Tag Archives: Precious Metals

The Overnight Report: Growth Has Slowed

By Greg Peel

The Dow closed up 51 points or 0.3% while the S&P rose 0.2% to 2095 as the Nasdaq fell 0.5%.

Disinflation

Cut in May and go away?

A 2% fall in the Aussie dollar over the past 24 hours to US$0.7596 would suggest the market believes the RBA has no choice but to cut next month following yesterday’s shock CPI data. The headline number fell 0.2% in the March quarter when economists had expected a 0.2% gain. The annual rate dropped to 1.3% when economists had expected it to hold steady at 1.7%.

It’s the first quarter of headline disinflation since December 2008.

The core CPI rose 0.2% when economists had forecast 0.5%. The annual core rate of 1.7%, down from 2.1% in December, is the lowest reading since 1997.

Economists are now split on whether the RBA will cut in May. The central bank has to balance a strong labour market, a solid housing market and a soaring rebound in commodity prices against disinflation and a too-high Aussie dollar. The board is carefully watching the jobs numbers for any sign of easing but there has been none to date. Analysts expect housing to soften in the second half and the commodity rebound to fade.

It appears to be a bit of a coin toss at this point.

The local stock market wasn’t taking any chances yesterday, if not backing a May cut at least expecting a cut to come sooner rather than later. The ASX200 initially rallied on the CPI release as for many sectors, a rate cut would be beneficial. But not for the banks of course. It was selling in the banks that turned a 61 point rally at the lunchtime peak into a 32 point loss at the close.

The 1.2% fall in the financials sector yesterday was the standout, both in percentage and in market cap clout. The industrials sector, in which many of Australia’s offshore earning companies lie, posted a small gain, as did consumer discretionary. Interestingly, the telcos were sold down 0.7% and utilities 0.1%, which seems opposite to what one might expect from a rate cut.

But realistically other sectors moves were fairly muted yesterday. For once the resource sectors did not take centre stage. It was all about the banks.

Tech Wreck

Facebook posted an earnings beat after the bell this morning and as I write, its shares are up 9%.

It is an against-the-trend result for this tech company when all of Microsoft, Google, Netflix, Apple and Twitter have posted weak results over the past couple of weeks. Twitter shares fell a solid 16% last night and Apple’s 6% fall took a good 40 points out of the Dow.

I mentioned yesterday that the US has two agencies monitoring weekly crude inventories and they can never seem to agree. On Tuesday night the API said a fall of a million barrels last week and last night the EIA said a rise of two million barrels. The market tends to go with the EIA, but the focus has now turned away from fluctuating weekly inventories toward the more important trend, being that of production reduction.

The EIA reported US production ticked down again last week to mark the seventh consecutive week of declines. That was enough to send the WTI price up 1.5%.

So last night Wall Street was selling tech and buying energy, which is evident in the split of movements among the major indices. The Dow was up 50 points, and could have been up 90 were it not for Apple, while the Nasdaq was down half a percent.

However all of the gain in the Dow and the S&P500 occurred subsequent to release of the Fed’s monetary policy statement at 2pm. Up until that point, the market had been poised at lower levels.

The critical sentence in last night’s statement was “growth has slowed”. Up to now the Fed has pointed to modest growth but in the meantime, economic data have not been too flash. Tonight sees the release of the first estimate of US March quarter GDP and that is expected to come in around 0.7%, down from 1.4% in December.

Those who were backing a June hate hike have now tempered their views. June is not out of the question, but the data would have to suddenly turn more positive in the interim. Many also suggest the Fed won’t hike just ahead of the Brexit vote, in fear of adding to potential market turmoil. But others find this foolish, as there are plenty of things going on all the time the Fed could use as an excuse for not changing policy, and rates would never move.

Either way, Wall Street suggested, by rallying toward the close, that June is now less likely, if it were ever likely in the first place. Attention now moves to the Bank of Japan’s policy meeting today, and the scary possibility of an even more negative Japanese cash rate.

Commodities

West Texas crude is up US67c at US$45.33/bbl and Brent is up US86c at US$47.20/bbl.

Base metal prices were a little weaker in London last night but the LME closed just as the Fed statement release is due, so tonight will tell the tale.

Iron ore is down another US$1.30 to US$62.80/t.

The US dollar index is down 0.1% at 94.40 and gold is relatively steady at US$1245.80/oz.

The Aussie, as noted, is now trading just under 76.

Today

The SPI Overnight closed up 52 points or 1.0%. Seems ambitious.

The RBNZ left its rate on hold this morning but hinted at a possible cut ahead. All eyes will be on the BoJ later today.

Tonight’s highlight will be the US GDP release.

On the local stock front, Cochlear ((COH)) and Computershare ((CPU)) will host investor days today while the quarterly production reports continue to roll in, with today featuring Independence Group ((IGO)). Mirvac Group ((MGR)) will provide a quarterly update.

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Newcrest Overvalued?

