidents’ Day in the US tonight and all markets are closed.

Japan will release its first estimate of December quarter GDP today before the Bank of Japan holds a policy meeting on Wednesday.

China will shut down on Wednesday for a week.

The eurozone will see trade data tonight, along with the important ZEW investor sentiment index and a consumer confidence measure during the week ahead of a flash reading of February PMIs on Friday.

The US will return from its long weekend to see housing sentiment and the Empire State manufacturing index on Tuesday, housing starts, industrial production, the PPI and the minutes of the last Fed meeting on Wednesday, and the Philly Fed manufacturing index and a flash manufacturing PMI on Thursday.

The minutes of the RBA’s rate-cut meeting will be out tomorrow and the market will be scouring for signs another cut might be forthcoming as soon as March. But in Australia, the big focus this week, and next, will be the bulk of the earnings result season.

The calendar is absolutely choc-a-bloc these next two weeks so strap in, and there are way too many reports due to justify noting any highlights. Please refer to the FNArena calendar.

Rudi will appear on Sky Business on Thursday at noon this week.
 

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

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

The eurozone will report its first estimate of December quarter GDP tonight ahead of a long weekend for the US, with markets closed on Monday night for Presidents’ Day.

Next week will no doubt bring further fluctuations in the Greek saga and oil prices and the world will be watching to see just how long the latest ceasefire in Ukraine will hold, if at all.

Next week will also see China depart for the week-long New Year break beginning on Wednesday. The annual disruption begins.

Japan will release its first estimate of December quarter GDP on Monday, ahead of a BoJ policy meeting on Wednesday. The first ZEW investor sentiment survey for the eurozone post-ECB stimulus will be published next week, as will a flash estimate of zone PMIs for February.

Once returned from the long weekend, the US will see housing sentiment and starts, industrial production, PPI, leading economic indicators, a flash manufacturing PMI estimate, the Empire State and Philly Fed manufacturing indices and the minutes of the last Fed meeting.

The minutes of this month’s RBA meeting are due on Tuesday and markets will be looking for clues as to whether the central bank might follow up with another immediate cut.

The stock market will take centre stage nonetheless, as the earnings season shifts into top gear for the remainder of the month. Anything could happen and probably will. There are far too many companies reporting to bother offering highlights, so readers are referred 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.

article 3 months old

The Overnight Report: Putin On A Show

By Greg Peel

The Dow rose 110 points or 0.6% while the S&P gained 1.0% to 2088 as the Nasdaq jumped 1.2%.

Jobs Scare

Bit of déjà vu yesterday as Australia’s unemployment rate was revealed to have pole-vaulted to 6.4% in January from 6.1% in December on the mere net loss of 12,200 jobs and an unchanged 64.8% participation rate. December’s result was revised up to an addition of 42,300 jobs.

Hmmm.

The ABS has had several months to get its act together and it’s all we’ve got to go on, so if this result is accurate then the RBA’s expectation of the unemployment rate creeping up to 6.5% by mid-2016 – a forecast justifying this month’s rate cut – seems way off the mark. We could be there next month. As such, CBA is among those economists now assuming another rate cut is inevitable in March, and maybe yet another as soon as May as well.

For the record, last night Sweden cut its cash rate from zero to minus 0.1%.

The stock market appeared yesterday to take on a more sombre mood, looking to the economic implications of rising unemployment rather than the benefits another rate cut might bring. We must remember that while everyone might get excited about rate cuts, particularly those up to their gills in mortgage repayments, they reflect a slowing overall economy.

But we’re also into the thick of result season now and that means a lot more “alpha” movement – individual stock prices moving on result numbers and perhaps affecting whole sectors – alongside “beta” movement – general market sentiment based on global macro developments and what’s going on in the US, China and so forth.

Euro Jumps

The latest Greek news for today (yawn, oh excuse me) is that the ECB has raised the limit on the amount Greece can borrow through the central bank’s Emergency Liquidity Assistance program. This no doubt reflects that fact that as the stand-off between the new government and its creditors drags on, Greece is fast running out of money.

Last night’s eurozone industrial production result for December did not provide a lot of comfort, being unchanged from November after three months of encouraging growth. Over 2014, production contracted 0.2%.

But the Greek news was enough to send the euro higher against the greenback and we can also throw in the marathon talks in Minsk between the leaders of Russia, Ukraine, Germany and France which have resulted in a ceasefire being called in eastern Ukraine.

