Tag Archives: Japan

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 fate of Greece will be decided at a meeting tomorrow night, we’re led to believe, although that fate may yet be an extension to negotiations. The IMF nevertheless seems pretty intent that Greece will be in arrears if it does make good on its repayment on Tuesday. Arrears is not default, just a step towards it.

Meanwhile it appears the Australian market is crashing in anticipation, although I doubt Greece has much to do with such end of financial year volatility.

It’s a busy week around the globe next week, Greece notwithstanding, and includes a short week in the US given the Fourth of July long weekend. Being the first week of the month we will, as usual, see global PMIs and US jobs numbers.

Wednesday sees manufacturing PMIs from Australia, Japan, China (HSBC), the eurozone, UK and US, and the official Chinese manufacturing and service sector PMIs from Beijing. On Friday everyone repeats with their own service sector numbers except the US, where markets will be closed.

Economic releases in the US next week include pending home sales, Case-Shiller house prices, the Chicago PMI, consumer confidence, vehicle sales, construction spending and factory orders. The ADP private sector jobs report is out on the Wednesday as usual but the non-farm payrolls numbers will be brought forward to Thursday due to the holiday.

With Greece in the balance, the eurozone will see a flash estimate of June CPI next week.

The RBA governor will speak on Tuesday ahead of the usual first of the month PMI, house price index and TD Securities monthly inflation gauge, along with building approvals. The services PMI on Friday wraps up Australia’s economic week.

Tuesday is end of financial year, and as we can probably gauge from today’s activity on the ASX, we may yet see more volatility.
 

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

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

Once we get through tonight's quadruple witching expiry on Wall Street, the focus will all be on Greece, although something may yet occur during tonight's trading.

A report stemming from last night's eurozone ministers' meeting suggests Greek banks may have to shut their doors on Monday. Whether or not this is an accurate assessment, the report itself may yet prove self-fulfilling, such that tonight would see a run on Greece's banks just in case, forcing a shutdown.

EU leaders have brought forward their own meeting scheduled for later next week to Monday, suggesting a crisis meeting.

Watch this space.

Back in the real world, China will be closed on Monday before HSBC releases its flash estimate of China's June manufacturing PMI on Tuesday. Similar flashes will also come from Japan, the eurozone and US.

Germany's IFO business sentiment survey, due on Wednesday, may end up being redundant depending on what happens in the next few days.

Meanwhile, the US will see a lot of data releases next week, including existing and new homes sales, house prices, durable goods, personal income & spending, consumer sentiment and the Chicago and Richmond Fed activity indices.

The US will also see the last revision of March quarter GDP ahead of the first estimate of June quarter GDP next month.

Australia is largely devoid of major economic releases next week. On Thursday, quarterly stock options will expire on the ASX.
 

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

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 focus of next week's market activity will be the Fed policy meeting and statement due on Wednesday night. As it's a quarterly meeting, Fed chair Janet Yellen will also hold a press conference.

For the past couple of weeks, US bond yields have started to "price in" a Fed rate rise, albeit the impetus for initial bond selling has been a rise in German yields. The Fed will possibly take heart that the US ten-year rate has risen from under 2% to almost 2.5% without causing any major volatility in US stock markets. With recent employment and retail sales data suggesting an improving economy, will Yellen take the opportunity of the June meeting to set a rate rise timetable?

Next week in the US also sees housing sentiment and starts, industrial production and inflation numbers along with the Empire State and Philly Fed activity indices. The Fed meeting will offer the most likely source of any market volatility but Friday's quadruple witching expiry also throws up the possibility of some sharp moves.

The eurozone's ZEW investor survey will also be in focus next week and on Friday the Bank of Japan will hold a policy meeting. New Zealand will release its March quarter GDP on Thursday.

In Australia, attention will be drawn to the minutes of the June RBA meeting. The Aussie dollar has been up and down like a yo-yo of late on every little turn in thinking with regard another rate cut, or not.

Australia also sees a quarterly expiry day this week, on Thursday, for futures and index options.
 

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: Data Deluge

By Greg Peel

The Dow closed up 29 points or 0.2% while the S&P gained 0.2% to 2111 and the Nasdaq rose 0.3%.