-Higher capex, costs likely in June qtr
-Are assumptions optimistic?
-Question over Lihir grades

By Eva Brocklehurst

While gold sector leader Newcrest Mining ((NCM)) delivered a solid March quarter, brokers question whether the share price factors in too much upside.

Positive revisions at Cadia and Lihir were offset by lower production at other operations and the stoppage at Gosowong. March quarter gold production was 637,000 ozs, with all-in sustainable costs (AISC) of US$723/oz.

The sustainability of the company's performance at Cadia and Lihir is paramount, Deutsche Bank maintains, given the uncertainty at other smaller assets. Both Cadia and Lihir performed well on ore milled in the quarter while Lihir had higher than expected grades.

Lihir and Cadia delivered 5-6% more gold than Deutsche Bank expected, whilst Hidden Valley benefited from a return to open pit mining, which appears to have targeted a small higher grade zone. The broker observes the cost performance at Hidden Valley was impressive, moving to an AISC of US$542/oz from US$1,589/oz in the December quarter.

Deutsche Bank acknowledges a number of optimistic assumptions leading into FY17, expecting improvements at a number of assets including a significant lift in milling rates at Cadia and Lihir. Yet, regardless of lower costs in coming years and realistic mine life expectations, the broker believes the stock is expensive and retains a Sell rating.

Production guidance for FY16 remains at 2.4-2.5m ozs, despite ongoing disruptions at Gosowong and downgrades at Telfer and Hidden Valley. Yet, with just 53% of stripping capex and 68% of sustaining capex spent in the year to date, Deutsche Bank notes guidance also implies a lift in spending in the June quarter and higher AISC.

UBS calculates a 3.5% lift in production is required in the June quarter to meet the mid point of guidance and remains confident Newcrest can meet or exceed its targets. At Cadia, the Ridgeway deposit, now mothballed, is being replaced with higher grade ore from Cadia East. UBS notes Cadia East ore accounted for 94% of mill feed compared with a 2016 average of 66%.

The broker is forecasting 1.2g/t in FY17 but acknowledges this could prove conservative. Grades are expected to moderate after FY17. Offsetting this is the ramp up of Cadia East and longer term plans to expand to 32mtpa.

The broker suspects investor attention on the stock will remain high and retains a Sell rating on valuation grounds, believing that while the operational performance is improving the risk/reward outlook is unfavourable.

Ord Minnett disagrees and considers the company, operationally, may have turned a corner. The broker suggests the stock may be expensive on a pure net present value calculation but global investors pay more heed to how the company compares with its peer group. On that basis a Neutral rating is maintained, as the stock is trading on multiples that are broadly in line with global peers.

There is just one Buy rating on FNArena's database for Newcrest, from Citi. The broker likes the ramp up at Cadia and the improved production outlook across the major operations and is holding out for a dividend in FY16.

Production was ahead of Morgan Stanley's estimates too, driven by Cadia. Yet the grades at Lihir are a concern, with the 3.7g/t mined at the pit well above reserve grades, although the blend of pit to stockpile material is moving closer to 50:50.

While production guidance is unchanged it is predicated primarily on the back of increased expectations for Lihir, and the broker maintains the lift needs to be driven by more than just throughput and recovery. Assuming a 50:50 ex pit to stockpile split, an 80% recovery and 13mtpa throughput, this implies pit grades in excess of these 3.7g/t grades.

Lihir instability continues to be an issue for Macquarie. While production was better than expected the fall in gold recoveries to 71% reflected the need to bypass the autoclave. Front end throughput is now at the target 13mtpa, but the broker believes maintaining a stable rate is a challenge and presents a key risk to forecasts.

Delivering on the optimised targets at Lihir is important in order to unlock the value inherent in the 28m ozs reserve and Macquarie retains a Neutral rating given the pending production risks. The broker prefers to play gold through Evolution Mining ((EVN)) and St Barbara ((SBM)).

Credit Suisse on the other hand believes Newcrest is getting on top of its plant reliability issue at Lihir and is now delivering a more consistent performance, towards the aspirational throughput rate of 15mtpa. Acknowledging reliability is key, the June quarter is expected to be stronger.

The main negative for Credit Suisse in the quarter was the event at Gosowong, where all production at Toguraci and Kencana ceased on February 8. Toguraci has since re-commenced but Kencana remains idled while remediation continues.

The broker notes there is no information on how much additional capital has been spent on rehabilitation. While Gosowong is a small and declining part of the portfolio, the broker is disappointed Kencana is suspended with no guidance for a re-start data or rehabilitation costs.

Besides Citi's Buy there are two Hold ratings and four Sell on the database. The consensus target is $14.63, suggesting 19.0% downside to the last share price. Targets range from $8.71 (UBS) to $20.50 (Citi).

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The Overnight Report: Waiting Game

By Greg Peel

The Dow closed up 13 points or 0.1% while the S&P rose 0.2% to 2091 and the Nasdaq fell 0.2%.

Profit-taking

It looked like it was going to be a dull old day on the local bourse yesterday as the market nursed its Anzac Day hangover, but at midday someone came in and started selling, possibly out of Asia. The ASX200 pretty quickly dropped 25 points.