Seen that movie before. Give it a week.

Either way, the US dollar index fell a significant 0.9% overnight to 94.10, on strength in the euro and also on weak US retail sales data.

Wall Street

US retail sales fell 0.8% in January having fallen 0.9% in December. To gain a true perspective we have to extract the 9.3% plunge in gas station sales, reflecting the drop in oil prices, but that still leaves January flat on December.

Commentators have been assuming since last year that the fall in the oil price will provide a big boost for US consumer spending. With regard the official retail sales number, presumably this would imply flat results as the fall in gas station sales is offset by a rise in spending elsewhere. But this is yet proving elusive.

Wall Street nonetheless shrugged off the weak data and cited the Ukraine ceasefire and subsequent bounce in the price of oil as reason enough to send the indices almost back to their record high levels. The Nasdaq also provided an updraft for the broad index following a strong earnings result from Cisco and the relentless charge of the world’s largest company, Apple.

Commodities Bounce

Oil price movements are becoming almost as tedious as Greek news given the crazy day to day fluctuations on the slightest little thing. Last night both oils rose almost 5% with West Texas up US$2.38 to US$51.46/bbl and Brent up US$2.62 to US$57.41/bbl.

On the LME they were also citing the ceasefire, and the latest Greek news, as reason to buy the metals they’ve been selling all week. Throw in the drop in the US dollar, which also provided a fillip for oil, and we saw all metals higher including 2% moves for copper, lead and tin.

Gold did not participate on the dollar drop, as it is steady at US$1222.80/oz. The Aussie kicked up 0.4% however, to US$0.7746.

Today

So we have oil up, base metals up, iron ore up, and Wall Street up. How will we fare today? The SPI Overnight closed up 30 points or 0.5%.

Glenn Stevens will provide a mandatory testimony to a parliamentary committee today to speak to last week’s RBA quarterly Statement on Monetary Policy. Tonight the first estimate of eurozone December quarter GDP will be released, while the US will gauge consumer sentiment in the wake of the weak retail sales number via the fortnightly Michigan Uni survey.

Newcrest Mining ((NCM)) will provide the highlight of today’s handful of local earnings reports.

Oh dear, take a look at the calendar. Be afraid.

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: Endless Greece

By Greg Peel

The Dow closed down 6 points while the S&P was flat at 2068 and the Nasdaq added 0.3%.

Blood in the Pit

A pullback has been inevitable for the ASX200 ever since the index posted a 12-day rally but yesterday’s selling was concentrated in specific sectors, leading to a mixed bag of sector moves. The latest drop in the oil price saw energy down 2.4%, and concerns over an ever-weakening Chinese economy had materials down 1.3%, but the big move was a 3.9% fall in healthcare thanks to a weak results report from top-ten market cap member and market darling CSL ((CSL)), which fell 8%.

By contrast, utilities rose 2.3% and even consumer discretionary saw some buying.

It may have been a down-day on the index but while the US stock market has trod water in 2015 – the Dow is about breakeven for the year – the local index is up 6.6% since the end of 2014 despite the damage experienced in the resource sectors. Of course the US indices are way above their old pre-GFC highs now while the ASX200 is still over 1000 points shy, but a good start to the year has fed into consumer confidence.

Throw in cheaper petrol prices, and the RBA’s first rate cut in over a year, and we’ve had the perfect recipe for a surge in sentiment. And surge it did in Westpac’s February survey, up 8% to the highest level since January 2014, when the market was still strangely excited about a bloke called Tony Abbott.

The local housing market also boomed in December, adding to the general wellbeing. The annualised numbers in December give us the 2014 score card, which saw the volume of loans to owner-occupiers rise 4.1%, the value of those loans rise 10.6%, the value of loans to property investors rise 17.9%, and the value of loans to builders rise 9.8%.

No wonder analysts are suggesting the market is underestimating the housing recovery.

Greek Merry-Go-Round

Up, down, up, down, or more realistically, round and round. Each day this week has seen US stocks markets either rise or fall depending on the latest fluctuating news from Europe, and last night began as another down-session. Tuesday’s rumour that Greece could be granted a six-month extension to its bail-out program has been summarily dismissed, and now the eurozone finance ministers will meet to discuss just what to do with the problem child.

No one can quite determine what the outcome for Greece might be, other than to know that were it not for a tangled web of global debt obligations and derivative hedge positions, Greece’s rope would have been cut long ago.