Insanity

So tell me: what changed between Friday and Monday as far as Bridge Street is concerned? Greece? Give me a break. That long running saga is just something the media trots out each time it cannot otherwise rationalise market movements. Building approvals? Well that was a slight disappointment but nothing to sell the farm over and besides, all last week we saw worrying Australian data but that didn’t stop the ASX200 being up over 90 points at one stage on Friday.

And then yesterday it was down over 90 points before midday, and most of that fall was in place before the building approvals release. For the record, building approvals fell 4.4% in April, worse than the 2.0% expected. Housing is about the only thing driving the Australian economy at present, and not by enough to overcome contraction elsewhere. But most of that 4.4% represented lump apartment block approvals, and net approvals were up a very healthy 16.3% year on year in April.

The bottom line is, there was very little to justify the rally on Friday, and nothing to justify why the mood might change so spectacularly over the weekend. If you’re a longer term investor you might as well just sit back and laugh while the idiots play their games. Intraday volatility on Bridge Street is off the scale, but the ASX200 has done nothing but range-trade since the beginning of March.

Yesterday’s rebound from the bottom, such that we only closed 40 points down, occurred after the index breached 5700. I suggested the other day it looked like 5700 was the new 5600 in terms of bargain hunter support. But if you believe in the technicals, yesterday’s failure to hold over 5750 means we’re headed south.

And seriously, what would presently justify a major move north?

PMIs

In case you missed it in yesterday’s dust, Australia’s manufacturing PMI rose to 52.3 last month from 48.0 in April. That means expansion. Woohoo!

The lower Aussie has been touted as the fillip, but I’m pretty sure this PMI has not posted two consecutive months over 50 in many years, it’s ridiculously volatile, and let’s face it, manufacturing is rapidly becoming an insignificant contributor to GDP.

Beijing’s manufacturing PMI for China has posted three consecutive months of expansion. This might sound like great news, except that at 50.2, the May number reveals three months of negligible expansion. Besides, at 49.2, HSBC’s own China manufacturing PMI has now posted three consecutive months of contraction.

Japan has managed to sneak back into expansion at 50.9, the UK ticked up very slightly to 52.0, the eurozone saw a more pleasing increase to 52.2 from 50.0, and the US was also pleased with a move up to 52.8 from 51.5.

It would seem the global manufacturing sector is just managing to grow overall. On official numbers we have 52.3, 50.2, 50.9, 52.0, 52.2 and 52.8. Given the vicious currency wars in play around the globe, it’s an interesting suite of numbers.

Wall Street

Wall Street was pleased with a stronger manufacturing sector in May and also pleased with a solid jump in construction spending in April, both of which support the thesis that negative economic growth in the March quarter was all about the weather. But when it came to last night’s personal income & spending data for April, the mood turned a little sour.

Incomes rose 0.4% in April, which is promising against the prevailing weak trend of 0.2%. But consumer spending post 0.0% change. Savings levels increased to 5.6% from 5.2% of income and have now been over 5% for five consecutive months.

Also of interest is the alternative measure of inflation that arises from the personal income & spending numbers. The core personal consumption & expenditure (PCE) measure posted 1.2% annualised growth in April. This compares to inflation as measured by consumer prices, ie the CPI, which showed 1.8% annual core growth in April.

The Fed prefers the PCE to the CPI. Thus if rising inflation is to be a trigger for the first rate rise, it’s a long way off. But on Friday we get jobs numbers, and that’s another trigger.

Wall Street initially rallied on the data last night before thinking better of it, with the Dow turning a peak 95 point gain into only a 29 point gain on the close.

But the US bond market saw it the other way. Spending and inflation aside, the currently volatile bond market decided the positive manufacturing and construction numbers justified expectations of a rebound out of the contractionary March quarter. Hence the ten-year yield rose 10 basis points to 2.19%.

The US dollar index also rose, up 0.6% on its index to 97.45.

China Syndrome

Commodities markets were more focused last night on Chinese data than on US data. On the LME, traders would probably have preferred to see Beijing’s official manufacturing PMI slip into the negative to match HSBC’s interpretation, which would bolster the chances of further stimulus. At 50.2, it’s sort of neither here nor there.