Half of that drop was scrounged back by the closing bell and on the sector wash-up, only two moved the dial. A dip in oil prices had the energy sector off 1.0% while the big drop in the iron ore price, following the big jump last week, saw materials down 2.1%.

The two big miners were down 3% yesterday which largely told the tale. It’s not every month you see a company like BHP Billiton ((BHP)) run up around 40% so to see a 3% drop is hardly surprising as that gain is locked in. There remains much talk among analysts of iron ore prices in the sixties being unsustainable and seasonally fleeting, so you wouldn’t want to caught if BHP heads south in a hurry once more.

The other sectors didn’t much trouble the scorer yesterday. Stock markets across the world are awaiting the two big central bank meetings this week, being the Fed tonight and the BoJ on Thursday, and not doing much ahead of those outcomes.

Bad Apple

Apple is struggling to sell iPhones in China, it would appear, which is why the share price of America’s biggest company is down 8% in the Wall Street aftermarket as I write. Aside from the central bank meetings, Wall Street was quiet last night ahead of this particular earnings release.

Twitter also disappointed by posting weaker guidance with its result after the bell and its shares are down 13%. So much for the new world, although EBay is at least up a percent, but EBay’s a bit old hat these days as well. AT&T (Dow) is trying to become a bit more new hat, and it posted a reasonable result.

It might be another bad session for the Nasdaq tonight, notwithstanding on the Fed. The Apple and Twitter results serve to emphasise the point a company’s actual earnings result is not the singular factor in determining success or otherwise. In the US earnings season to date it has yet again been the case of earnings results not being as bad as expected, but revenue has been the deciding factor in, for example, the Apple and Twitter results.

There will be a lot of focus on the US energy sector as we move towards the end of the week, with results due from major oil service provider and rig counter Baker Hughes, as well as oil heavyweights and Dow components Exxon and Chevron.

In US economic news last night, durable goods orders rose only 0.8% in March when 2.0% was expected. The Case-Shiller house price index showed prices continue to rise but at a slowing pace. And the Conference Board’s monthly measure of consumer confidence showed a bigger than expected fall to 94.2 for April from 96.2 in March.

I’d be losing confidence too watching the GOP three-ring circus.

Any economic news is nevertheless trumped – ahem – by the Fed meeting tonight.

Commodities

The American Petroleum Institute each week releases US crude inventory data on a Tuesday night before the Energy Information Agency does the same on Wednesday night. But the two numbers never match. Indeed, they are more than often not wildly different.

So we might take with a grain of salt the fact the API last night suggested a bigger than expected fall last week, thus sending West Texas up US$1.67 or 3.9% to US$44.66/bbl and Brent up US$1.56 or 3.5% to US$46.34/bbl.

Iron ore has fallen another US90c to US$64.10/t. That’s twice now the iron ore price has seen mindless surges only to retreat rather swiftly back to reality. No wonder Beijing is seeking to crack down on commodity speculation.

It was another mixed bag on the LME last night, as base metals continue to oscillate a lot but move little. Nickel and zinc both bounced back a percent while copper dropped half a percent.

The US dollar index is down 0.3% at 94.53 and thus gold is up US$5.40 at US$1243.30/oz.

The Aussie is up 0.4% at US$0.7745.

Today

The SPI Overnight closed up 20 points or 0.4%, likely because of the oil price. Those Apple and Twitter results could play havoc on Wall Street tonight, at least until 2pm when the Fed statement hits the wires.

With regard local monetary policy, today sees the release of Australia’s March quarter CPI numbers. One or two economists had been predicting a May rate cut from the RBA – the central bank often waits for quarterly inflation data before making a move – but those predictions have since been tempered following the big rebound in commodity prices.

The UK will release its March quarter GDP result tonight. As we approach June, global markets are becoming increasingly uneasy about the Brexit vote.

On the local stock front, today will bring March quarter numbers from ResMed ((RMD)) and Henderson Group ((HGG)) while high-flying APN Outdoor Group ((APO)) will hold its AGM.

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The Monday Report (on Tuesday)

By Greg Peel

Friday

Friday’s local session was a game played in two halves. Taking a lead from Wall Street, which having rallied up to psychological levels on its major indices decided it was time to take some profits, the ASX200 fell sharply from the open.

It nevertheless appeared to be more of a case of buyers standing aside rather than sellers piling in, thus when the morning’s opening rotation was complete and close to 50 points were lost, the buyers were ready to get in at better levels. If we truly are in rally mode right now, such dips offer welcome opportunities for previous slow movers.

So by lunch time the index was back to square. But then someone pointed out that it was a long weekend, and thus Friday afternoon was all about drifting off again as traders locked in what should have been some solid short term profits and got out of the city as soon as possible.

We can always take such Fridays with a grain of salt. The profit-taking tale is most obvious if we look at the biggest sector fall on the day, that of materials, which dropped 2.4% on a day iron ore had rallied 7%. You don’t see that too often. But given the likes of BHP and co had run up some 30% from their lows as the iron ore price pushed sharply higher, it seemed like a great opportunity to lock that in. Particularly if that 7% jump seemed like a possible blow-off top.