The US stock indices were nevertheless all over the shop last night, with the Dow down over 100 points at lunch time before rallying back to be briefly in the green. Once again, a drag was provided by lower oil prices.

Wednesdays are weekly inventory reporting days in the US, and last night the EIA confirmed US crude supplies are holding steady at their highest level in 80 years. Perhaps the market is beginning to appreciate that there is a big time lag between a falling rig count and lower immediate supply. West Texas fell US$1.20 to US$49.08/bbl and Brent fell US$1.89 to US$54.79/bbl.

Metals Hammered

Greek fears sent the euro lower last night and thus the US dollar index up by 0.3% to 95.00. The rising greenback is proving too much for gold, which fell US$13.00 to US$1220.40/oz, but is also assisting the Aussie to fall, which is down 0.8% to US$0.7712.

And the greenback continues to apply pressure on base metal prices, but the theme at present on the LME is simply one of selling ahead of next week’s Chinese New Year, which basically sees the world of metals shut down for a week. Copper is slightly lower but aluminium is down 1%, lead 2% and tin 3%.

Iron ore was unchanged at US$62.20/t. The LME will still be open during CNY, but the spot iron ore market will shut up shop.

Today

A flat session on Wall Street has not prevented the SPI Overnight from rising 14 points or 0.2%.

It’s that time of the month when we can all have a giggle over the ABS’ attempts at providing Australian unemployment data.  The eurozone will publish industrial production numbers tonight and the US will be looking for any cheap-oil impact on January retail sales numbers.

Today’s local earnings season highlights include Mirvac Group ((MGR)), Rio Tinto ((RIO)) and Telstra ((TLS)). Many an investor is feeling anxious this morning about just what goodies Rio’s management is prepared to hand out with its result, given the collapsed iron ore price.

Rudi will make an appearance on Sky Business at noon, for Lunch Money, and again between 7-8pm, for Switzer TV.
 

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: Buy It Anyway

By Greg Peel

The Dow closed up 139 points or 0.9% while the S&P gained 1.1% to 2068 as the Nasdaq added 1.3%.

Local Market

Bridge Street again exhibited resilience yesterday as a 30-plus point fall at the depths became only a 14 point fall at the death for the ASX200. Consumer discretionary saw some buying while all other sectors finished mildly down.

Australian average house prices rose by a solid 1.9% in the December quarter. The year on year growth rate of 6.8% is the slowest since June 2013 but bear in mind we’ve since had a rate cut. NAB’s monthly business confidence survey was also conducted pre-cut so a flat reading for “conditions” at plus 2, and a one point tick up for “confidence” to plus 3, are not telling the latest tale.

China Disinflates

The index hit its low-point yesterday after the release of China’s inflation data for January. The annualised headline CPI came in at 0.8% -- down from 1.5% in December, missing forecasts of 1.0%, and representing the lowest level since 2009. The fear now is that China is in a deflationary spiral. This is exactly the same concern markets had for Europe up until the ECB finally called in the cavalry.

Lower prices for oil and other commodities were clearly primary drivers of the weak inflation number, aided by warm weather that has seen fruit & veg and fish prices fall. Food is a significant element of the average Chinese household budget. Beijing doesn’t publish a “core” CPI, ex food & energy, as developed economies do, so price volatility must be taken into account, but either way we can only assume the PBoC will be preparing something more active on the monetary policy front sooner rather than later.

Any Port in a Storm

The Greek drama continues to play out, swinging from hope to despair and back to hope again daily. After the prime minister’s little anti-austerity rant on Monday night, last night the Greek government announced plans to proceed with the privatisation of the Port of Piraeus, the country’s largest port. This is seen as an act of conciliation towards the creditors.

Presumably we’ll soon see the Parthenon in the real estate classifieds. “Spectacular views, old world charm, light and airy” etc.

There was also a rumour the EU was considering giving Greece a six-month debt repayment extension, although this was later denied.

Oil Tanks

Speaking of swinging back and forward, it was a down-day in the volatile oil markets last night, with West Texas falling US$2.59 or almost 5% to US$50.28/bbl and Brent falling US$1.59 or 2.7% to US$56.68/bbl.