Thus metals prices were mixed on uncertainty, with aluminium up 1% and nickel up 3%, lead and zinc down 1% and copper down slightly.

The iron ore market was closed last night for a holiday, leaving the spot price unchanged at US$61.40/t.

Oil traders could not find any inspiration out of a very busy 24 hours of global data. West Texas was little changed at US$60.21/bbl and Brent fell US51c to US$64.94/bbl.

Gold is down a tad to US$1188.60/oz.

With the RBA meeting today, the Aussie is 0.5% lower over 24 hours at US$0.7608 but no one expects a rate cut today.

Today

The SPI Overnight closed up 15 points or 0.3%.

While there’s very little chance the RBA will cut, the market will still be clearly focused on the statement release this afternoon. Last month’s statement caught the market by surprise by being rather upbeat. All the data in the meantime – particularly last week’s quarterly construction and capex numbers – have been downbeat. What will the board have to say today?

Before that decision, we’ll see the March quarter current account numbers, including the terms of trade. At the end of the day, this is Australia’s driving force.

The eurozone will see a flash reading of May CPI tonight, while factory orders will be the focus on Wall Street.
 

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

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

It's a long weekend for both the US and UK this weekend as they take Monday off for Memorial Day and a bank holiday respectively so aside from all the Wall Street markets, the London Metals Exchange will also be closed.

There follows a busy week in the US for all-important economic data and much ado about whether or not the Fed will raise in 2015 or 2016.

We'll see new and pending home sales, two house price indices, durable goods, two consumer confidence surveys, a flash services PMI estimate, the Richmond Fed index and Chicago PMI and, on Friday, the first revision of March quarter GDP, which may yet prove to show contraction.

The UK will also revise its GDP result on Friday and India will release its one and only GDP number.

Japan will release a raft of data over the week, including trade, retail sales, industrial production and inflation numbers.

It's a quiet week economically in Australia with private sector credit the only highlight from a monthly perspective, but the release of March quarter consumption and spending data reminds us that next week sees our own GDP result.

It's far from quiet on the local stock front nonetheless, with quite a handful of earnings results due.

Ozforex Group ((OFX)), Technology One ((TNE)), ALS ((ALQ)), Programmed Maintenance ((PRG)) and Fisher & Paykel Health ((FPH)) will all publish numbers while Nine Entertainment ((NEC)) and Suncorp ((SUN)) will hold investor days and there will be another raft of AGMs, including that of OZ Minerals ((OZL)).
 

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: Show Me The Way

By Greg Peel

The Dow closed flat while the S&P rose 0.2% to 2130 and the Nasdaq rose 0.4%.

Get Me In!

Was HSBC’s take on China’s May manufacturing PMI good or bad? One can offer two differing views.

At 49.1, HSBC’s flash estimate is an improvement on the April result of 48.9 (good) but missed forecasts of 49.3 (bad) and represents the third straight month of contraction (bad). Persistent weakness will likely encourage Beijing to implement further monetary easing and other stimulus policies (good) but it would seem measures taken to date are not having much effect (bad).

But did it matter? Not yesterday. We saw the signals for a potential rally yesterday in Wednesday’s trade, in which the bargain hunters had clearly decided it was time to move in on both a fundamental (value, including yield) and technical basis (5600 is a clear support level). This suggested to the wider market a bottom had been seen in this pullback and so yesterday, it was a case of get in quick.

It was green across the screen as all sectors finished positively. Healthcare again led the way with a 2.1% rise while energy (1.8%) was relieved the oil price stopped falling and materials (1.5%) must have simply been happy the government was wavering on the idea of an iron ore inquiry, given the iron ore price continues to ominously slide. The banks (0.6%) and the telco (0.9%) have found fully-franked yield support levels.

The government has now officially dismissed the idea of an iron ore inquiry, incredulous that anyone thought they were considering one in the first place. It was him, it was him, they said, pointing at Nick Xenophon.