The fall in energy was less dramatic at 1.1%, but oil prices were actually down a tad. Elsewhere, the two standout sectors in what was otherwise a fairly general pullback were the banks, which didn’t move, and utilities, which were hit 1.7%.

Interesting that the banks, which have also seen a run good run this month, should not see any notable profit-taking a day after a major broker issued a warning that the two smaller members of the Big Four could well cut their dividends next month.

As for utilities, well I noted in Friday morning’s Overnight Report that selling on Wall Street was driven mostly by yield sectors, including utilities, following a week of gains for the US ten-year bond yield. It looks like the local market saw this as a lead.

Friday Night

The Dow closed up 21 points or 0.1% to scrape back over 18,000. The S&P was flat at 2091 as the Nasdaq tumbled 0.8%.

If Bridge Street’s session was a game played in two halves, Wall Street’s session on Friday night was a game played across two halves of the market.

We tend to call stock such as Microsoft and Google “old tech” because they’re last century’s stars while the likes of a Facebook or a Netflix represent the “new tech” of the new millennium. But if we put those two together and call them “new(ish) tech” we can compare them to what we might call “very old tech”, such as railroads.

After the bell on Thursday night, earnings misses were posted by Microsoft and Google. This clearly put the frighteners through the market on Friday night, such that all tech names were unloaded in a hurry, new or old. That’s why the Nasdaq was down 0.8%.

But two major railroads posted solid results and went for a run, sending the Dow Transports (separate to the Dow Industrials) surging. Within the Dow Industrials, General Electric – the only remaining company to have been included in the first ever Dow Jones Average – posted an earnings beat while Caterpillar, which has seen the going very tough as commodity prices collapsed, suggested the bottom is nigh.

Honeywell, another old world stock (even aerospace is an old industry), also posted an earnings beat. Having run up strongly ahead of their releases, all three of these industrials saw slight dips on the day, but the distinction is clear. McDonalds is another Dow stock that is pretty old world these days, and it posted its best quarter in a very long time.

Hence the divergence on the day between the Dow and the Nasdaq, with the broad market S&P holding fast in the middle.

The US oil rig count fell by another 8 rigs last week to 343, according to Baker Hughes’ regular Friday report, marking a fifth straight weekly decline. West Texas crude rose US27c to US$43.70/bbl on Friday night and Brent rose US39c to US$45.12/bbl.

Zinc and nickel missed out on an otherwise strong session on the LME, which saw aluminium, lead and tin all up 1% and copper just a little shy.

Sentiment has clearly swung to the positive in commodities markets (and not just in rocks, but in agriculturals as well it should be noted). Recent strength has come despite the US dollar index having rebounded rather sharply over the week. It was up another half a percent on Friday night at 95.12.

This was good for the Aussie, which was able to come down 0.4% to US$0.7710 despite the big jump in the iron ore price, but not good for gold, which fell US$15.80 to US$1232.20/oz.

On Saturday morning the SPI Overnight closed up 26 points or 0.5%.

Monday Night

The US dollar index fell back again last night, by 0.4% to 94.79. The Aussie, however, is little changed from Saturday morning at US$0.7714.

And having been a feature of Friday night’s trade, the Dow Transports also fell back again last night.

Tech names continued to remain under pressure nonetheless, with all eyes on Apple’s earnings report tonight. But across Wall Street in general last night was a case of entering a new week which is not only loaded with earnings results and heavy on economic data releases, but which also sees two significant central bank policy meetings – those of the Fed and the Bank of Japan.

No one expects anything much different from the Fed on Wednesday night but the market will still look for any clues as to whether June might still be considered a rate hike possibility. The Bank of Japan has markets somewhat concerned nevertheless, as no one’s at all sure what might transpire. At its last meeting the BoJ lowered its cash rate into the negative, yet the yen has done nothing but rise ever since.

Could the BoJ go even further into the negative? While central bank stimulus around the globe is usually welcomed by stock markets, Japan’s negative rates represent an experiment that many worry could have unintended consequences.

Speaking of unintended consequences, Beijing is currently caught between a rock and a hard place as it tries to provide ample liquidity to the Chinese economy to prevent a sharp decline in growth while at the same time trying to keep a lid on debt, and potential asset price bubbles.

Over the weekend the PBoC requested that China’s major banks pare back their lending targets to 70% of what they were at the beginning of the month.

Oil prices fell from the open last night and helped the Dow down to almost a 150 point drop, but as oil eased back and other influences took over, Wall Street recovered. The Dow closed down 26 points or 0.2% while the S&P lost 0.2% to 2087 and the Nasdaq fell 0.2%. The uniformity of the index fall, traders suggests, signals positioning ahead of the central bank meetings rather than micro forces.

So since the ASX closed for business on Friday, the Dow was up 21 and then down 26. Just to drive home the fact little has changed on a net basis since Friday, the SPI Overnight closed up 26 points on Saturday morning and down 25 points this morning for a net one point gain.