Although this is a bit of a headless chook market at present, last night’s supposed impetus was a warning from the US Energy Information Administration that despite falling rig counts, the global supply glut will only get worse before it gets better. Both the EIA and the International Energy Agency are calling oil averaging in the fifties for 2015, but Citi, for one, suggests prices in the twenties may be seen before the average is established.

Your guess…

Wall Street

The oil price fall proved an inevitable drag on US indices but the ebb and flow of Greece fears helped stocks to an up-day in general, albeit many shrug off Greece as background noise given the tiny size of the country’s economy, what there is of it.

Beyond that, the almost forgotten US earnings season continues and after over two-thirds of S&P500 companies have reported, the “beat” ratio is still running at just over 70%. The common themes are cheap energy and the strong dollar, which have boosted/impeded December quarter results.

The dollar index rose last night by 0.2% to 94.72 and the US ten-year yield added another 4 basis points to 1.99%. Gold slipped back US$8.10 to US$1233.40/oz. The Aussie is little changed at US$0.7773.

Metals

LME traders focused on the weak Chinese inflation numbers last night, hot on the heels of the very poor trade data released on the weekend, in selling down all base metals by one to two percent. Trading was light one week out from the Chinese New Year break.

Iron ore rose US60c to US$62.60/t.

Today

The SPI Overnight closed up 24 points or 0.4%.

Japanese markets are closed today but locally we’ll see Westpac’s monthly consumer confidence survey and December housing finance data.

It’s the first big day of the local results season today, with many bigger days to come. Today’s reporters include AGL ((AGL)), Boral ((BLD)), Commonwealth Bank ((CBA)), CSL ((CSL)), Suncorp ((SUN)) and several more.

Rudi will make his regular appearance on Sky Business, 5.30-6.00pm.

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: Greece Lightning

By Greg Peel

The Dow closed down 95 points or 0.5% while the S&P lost 0.4% to 2046 and the Nasdaq fell 0.4%.

Local Resilience

It appeared the local market was finally experiencing a pullback yesterday after a record run when the ASX200 was down 40 points around 2.30pm, but late buying interest and an unusual spike at the death left the index down only 5 points – an end to the streak but hardly “pullback” material.

The numbers would be different if we removed a stand-out 1.9% jump for healthcare, led by Ansell’s ((ANN)) 5.4% surge on the back of its earnings “beat”. But either way, a slight rise for energy and a mere 0.7% fall for materials suggest the market was not too blown away by China’s shocking trade numbers, released over the weekend, which suggested imports of commodities from Australia were down 35% year on year.

Grexit?

Wall Street took on board the weak Chinese data last night as well but most talk was of the unfolding story in Greece. Despite conciliatory murmurings from the Greek finance minister of late, last night the Greek prime minister pledged to undo several austerity measures imposed on Greece by its EU/IMF creditors, suggesting he’s up for a confrontation.

Meeting with President Obama in Washington, Germany’s Chancellor Merkel pointed to the recovery stories in Ireland, Portugal and Spain as a template for the EU/IMF’s strategy and, in not so many words, told Greece “Why can’t you just shut up and get on with it as well?”

There is a difference however, which is that while the likes of Ireland and others were mostly just caught up in the pre-GFC credit boom folly, Greece’s story was all about unadulterated corruption in a country in which few deigned to pay tax. And while two plus years ago global markets were extremely nervous over the potential of a Greek exit from the eurozone, now the fear has largely subsided. Investors have shifted away from any specific risk and with all that is going on in Europe otherwise, particularly QE, a “Grexit” is no longer perceived as a potentially eurozone-destroying outcome.

Indeed, many no doubt just wish the EU would give Greece what it wants and cut it loose. The drachma would be so devalued the world will flock to Greece for cheap island holidays and the Greek economy could be back on its feet before too long. Pander to Greece and it is likely there will be anti-austerity party victories at elections across all of the zone.

Wall Street

China and Greece impacted on US stock markets last night but it was hardly the stuff of panic. Wall Street is still weighing up the impact of Friday night’s strong jobs numbers, which imply a Fed rate rise by mid-year is becoming more and more baked in, and taking note that the Dow rallied around 700 points last week.

Oil prices continued their recovery last night, with West Texas rising another US80c to US$52.87/bbl and Brent rising US14c to US$58.27/bbl. Rising oil has a positive influence on US indices, through the market cap of the large energy sector, but by late afternoon traders were happy to sell and thus the Dow closed near 100 points down.