Mixed PMIs

Having posted a not so encouraging March quarter GDP this week, Japan would have been happy to see its manufacturing PMI estimate suggest a swing into expansion in May, with a move to 50.6 from 49.9. Not so happy were QE co-conspirators the eurozone, which saw the estimate of composite (manufacturing plus services) PMI slip to 53.4 from 53.9. Germany’s individual manufacturing PMI fell to a three month low of 51.4.

The US also wavered, seeing a fall in the manufacturing number to 53.8 from 54.1, to add yet another reason to feel the Fed will hold off. But if these estimates are accurate, at least we can say the manufacturing industries of Japan, Europe and the US are all expanding, while China’s is contracting.

Directionless

Given the monotonous regularity with which the various US indices seem to hit new all-time highs these days, it’s interesting to note that the last time the big three actually hit a new ATH together on the same day was back in 1999. Last night looked like a strong chance for a trifecta once again, but while the S&P just snuck over the line, a typical late drift-off saw the Dow and Nasdaq retreat.

That the Dow closed about as flat as is possible on the session (+0.34 points) is testament to the apparent directionlessness of Wall Street this past week or so. They can’t find any real reason to buy it but they don’t really want to sell it either.

After a very strong read on US April housing starts earlier in the week, last night April existing home sales disappointed with a 3.3% fall. The year on year trend nevertheless remains positive.

More disappointing was the Philadelphia Fed activity index, which fell to 6.7 from 7.5 in April when forecasts suggested 8.3. The Chicago Fed national activity index saw improvement, but only to a slower pace of contraction at minus 0.15 from minus 0.36.

The Conference Board’s leading index for April forecast 0.7% growth, which seems a bit out of tune with the rest of the data. The Board suggested it means the US economy will rebound out of a sluggish, weather-bound first quarter, yet not dramatically so.

So that’s why Wall Street can’t go anywhere at present. Weak economic data are bad, but that keeps the Fed in its box, so that’s good.

Which makes you wonder why the US ten-year bond yield fell 7 basis points last night to 2.18%. Some bond buying is fair enough if the Fed is going to hold off, but the volatility in this market of late is really blowing away the long-held wisdom of the bond market representing the “smart money” and the stock market being a bunch of trigger-happy cowboys.

After a very strong week, the US dollar index finally eased slightly last night, by 0.3% to 95.35. The Aussie is thus 0.3% higher at US$0.7897.

Broken China

The oil markets apparently took three months of contraction for the Chinese manufacturing PMI to be a positive last night, as it implies further stimulus measures. Never mind that Chinese oil imports have only ever grown consistently even as the economy as a whole has slowed.

West Texas crude jumped US$1.91 to US$60.68/bbl while Brent rose US$1.60 to US$66.45/bbl.

The feeling was similar on the LME but the movements among metal prices were mixed. Copper rallied back 1% and lead jumped 2%, but elsewhere prices were weaker.

The iron ore price continued to drift away, down another US20c to US$57.60/t.

And gold continued to retreat to the sanctuary of a familiar 1200, falling US$3.30 to US$1206.50/oz.

Today

Futures traders expect the local market to go on with it today; the SPI Overnight closed up 19 points or 0.3%.

We’ll find out how German businesses are feeling about the state of play tonight with the release of the IFO survey, while the CPI result in the US will fuel up more Fed discussion.

On the local stock front, PanAust ((PNA)) will hold what will likely be its last AGM as a standalone entity 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: Minutes Of Nothing

By Greg Peel

The Dow closed down 26 points or 0.2% while the S&P lost 0.1% to 2125 and the Nasdaq was flat.

Sugar Hit

The ASX200 was again down over 40 points yesterday, by mid-morning, which was unsurprising on the back of big falls in commodity prices. The general fall also reflected what has been a soggy market all week, pressured by technical selling.

But while the material sector did indeed close the day down 1.6% and energy 1.3%, buying interest emerged in some sectors when the ASX200 hit the 5575 level. Healthcare’s had a rough trot, but it finished the day up 1.5%, and plenty of industrials have been caught in the down-draught, so that sector rose 1.1%. The banks were steady for once.

There may have been some incentive to buy on the mid-morning release of Westpac’s consumer confidence index for May. Having captured both the RBA rate cut and federal budget announcement, the index surged 6.4% to 102.4, marking the first time confidence has been on the optimistic side of the line (100) since February.