Oil prices fell last night because Kuwait production is back in full swing following the three-day strike, and the country intends to increase its production levels. Iraq is close to reaching a production record, Iran continues to ramp up, and Saudi Arabia is close to completing a major oil field expansion.

If you can’t freeze it, pump it as fast as you can. It is probably surprising that this morning, West Texas crude is down only US71c at US$42.99/bbl and Brent is down US34c at US$44.78/bbl.

Volumes on the LME were to the low side last night as metal traders, too, await this week’s central bank meetings. In thin trading, copper lost what it gained on Friday night, zinc fell 2% and lead fell 3%.

A spot iron ore price is proving difficult to get hold of this morning, probably because of the long weekend, but I can report a price being quoted this morning after two sessions of US$66.07/t, down from US$68.70 on Thursday night.

Gold is up US$5.70 at US$1237.90/oz.

The Week Ahead

As noted, the Fed will release its April policy statement on Wednesday night and the Bank of Japan will meet on Thursday, as will the Reserve Bank of New Zealand.

A busy week for US data releases, coinciding with the busiest week for US earnings results, sees durable goods orders, Conference Board monthly consumer confidence, Case-Shiller house prices and the Richmond Fed index tonight, pending home sales on Wednesday and the first estimate of March quarter GDP on Thursday. The market is forecasting a mere 0.7% annual growth rate.

Friday sees personal income & spending, the Chicago PMI and Michigan Uni fortnightly consumer sentiment.

The UK will publish its first estimate of March quarter GDP on Wednesday and the eurozone will follow suit on Friday.

While attention will be focused on the BoJ on Thursday, Japan will also see monthly releases for inflation, unemployment, retail sales and industrial production ahead of a public holiday on Friday.

Monetary policy debate downunder will focus this week on Wednesday’s release of the March quarter CPI numbers, followed on Friday by the PPI.

On the local stock front, this week brings another mix of resource sector quarterly production reports, quarterly updates from other sectors, investor days and AGMs.

Production report highlights this week include those from Independence Group ((IGO)) on Thursday and Origin Energy ((ORG)) on Friday. ResMed ((RMD)) will release quarterly earnings on Wednesday, Mirvac Group ((MGR)) will issue a quarterly report on Thursday, and Thursday also brings investor days from Cochlear ((COH)) and Computershare ((CPU)).

Rudi is on leave this week.

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

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The Overnight Report: What Goes Up

By Greg Peel

The Dow closed down 113 points or 0.6% while the S&P lost 0.5% to 2091 and the Nasdaq closed flat.

Energised

A 5.7% gain for the energy sector about sums up yesterday’s session on Bridge Street, although it was not a lonely journey. A strong gain for oil prices overnight spurred on energy stocks but ongoing gains for iron ore with support from base metals had materials up 2.0%, while the dominant market cap sector of the banks posted a 0.8% gain.

The banks may currently be under siege from all quarters but it seems the market is more interested in bad debt relief being offered by the commodity price rebound and the flow-on of stronger commodity prices into a reduced likelihood of the RBA having to cut its cash rate.

Assuming the commodity price rally holds. But it must be said some previously bearish analysts are beginning to concede there may be some justification in recent strength beyond just short-covering and seasonal restocking.

Healthcare and consumer staples both posted 1% gains yesterday but elsewhere movements were more modest, with the telcos missing out altogether.

The ASX200 has now left 5200 behind and is eyeing off 5300 on its way, chartists are assuming, to 5400, but we may see a stumble today after Wall Street decided to take some money off the table last night. It might be a mixed bag nonetheless, with oil prices off a bit last night but iron ore going nuts with another 7% jump.

Yield Off

Mario Draghi offered up no surprises last night in leaving ECB monetary policy unchanged following the shock & awe package delivered in March.

After a couple of strong post-Doha sessions which took oil prices to new 2016 highs, it was no shock to see a bit of a pullback last night. But while this did mean a bit of selling in US energy stocks, it was not the primary reason for a generally weaker session on Wall Street on the oil correlation, which was more of a March quarter story.

With the Dow having hit 18,000 and the S&P 500 having hit 2100, following a strong run up, it was time for some consolidation. These numbers are no more important than any other but because they are round, they are targets traders will often set as a triggers for taking profits.

Yet while the pullback in stocks last night was not surprising, the spread of sector movements was interesting.

The US ten-year bond yield has been moving up recently, rebounding from the depths reached following the aforementioned shock & awe package from the ECB which dragged down German yields and thus US yields on a relative basis. While the Fed has indicated it is in no rush to hike yet and US economic data releases have not been too encouraging of late, bonds have been sold off across the globe as general panic has subsided.

As US bond yields rise, the value of high-yielding US stocks eases. When the wheels fell off in January and into February this year as the oil price collapsed, investors ran to the shelter of yield stocks such as utilities and telcos and out of cyclicals such as resources. They were rewarded as bond yields continued to fall.