The strong US dollar is an ongoing subject of discussion as the US earnings season continues to unfold. Few exporting companies have failed to have a whinge about the greenback when speaking to their earnings results. But you can’t have a strong economy and a weak currency at the same time.

The US dollar index slipped last night by 0.2% to 94.52 but the Aussie is also lower, by 0.4% to US$0.7767. See: China. Gold is up US$6.20 to US$1241.50/oz and the US ten-year yield is steady.

Metals

There was very little action on the LME last night, leaving base metal prices barely moved.

Iron ore fell US20c to US$61.60/t.

The SPI Overnight fell 7 points.

Today

Chinese inflation data for January is due out today which, combined with the weak trade numbers, will prompt speculation of further monetary easing in China pronto.

Locally, NAB will release its monthly business confidence survey today and a December quarter house price index will be published.

There are a handful of companies reporting earnings today including Cochlear ((COH)), we hear.
 

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

By Greg Peel

Profit-Taking

The ASX200 finished in the green for the twelfth session in a row on Friday – which just doesn’t happen – despite some inevitable end-of-week profit-taking following such an almighty surge. The index opened up about 40 points to a nice, neat 5850 before falling back to be up only 9 points on the day, despite another 200 point Dow rally.

Sector movements were relatively even in the session, although the telco did cop some selling, and the story of strange bedfellows continued with the two biggest movers being energy and utilities, both up 0.7%.

US Jobs

There was also an incentive to square up locally ahead of Friday night’s all-important jobs report in the US. And oh how Tony and Joe would love a report like this one right now.

The US added 257,000 jobs in January, beating expectations of 230,000, but the big surprise was the extent of upward revisions to the previous two months’ numbers. Post revisions, which included a new result of 423,000 jobs for November, the three months November-December-January saw an average of 336,000 jobs created per month.

The US economy has added in excess of 200,000 jobs per month for twelve straight months, a feat not seen since 1994-95 (albeit the population has grown since).

But even more encouraging was the one element that had been missing during 2014 – wages growth. A lack of wages growth was a factor not missed by the Fed over the year, and cause for the market to suspect the FOMC would hold off its interest rate rise. But after declining in December, the average wage grew by 0.5% in January. The twelve months of 2014 saw net 1.9% growth but the twelve months to January has marked 2.2%. Still below the historical average, but three times the current rate of inflation.

The unemployment rate ticked up to 5.7% from 5.6%, but that’s okay because it represents increased participation.

Greek Downgrade

Suffice to say, Wall Street is back to assuming the Fed will act earlier rather than later on interest rates. No later than June and perhaps before then. Such anticipation was evident in the US bond market on Friday night, which saw the ten-year yield leap 12 basis points to 1.94%.

The US stock market seems now to have overcome its rate rise panic attacks and initially rose on the positive jobs numbers, although it was also a Friday in the US after a week of strong net gains.

Thus an excuse to take some profits was needed, and it came in the form of Standard & Poor’s downgrading Greek sovereign debt to B minus from B with a “negative” watch. "Liquidity constraints have narrowed the timeframe during which Greece's new government can reach an agreement with its official creditors on a financing program, in our view," the rating agency said in a statement. "We believe the potential uncertainties surrounding the timing and success of such an agreement risk exacerbating deposit outflows, depressing investment, and weakening tax compliance."

There remains disagreement on the Greece factor across global markets. There are those who believe a Greek exit, were that to eventuate, would destabilise the whole eurozone and others who suggest it would prove but a minor hiccup. Whatever the case, markets seem to worry about Greece one day and then quickly forget about Greece the next. As suggested, the credit downgrade merely provided Wall Street with a trigger on Friday for some profit-taking.

The Dow closed down 60 points or 0.3% while the S&P lost 0.3% to 2055 and the Nasdaq fell 0.4%.

Greenback Surge

Earlier last week the euro rebounded on the news the Greek finance minister had backed away from a debt write-off. On Friday night the US dollar index surged 1.2% to 94.66 on the jobs numbers but still actually closed slightly lower on the week.

It was enough to spook the gold bugs nonetheless, given gold fell US$29.10 to US$1235.30/oz and made the 1300 mark appear but a distant memory. The Aussie slipped a little to US$0.7799 on Saturday morning but is lower in this morning’s trade.

The strong greenback is not good for base metal prices, but then the US jobs report is a positive. LME traders are looking ahead to the Chinese New Year holiday and prices closed mixed on Friday night, with copper falling 0.8%.