But realistically any budget influence was more a case of relief than enthusiasm. Last year’s shocker saw confidence plunge, so this year’s effort managed to reverse some of that angst. It could have been a lot worse, most Australians have decided. And if the stock market was strictly responding to a jump in consumer confidence, we should have seen that in the consumer sectors. Yet discretionary was flat on the day and staples slipped slightly.

Yesterday seemed more a case of the stock pickers moving in to snap up some beaten down names.

Sun Not Quite Rising

Japan released its March quarter GDP yesterday, and on face value it looked like Abe’s shock and awe stimulatory tactics have finally been vindicated. The Japanese economy grew at a 2.4% annualised pace in the quarter, trouncing forecasts of 1.5%.

The Nikkei jumped 0.9% as a result, and may also have had some influence on the buying downunder.

But drilling down into the numbers, the result actually isn’t that flash after all. Consumer spending did increase as hoped, given Abe is trying to manufacture inflation, but the biggest contributor to the solid net result was growth in inventories. In this day and age of “just in time” inventory management, inventory growth only implies goods that have failed to move.

Outside of the inventory impact, Japan’s GDP grew by only 0.4% annualised, a much more tepid figure. June quarter data already point to a slower pace of growth, and if those inventories start hitting the discount bins, Abe’s 2% inflation target will seem ever more distant.

Wobbly Wall Street

After some wild fluctuations earlier in the month, volatility on Wall Street has subsided notably this week. Why? Because the indices are back to all-time highs and recently whenever this happens, investors get nervous. March quarter GDP was weak, and may yet turn out to be a contraction on revision. Corporate earnings in the quarter were better than expected, but expected was very weak. The oil price has consolidated after bouncing from its depths but still at a much lower price than a year ago, yet consumer spending remains in the doldrums.

What are we doing at all-time highs?

The short answer is of course, the Fed, which has continued to hold off on normalising monetary policy and allowed the stock markets to carry on being juiced up by free money. A lot of that free money is being used to fund share buybacks, which lift earnings per share valuations, and to increase dividends, which entice investors to buy shares on a TINA basis compared to fixed income investment. There is no alternative.

The US bond market has also seen a rush of selling as traders begin to get a little nervous ahead of the Fed rate rise that will, eventually, come. That money has to go somewhere. TINA.

Back in April, the FOMC had decided a June rate rise was probably off the cards. So suggested the minutes of that policy meeting, released last night. On that news, Wall Street did a whole lotta nothing. For starters, back in April the market had already decided September would be the earliest possibility, and maybe even that was ambitious, and back in April is, well, back in April – a long time ago in the life of the world’s largest economy. Data releases since that meeting have for the most part been disappointingly weak.

The US dollar index did go up again last night, by 0.3% to 95.59, but only because the euro continued its plunge. The euro is still pulling back on news earlier in the week the ECB would front-load bond purchases in May-June, and also because recent eurozone economic data releases have been a little underwhelming.

The US bond market obviously saw nothing of interest in the minutes, as the US ten-year yield moved on one basis point, down to 2.25%.

Commodity Mix

The strengthening US dollar is not doing commodity prices any favours, although last night did see a little more stability following Tuesday night’s steep falls.

The oils managed a slight bounce, with West Texas up US78c to US$58.77/bbl in its new July delivery front month. Brent, already July delivery, was up US48c to US$64.85/bbl.

The LME closed ahead of last night’s release of the Fed minutes so there was reason to be cautious, thus last night’s moves were less dramatic. Zinc went on with it, nonetheless, falling another 1%, but nickel did manage a rebound of 1% after Tuesday night’s plunge.

Iron ore keeps ticking down, last night falling another US60c to US$57.80/t.

Gold was steady at US$1209.80/oz.

The rising greenback is at least providing further relief for the Aussie dollar, which is down another 0.6% to US$0.7872. This will please the RBA a little, but the RBA is always quick to point out that US dollars are not Australia’s only trading currency, and the weak euro, for example, is keeping that exchange rate elevated.