That trade is now reversing. With Wall Street having returned to 2016 highs on a commodity price rebound that is looking more entrenched, steadily rising US bond yields (now back at 1.87% in the tens having been down towards 1.6%), investors are switching out of those defensive yield names in fear they may miss a cyclical push higher.

Thus last night’s hundred point fall in the Dow and pullback from the high in the S&P was more about sector rotation than it was about general market selling. We note the Nasdaq, in which it would be hard to find a solid dividend payer among the growth stocks, closed flat.

Of course we’re also in the midst of US earnings season, and after a strong start it has to be said the results have become more mixed, offering another reason for Wall Street to take a breather.

Among the Dow stocks, misses led to sharp falls for Verizon and Travelers last night while American Express managed a modest gain. In the wider market, General Motors managed a decent gain but Mattel had a session Barbie would prefer to forget.

It got worse after the bell. All of Microsoft (Dow), Visa (Dow), Google and Starbucks posted misses and their shares are down 3-5% in the aftermarket.

Tonight sees results from some heavy industry names in the form of General Electric, Caterpillar and Honeywell and global barometer McDonalds. A common theme among reporters so far has been the impact of the strong greenback in the March quarter, as well as commodity price weakness, so given both have since reversed, traders are prepared to give some weaker results the benefit of the doubt as the June quarter progresses.

Commodities

West Texas crude is down US75c at US$43.43/bbl for the new June front month and Brent, already trading June, is down US84c to US$44.73/bbl. Note how tight that spread has now become.

Iron ore, blow me down, closed up US$4.40 or 6.8% at US$68.70/t.

Trading was mixed on the LME, with nickel down 2% and zinc 1% but copper and aluminium continuing their steady rise with 0.5% gains.

The US dollar index is up 0.1% at 94.66 but gold is a little higher at US$1248.00/oz.

It looks like perhaps the forex cowboys had set themselves for an ECB rate cut into the negative last night even though no one else expected such. The Aussie had pushed higher above 78 all through the local session then suddenly plunged in European trading to be down 0.7% over 24 hours at US$0.7739, despite the big jump in iron ore and despite little movement in the greenback.

Today

The SPI Overnight closed down 29 points or 0.6%. We’re probably due an index pullback, but it could be a jumble among the sectors.

Japan, the eurozone and US will all publish flash estimates of April manufacturing PMIs tonight.

Santos ((STO)) will release its quarterly production report today.

Rudi will link up with Sky Business through Skype this morning, probably around 11.05am to discuss broker calls. Citi is calling for dividend cuts from both National Australia Bank ((NAB)) and ANZ Bank ((ANZ)) over the next few weeks, so that might have an impact in today's session too.

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The Overnight Report: Quiet Achievement

By Greg Peel

The Dow closed up 42 points or 0.2% while the S&P rose 0.1% to 2102 and the Nasdaq gained 0.2%.

Wall of Worry?

On Tuesday the ASX200 gave up an 82 point rally to close up 51 and yesterday gave up a 44 point rally to close up 27. The rally from 4900 to 5200 has been driven almost entirely by the energy, materials and financials sectors due to rallies in oil and iron ore and subsequent loan relief for the banks.

This two steps forward, one step back increase suggests not everyone’s convinced in its sustainability. You would be hard pressed to find an analyst who believes the rally in oil represents any more than short-covering which must soon end, and the rally in iron ore a seasonal upswing which must soon be followed by a downswing.

Yesterday the materials sector led the charge with a 2.1% jump and energy chimed in with 1.1%, but both moves represented slips back from early highs. Financials closed flat yesterday after initially rising, thanks to the government’s decision to make the banks pay for increased funds for ASIC to keep a closer eye on them. Industrials decided to make a move yesterday, up 1.2%, but there was little happening in other sectors.

If the rug were pulled out from under commodity prices then there is nothing else holding up the local market at present. But last night oil was up another 4% and iron ore another 4% and the futures are suggesting up 36 from the open this morning.

Softly Softly

The US earnings season to date has so far registered earnings beats for 71% of reporting S&P500 companies. But it’s still early days and numbers for the big industrials are only just beginning to flow. Last night’s highlight was Coca-Cola (Dow), which missed on revenue and fell 4%. This morning American Express (Dow) posted a beat after the bell, and is up 6% in the aftermarket.

In US economic news, existing home sales jumped a better than expected 5.1% in March. It’s one bright data point in what has generally been a pretty weak run of late, underscoring expectations the US economy barely grew in the March quarter. But hey, the Fed’s got Wall Street’s back.

Which just leaves oil.

Weekly US data last night showed a 2.1m barrel increase in US crude inventories when 3.1m was expected. US production fell by 24,000bpd to 8.9mbpd, marking the six consecutive weekly decline. Forget Doha, this is where the real supply freeze is going on.

WTI is thus up 4% this morning. It’s a bold play to push oil higher still when most of the market believes the only thing holding prices up at present is the Kuwaiti strike, which must eventually resolve, unless prices were never going to fall after Doha anyway. It could just be ever more short-covering, but one day the shorts may be right if the post-Doha world means stepped up competition for market share between OPEC members.