Iron ore rose 70c to US$61.80/t on Friday to finish down US10c for the week.

Oil is playing its own frenetic game at this point so jobs and the US dollar were not as influential as another drop in the US rig count, announced on Friday, and a rejection of the latest peace deal to striking refinery workers. West Texas jumped US$1.53 or 3% to US$52.07/bbl and Brent rose US$1.43 or 2.5% to US$58.13/bbl.

The SPI Overnight closed up 3 points on Saturday morning.

China Slumps

There were positive developments in Europe over the weekend as the leaders of Germany, France and Russia agreed to hold talks over the ongoing Ukraine stand-off, with the suggestion of a demilitarised zone, a la Korea one presumes, being established as a concession. Were a deal to be brokered that would bring an end to sanctions against Russia, European markets would fly.

Meanwhile, China posted its weakest monthly trade numbers since 2009 on the weekend. December’s numbers had shown some promise and economists had forecast export growth of 6.3% in January, year on year, and import growth of 3.0%. As it was, exports fell 3.3% and imports collapsed 19.9%, according to official data.

Sharply lower import volumes of coal, oil and commodities (iron ore in particular, one presumes) were blamed, and of course the prices of all of the above have been very deflated. Imports from Australia fell by 35.3%, which no doubt is why the Aussie is lower this morning.

Economists are always wary, it has to be said, of Chinese numbers either side of the disruptive week-long New Year break. And of Chinese numbers generally, one might add. But this January result is no less than a shocker, and the pressure is now on Beijing to up the ante on monetary easing measures.

The Week Ahead

China will release inflation data tomorrow, which may provide the incentive for further PBoC action.

Europe will be in the frame later in the week when industrial production and trade numbers are provided and on Friday, the first estimate of eurozone December quarter GDP is released. The forecast is for 0.8% annual growth.

US data releases are uneventful up until Thursday, when retail sales and business inventories are released, followed by fortnightly consumer sentiment on Friday.

It’s a busy week in Australia, no matter who is prime minister. We have ANZ job ads today, NAB business sentiment and a December quarter house price index tomorrow, housing finance and Westpac consumer confidence on Wednesday and our own jobs numbers on Thursday.

RBA governor Glenn Stevens will speak at a function today and will speak before a parliamentary committee on Friday as is always the case post the release of a quarterly Statement on Monetary Policy, which we saw on Friday. The statement included a downgrade to Australia’s economic growth forecasts, which was basically flagged in Stevens’ policy statement last Tuesday.

But politics and economies aside, this week sees the local earnings reporting season start to really fire up. The subsequent two weeks see an avalanche of reports. Readers are referred to the FNArena calendar for release dates but be warned, these are not set in stone and as always, three different brokers will give you three different release dates for the same company.

So please accept the calendar is published on a best endeavours basis.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon and again between 7-8pm for the Switzer Report.
 

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

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

US jobs numbers tonight, which will no doubt rekindle the fire of Fed rate rise debate after a brief hiatus of worrying about Europe and oil.

China releases its January trade numbers over the weekend.

Next week China releases inflation data, which will provide insight into the potential for more PBoC easing. It's a quiet week in the US economic data-wise up until Thursday when retail sales and business inventories are released, flowed by fortnightly consumer sentiment on Friday. The end of the week also brings eurozone monthly industrial production and trade data and the first estimate of December quarter GDP.

It's a busy week for Australian data, with ANZ job ads, NAB business and Westpac consumer confidence all due, along with housing finance and our own jobs numbers on Thursday. If good, Joe Hockey will put it down to the government's moves to reign in the budget. If bad, it will be the previous Labor government's fault.

The highlight from next week in Australia will nevertheless be the step-up in activity in the local six-monthly result season. It's been a trickle up to now but next week sees a shift into a much higher gear as the results begin to come thick and fast.

The last two weeks of the month see an avalanche.

For all result release dates please refer to the FNArena calendar (link above). A warning though, companies are not legally obliged to publish or stick to a release date and three different broker calendars will give you three different dates for several stocks. So FNArena's calendar represents a best endeavours effort.


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.

article 3 months old

The Overnight Report: Damn The Torpedoes

By Greg Peel

The Dow rose 211 points or 1.2% while the S&P gained 1.0% to 2062 and the Nasdaq added 1.0%.