Today

The SPI Overnight closed up 17 points or 0.3%, which suggests futures traders are expecting more bargain hunting among stocks today. Mind you, futures traders have been wrong all week.

Lock up your children, the flashers will all be out and about today and tonight. We’ll see flash estimates of May manufacturing PMIs from China (HSBC), Japan, the eurozone and US.

It’s a crowded night for US data releases, including existing home sales, leading economic indicators, the Philly Fed activity index and the Chicago Fed national activity index.

On the local stock front, James Hardie Industries ((JHX)) will release its quarterly result, Woodside Petroleum ((WPL)) will hold an investor day and G8 Education ((GEM)) will discuss the ramifications of the government’s planned child care changes in the budget at the company’s AGM.
 

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

Just A Flesh Wound

Friday saw a bit of bargain hunting in the local market after an otherwise corrective week with investors clearly keen to call the bottom in oil and metals prices. Materials (+1.5%) and energy (+1.3%) led the charge aided by some hesitant buying in the banks (+0.3%). Not enjoying the current state of play is the popular healthcare sector (-0.5%), which must trade off perceptions of a long term growth story with the immediate impact of the Aussie dollar, given our big names generate a lot of income offshore.

Resource sector buyers were encouraged by Beijing’s official Chinese manufacturing PMI for April, which came in at 50.1 against 50.0 expectations. Not exactly cork-popping stuff, but expansion nevertheless. Beijing’s service sector PMI slipped to 53.4 from 53.7.

Unsurprisingly, manufacturing in Australia continues to contract, albeit at a slower pace in April. The PMI rose to 48.0 from 46.2 in March. Manufacturing is no longer much of a contributor to Australia’s GDP, with the service sector now accounting for around 70%. Wholesale prices for services are running at a 0.9% annual growth rate according to Friday’s March quarter PPI data, while wholesale goods prices are flat thanks to the impact of oil prices. Net PPI came in at 0.7%pa, clearly no hindrance to an RBA rate cut tomorrow.

Bounce Back

The Bank of Japan made no policy changes at its meeting last Thursday despite downgrading its economic forecast, and despite QE competition from its major export rivals. Japan’s manufacturing PMI fell to 49.9 in April from 50.3, contracting for the first time in a year.

The UK equivalent fell to a seven month low 51.9 from 54.0, while the US ISM reading was unchanged at 51.1, missing forecasts of 52.0. Europe and China were closed for May Day on Friday so the eurozone PMI and HSBC’s China numbers will be published this week.

US weakness was further underscored by a 0.6% drop in construction spending in March, but Michigan Uni’s fortnightly measure of consumer sentiment held firm at 95.9, up from 93.0 a month ago, and a 5.4% jump in vehicle sales in April was well received.

As is the case in Australia, it appears there’s only so far Wall Street can fall before investors decide to get back in, given there are few other places beyond the stock market one can put one’s money. With Europe closed the US dollar index rallied 0.5% to 95.21 on Friday night and stock markets fell into step. Having fallen by roughly the same amount on Thursday night, the Dow gained 183 points or 1.0%. The S&P rebounded 1.1% to 2108 and all the biotech stocks that were on the nose for most of week suddenly looked like value, so the Nasdaq jumped 1.3%.

Copper This

Volumes on the LME were low on Friday night in the absence of China and Europe but the resurgence of copper continued as the bellwether metal posted another 1.7% gain. Elsewhere moves were mixed, with nickel falling 1.3%.

Iron ore remained unchanged at US$56.20/t.

The oils were also a bit quieter on Friday, slipping away from 2015 highs. West Texas fell US54c to US$59.26/bbl and Brent fell US27c to US$66.56/bbl.

Enigmatic gold appears to have broken down from its recent tight range with a US$5.90 fall to US$1177.90/oz, with the stronger greenback an excuse.

The Aussie dollar continues to build expectations the RBA will cut tomorrow, falling another 0.8% to US$0.7851.

Futures traders are thus expecting the stock market rebound to continue into today. The SPI Overnight closed up 34 points or 0.6% on Saturday morning.

The Week Ahead

It’s jobs week in the US this week, critical to the market’s ongoing obsession with debate over Fed rate rise timing. The ADP private sector number is due on Wednesday night and the non-farm payrolls report on Friday.