On that point, Saudi Arabia, who scuttled Doha, is now considering the unthinkable – putting a stake in its state-owned Aramco energy company up for IPO. Saudi Arabia has always maintained it can endure lower oil prices until production declines in the US, but clearly the kingdom needs the money.

The Dow gave up a hundred point gain at 3pm to post another modestly positive session. Trading was quiet and volume was light, as it has been over the week. If Wall Street is to reach to new all-time highs in the next few sessions, it won’t be without some level of nervousness, it would seem.

But where else are you going to put your money?

Commodities

On the expiry of the May delivery contract, West Texas crude closed up US$1.67 or 4.1% to US$42.63/bbl. Brent, already trading June, is up US$1.51 or 3.4% at US$45.57/bbl.

Right now commodities are not paying a lot of attention to the US dollar, which last night rebounded 0.5% on its index to 94.55. On the LME, talk is of Beijing preparing to announce a ramp-up of infrastructure stimulus (hence the jump in the iron ore price) and of production cuts in China and elsewhere, which have at least been announced if not yet delivered.

A fall in inventories saw aluminium jump 2.5% last night in another generally positive base metal session in which only zinc slipped a bit.

Iron ore is up US$2.50 at US$64.30/t.

The rebound in the dollar has gold off US$6.00 at US$1244.30/oz but the trade-off of a stronger greenback and stronger commodity prices means the Aussie is only down 0.2% at US$0.7797.

Today

As noted, the SPI Overnight closed up 36 points or 0.7%.

The ECB will hold a policy meeting tonight, but there is no expectation of anything new at this stage.

Before that, it will be a very busy day on the Australian corporate front.

The quarterly production reports come thick and fast today and include numbers from Alumina Ltd ((AWC)), Iluka ((ILU)), OZ Minerals ((OZL)) and South32 ((S32).

Quarterly updates will also be provided by Brambles ((BXB)) and Challenger ((CGF)), while Wesfarmers ((WES)) will report quarterly sales and Ten Network ((TEN)) will report first half earnings.

Cimic ((CIM)) and Woodside ((WPL)) will hold AGMs and Nufarm ((NUF)) will host an investor day.

Bring on the long weekend.

Rudi will make his usual weekly appearance on Sky Business today, 12.30-2.30pm, and re-appear for a verbal wrestle with Peter Switzer at around 7pm.

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The Overnight Report: Just Like Old Times

By Greg Peel

The Dow closed up 49 points or 0.3% while the S&P gained 0.3% to 2100 and the Nasdaq fell 0.4%.

Well Resourced

It was all about commodities and the resource sectors on the local market yesterday thanks to a jump in the iron ore price and no drop in oil prices. We recall that on Monday, energy names were sold down following a lack of agreement coming out of Doha, perhaps not so much as a panic trade but more of a safety trade.

Given oil prices fell initially but ultimately recovered on Monday night, yesterday saw those same energy names bought back again. The banks had similarly seen some squaring up for safety on Monday on the energy sector loan link, and they, too, recovered yesterday.

The ASX200 was up 82 points early in the session before some profit-taking emerged after the solid run up from 4900 in the past few sessions. The close of up 51 points was led by energy (3.8%) and materials (3.3%) with some help from the banks (0.8%).

But interestingly, the resource sectors were the only cyclicals to join in the spoils as the index briefly breached 5200. Industrials actually fell 0.6% and the consumer sectors were flat while the defensives of telcos and utilities each rose 1%. If we are to push upward towards 5400 as the technicals suggest, we cannot be confident in a rally driven by defensive yield and fickle commodity prices.

There is much focus at present on Wall Street and the potential of quarterly earnings results to push the US indices back to all-time highs. But locally we are now entering an important quarterly season of our own – not in the form of official earnings results but in the form of quarterly updates from both resource sector and non-resource sector companies, as is increasingly becoming the norm. By next week we will start to see a flood of AGMs being held by calendar year-reporting companies.

In other words, we are entering a period of micro influence that in aggregate should help paint a macro picture for the Australian economy. The macro has taken a back seat in other developed economies given safety nets provided by central banks. As to whether the Australian central bank can also provide some support is now a subject of heated debate.

RBA governor Glenn Stevens spoke in New York last night and I suggested yesterday it probably wasn’t the forum to discuss currency issues downunder. And it wasn’t. Stevens made it clear he wasn’t there to discuss Australia but to provide his take on the current international economic climate.

Yesterday the minutes of the RBA’s April policy meeting were released, and provided no new insight. The word “complicate” was used in the official statement following that meeting and appeared again in the minutes:

“Oil and iron ore prices had risen noticeably since earlier in the year. The rise in commodity prices had been accompanied by an appreciation of the Australian dollar, which also partly reflected the expectation that US monetary policy would be more accommodative over the coming year than had been anticipated earlier. Members noted that an appreciating exchange rate could complicate progress in activity rebalancing towards the non-mining sectors of the economy.”

We might note that in early April the Aussie was trading around US$0.75 and on the strength of commodity prices and further weakness in the US dollar, is up 0.8% over the past 24 hours to US$0.7812.