Local Strength

You can’t keep a good market down, not when global demand for yield remains elevated. Yesterday the ASX200 overcame a 2.0% fall in energy and 0.8% fall in materials to rise a net 0.6%, driven by the banks (+1.4%) and the telco (+1.1%). Consumer discretionary still managed to gain 0.9% despite a soft December retail sales number.

Retail sales grew a mere 0.2% in the Christmas month, to mark 4.1% growth in 2014. Confidence remained subdued heading into Christmas, forcing retailers to yet again discount their wares in order to move them. Thus volume growth was reasonable, but revenue growth was not. Retailers are nevertheless more confident heading into 2015 given the flow-through to the pump of lower oil prices (household and transport costs reduced) and this month’s rate cut.

EU Upgrades Growth

The current trend around the world is to ease monetary policy in a self-feeding race to the bottom (Denmark cut its rate again for the fourth time in a month last night, into negative) but the UK is sitting on the US side of the ledger, with markets having spent a lot of 2014 pondering whether the Bank of England might tighten. The UK economy has been a strong performer, in relative terms, ever since the London Olympics.

But last night the BoE elected to retain its 0.5% cash rate, for the 71st consecutive month, and leave its QE program unchanged. Will the Fed also extend its patience?

The euro rebounded last night as fears began to ease once more over Greece. The ECB decision not to accept Greek bonds as collateral appears to now be seen as less ominous. Moreover, last night the European Commission raised its economic growth forecasts for the EU to 1.3% in 2015 and 1.9% in 2016 from a previous 1.1% and 1.7%.

The bounce in the euro sent the US dollar index down 0.4% to 93.58, which is always a positive for commodities. The Aussie rose in response, but only by 0.2% to US$0.7810.

Oil Recovers

Traders cite the EU forecast increase as impetus for oil’s rebound last night from Wednesday night’s big plunge, but realistically oil is exhibiting a typical consolidation pattern in which fundamentals become less influential. It’s like a bouncing ball that rises and falls less and less until it stops. Volatility should thus start to ease from here, but as to whether this is the “bottom”, and not just a temporary consolidation level, is only something we can confidently say with hindsight.

West Texas rose US$1.66 to US$50.54/bbl last night (is 50 the level?) while Brent rose US$1.96 to US$56.70/bbl.

Wall Street

The rebound in the oil price was cited as one reason Wall Street was again strong last night but really, for how long can these guys give themselves stock market whiplash over a very volatile and currently headless-chook commodity price? Are the computers plugged into the Nymex feed?

The US energy sector, granted, will rise and fall on the oil price but beyond that, we cannot forget what has been the background noise to macro developments this past month – the US earnings season. With around 60% of S&P500 stocks having reported to date, around 70% have beaten estimates. Last night’s results were mostly positive, providing upside support to the indices.

Last night’s weekly new jobless claims number was also positive, priding comfort ahead of tonight’s non-farm payrolls release.

And these 200 point Dow swings seem to have become de rigeur.

Metals

That US jobs number for January is expected to come in at 236,000, and while US stocks and global oil markets are happy to fly around ahead of this globally important release, the LME took the traditional stance last night of squaring up and waiting. Base metal price moves were negligible.

Gold is steady at US$1264.40/oz.

Iron ore is suggesting that one little price rise blip a couple of days ago was just that – a blip – in falling another US30c to US$61.10/t. Chinese steelmakers are clearly winding down now ahead of the week-long New Year holiday, which begins on February 18.

Today

Looks like we’re in for another strong one on Bridge Street today with the SPI Overnight up 39 points or 0.7%. My calls on daily movements have been way off the mark of late so I’ll shut up, other than to say another up-day for the ASX200 would be the twelfth in a row and it is a Friday – a popular day for taking profits and going to lunch.

Australia will see the January construction PMI today and the RBA’s quarterly Statement on Monetary Policy. The US jobs report is the biggie tonight, and on Sunday China releases its January trade data.

There were a handful of local (larger cap) earnings reports yesterday and today Energy Resources of Australia ((ERA)) is in the frame, but beginning next week all hell starts to break loose on the earnings report front. To that end, today will feature publication of the first FNArena Reporting Season Monitor of the season.

The Monitor will track earnings results day by day, providing beat/miss assessments, broker ratings and target price changes and commentary. This is presented in the form of an Excel spreadsheet attachment that will build each day through to the end of the month. Those companies having already reported this week and last are also included.
 

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