US data throughout the week will include factory orders tonight, the service sector PMI and trade balance tomorrow, private sector jobs and March quarter productivity on Wednesday, and chain store sales and consumer credit on Thursday. Friday brings the official jobs numbers, along with wholesale trade.

Japan will be closed Monday to Wednesday, and the UK will be closed tonight.

There will be much speculation during the week as the UK builds to Saturday’s general election. A hung parliament looks the likely outcome. A vote for the Tories means a referendum on whether the UK should withdraw from the EU.

HSBC will report its China manufacturing PMI result today and services on Wednesday. Beijing will release trade data on Friday and inflation numbers on Saturday.

It’s all happening economically in Australia this week. Today sees ANZ job ads, building approvals and the TD Securities inflation gauge. The RBA is at even shorter odds to cut on Tuesday than it was last month. The trade balance and services PMI are also due on Tuesday.

Wednesday it’s retail sales and new home sales, Thursday sees our own jobs numbers take a spin on the chocolate wheel (where it stops, nobody knows!), and the RBA will release its quarterly Statement on Monetary Policy on Friday.

On the local stock front, Westpac ((WBC)) will report half-year earnings today, ANZ Bank ((ANZ)) tomorrow and National Bank ((NAB)) on Thursday. Commonwealth Bank ((CBA)) will provide a quarterly update on Wednesday and Macquarie Group ((MQG)) will round out a big week for the banks with its full-year result on Friday.

News Corp ((NWS)) will release quarterly earnings tomorrow and Woolworths ((WOW)) will hold a strategy day on Wednesday and probably won’t mention the war. BHP Billiton ((BHP)) will hold an extraordinary meeting on Wednesday to vote on the South32 demerger, and Rio Tinto ((RIO)) will hold its AGM on Thursday.

A handful of other companies will also hold AGMs this week as the last of the resource sector quarterly production reports tickle in.

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

March quarter GDPs will be in focus next week as we first see the UK’s result on the Monday and then the US result on the Wednesday. Bear in mind the US result in particular is very prone to significant revisions in subsequent months.

The US GDP will nevertheless bring Fed policy sharply back in focus and it so happens the Fed’s next policy meeting is also on Wednesday. The Fed’s data-dependence will be tested tonight with durable goods and next week with house prices, consumer confidence, the Richmond Fed index, pending home sales, personal income & spending, construction spending and the April manufacturing PMI.

Friday is the first of May which means manufacturing PMIs from Australia, Japan, China and the UK as well, although being May Day we won’t see a eurozone PMI just yet as major markets will be closed. China is also closed, hence the HSBC number will also follow later.

The impact of ECB QE should begin to be seen in next week’s inflation estimate and industrial production and retail sales numbers. Japan’s manufacturing sector appears to have slipped into contraction for the first time in almost a year, so it will be interesting to see whether the Bank of Japan is still happy to sit on its hands when it meets on Thursday.

Australia will also be focused on monetary policy next week as we have a speech from Glenn Stevens, private sector credit and the March quarter PPI numbers, as well as the manufacturing PMI.

A busy week on the local stock front will include more resource sector production reports, a handful of quarterly updates from non-resource companies, including Wesfarmers’ ((WES)) sales result, interim earnings from BT Asset Management ((BTT)) and a handful of AGMs including that of Santos ((STO)).
 

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: Sirens Sound

By Greg Peel

The Dow closed up 20 points or 0.1% while the S&P gained 0.2% and the Nasdaq added 0.4%.

Material Moves

HSBC’s flash estimate of its reading on China’s April manufacturing PMI came in yesterday at a one-year low 49.2, down from March’s 49.6 which was also where April forecasts sat. On any other day, such a result would have led to weakness in Australia’s resource sectors, but with belief growing that we’ve seen the bottom in oil prices and expectations that the same may be true for iron ore, as the majors start to ease back on their expansion plans, the PMI reading didn’t much matter yesterday.

We might also consider weak Chinese data to currently evoke a benign response from markets given Beijing’s clear indications, via last week’s big RRR cut, that it is prepared to pump up the stimulus as required. Thus Wednesday night’s moves up in the oil and iron ore prices were enough to promote a 1.1% rally in the local energy sector yesterday and a 1.3% rally in materials.

The ASX200 nevertheless closed almost flat on offset falls in supermarkets (0.5%) and financials (0.3%). The fall in financials doesn’t seem like much but we must remember that since the de-rating of Australia’s resource sector, the banks and other financials now account for almost half the market cap of the index. Insurers are included in the financials sector, and they continue to see fallout from the NSW east coast storms.

Grexit Games

It was not a good 24 hours globally for estimates of April manufacturing PMIs. Japan’s PMI fell to 49.7 from 50.3 in March to mark the first slip into contraction in eleven months. The eurozone saw the first decrease in two months to 51.9 from 52.2 when economists had forecast 52.6, helping the German DAX index to fall 1.2% overnight. And the US equivalent dropped to 54.2 from 55.7.

EU leaders held a summit in Brussels overnight to discuss the issue of migrants, and the Greek prime minister took the opportunity to have a quiet word to the German chancellor. The two reportedly spoke about how to keep Greece in the eurozone, but separately the German finance minister appears resigned to a Greek exit.

The EU finance ministers meet in Latvia tonight where Greece is obliged to present a list of reforms it plans to carry out in order to satisfy its ongoing bail-out conditions, but the German ministry will apparently be surprised if anything actually is presented.

Nasdaq Milestone

Having reconquered the 5000 mark for the first time in fifteen years earlier this year, the US Nasdaq index last night surpassed its previous all-time high of 5048 set in March, 2000, with a close of 5056. This sparked a lot of buzz on what was otherwise a wobbly performance from Wall Street. The Dow was up over 90 points at one stage before settling back to a small gain. The S&P500 kissed its March all-time high before retreating.

Proctor & Gamble (Dow) blamed the strong greenback for its March quarter earnings miss, and fell 1.8%. Poor results were also posted by General Motors (down 3.3%) and Facebook (down 2.6%) while Caterpillar (Dow) surprised to the upside but closed flat, and eBay was a winner with a 3.8% gain.

Results reported after the bell faired a lot better, providing for a potential boost on Wall Street tonight. In aftermarket trading, Microsoft (Dow) is up 3.1%, Google 3.5% and Amazon 5.9%.

US new home sales fell 11.4% in March to mark the slowest pace of growth since November. The result came as a disappointment after Wednesday night’s 6.1% jump in existing home sales. New home construction is economically stimulating but the swap of old houses doesn’t do a lot. Wall Street is also a little worried that weekly new jobless claims have been quietly ticking up these past three weeks.

But that only suppresses thoughts of an early Fed rate rise, so last night the US dollar index fell 0.8% to 97.30 and the US ten-year bond yield fell back 2 basis points to 1.95%. Speaking of bond yields, the German ten-year has rocketed back over 100% this week. Mind you, a move from 0.08% to 0.17% doesn’t actually move the dial much.

Hot Iron

The spot iron ore price has posted its sixth consecutive rise, gaining another US90c to US$53.80/t. Happy days are here again. Well, a little bit.

LME traders weighed up the weak Chinese PMI, and weak PMIs globally, and the drop in the US dollar before deciding, as I had suggested last week, to stick to individual metal fundamentals. Hence copper rose 0.8% while aluminium fell 1.4%, lead was down, nickel was up, and tin and zinc were down.

Iron ore might be grabbing the spotlight right at the moment, but last night the oils hit 2015 highs. Renewed Saudi airstrikes on Yemen, lower than expected weekly US crude inventories and expectations China’s weak PMI will lead to further stimulus sent West Texas up US$1.25 to US$57.44/bbl and Brent up US$2.05 to US$64.73/bbl.

The fall in the greenback helped gold to push back towards the safety of its 1200 Linus blanket, with a US$7.20 gain to US$1193.70/oz.

Today

While strong aftermarket US earnings reports may have played a part, ongoing commodity price gains are likely the reason behind a 31 point or 0.5% gain for the SPI Overnight.

Outside of the EU finance ministers meeting in Riga and a possible further step towards a Grexit, tonight sees US new durable goods orders.
 

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