A lack of any further hints about a possible rate cut to address the “complication” is likely why the consumer and industrial sectors were held back yesterday. More than one economist is tipping a May rate cut, although you wouldn’t pick one from the RBA’s current rhetoric.

Here We Are Again

With OPEC having failed to agree to a production growth freeze on the weekend it’s perhaps ironic that right now OPEC supply is under restraint thanks to the strike in Kuwait, significant production outages in Yemen, South Sudan and Iraq and pipeline outages in Nigeria. These restraints are helping to support oil prices, which were up a couple of percent last night.

But strikes and outages are usually temporary so the real focus is on US production, and the US weekly numbers are out tonight. Ongoing weakness in the US dollar is also supporting oil prices and indeed commodity prices across the board.

The weaker greenback is also supporting Wall Street. The current focus is on March quarter earnings and whether they’ll be less bad than forecast, and a lot of the weakness built into forecasts reflects a strong US dollar over a quarter in which assumptions were for routine Fed rate rises. Now that those assumptions have evaporated and the greenback has steadily fallen, Wall Street can also look ahead to some better earnings numbers from multinationals in the June and September quarters.

Last night the S&P500 closed smack on the psychological level of 2100. The broad index did reach as high as 2104 early in the session as the Dow shot up 100 points on the open, but there is some nervousness beginning to creep in. It’s only 300 more Dow points to the all-time high and 30 more S&P points. The average PE ratio is starting to test the top of its typical range.

And next month is May. But the “Sell in May” adage usually only works if Wall Street has rallied through the first quarter and into the second, and this year we’re still not yet at the old high as May approaches. The S&P last saw 2100 in November and first saw 2100 in February of last year. The earnings result season has only just begun.

Last night’s earnings results were not that flash. “New tech” Netflix saw its shares down 13% after the company eased back subscriber growth forecasts, which goes a long way to explaining why the Nasdaq bucked the trend last night. “Old tech” IBM (Dow) saw its shares fall 5.5% following yet another drop in revenue. Further old tech disappointment was provided by Intel (Dow) after the bell, and its shares are down 2% in the aftermarket, while Yahoo shares are up 1%.

Commodities

West Texas crude is up US91c at US$40.96/bbl and Brent is up US$1.13 at US$44.06/bbl.

Base metal prices have been given a kicker by the stronger oil price, or perhaps the not weak oil price, and also by the weaker greenback. The US dollar index is down 0.4% at 94.11 and aluminium, nickel and tin all rose on the LME last night, 1% while copper, lead and zinc all rose 2%.

Iron ore’s surge continues. It’s up another US$1.90 at US$61.80/t.

The dollar index briefly breached the 94 support level last night which has the gold bugs excited. Gold is up US$17.80 at US$1250.30/oz.

Today

Hard to ignore commodity price strength. The SPI Overnight closed up 31 points or 0.6%.

BHP Billiton ((BHP)), Newcrest Mining ((NCM)) and Woodside Petroleum ((WPL)) all report quarterly production and sales numbers today.

Rudi will host Your Money, Your Call Equities tonight. Tune in from 8-9.30pm.

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The Overnight Report: Doha Indifference

By Greg Peel

The Dow closed up 106 points or 0.6% at 18,004 while the S&P gained 0.7% to 2094 and the Nasdaq rose 0.4%.

Playing it Safe

The primary talking point across financial markets over the last 24 hours is Doha, and genuine surprise that oil prices did not collapse in the wake of a lack of agreement at the meeting. But given no one believed there would be an agreement reached, why the surprise?

The Australian market had to make the call yesterday before northern hemisphere oil trading provided direction. I had noted yesterday that the Aussie had plunged over a cent on the Doha news but immediately recovered more than half of that drop, and suggested that might just be a hint as to what would happen in other markets.

Sure enough, the ASX200 fell 39 points from the open yesterday, led down by the energy sector, and it looked like we might be in for an ugly session. But no, by late morning the index was back to square.

We drifted off again in the afternoon to a close down 20 points, and the energy sector closed down 2.9%, suggesting it might be a good idea to square up ahead of what no one was sure was going to happen in oil markets last night. But the energy sector had fallen well over 3% initially.

The banks took a similar tack, given the market is tying in the energy sector loan factor at present. The financials sector fell 0.7%. Materials fell 0.9% on a pullback in the iron ore price.

Those losses were nevertheless offset by two other sectors – healthcare, which rose 1.1%, and telcos, which rose 1.5% after analysts all agreed a share buyback will likely follow Telstra’s ((TLS)) asset sale last week.

It was not the stuff of disaster. And just as well, given what did actually eventuate in oil markets and on Wall Street overnight.

Doha Schmoha

The WTI price plunged 6% on the open last night, hitting US$37.61/bbl. The fall most likely reflects buyers standing aside to see what would happen rather than sellers going in hard. When the price found a bottom, the buyers came in and steadily pushed the price back again throughout the session, to only a modest drop.

US energy stocks all opened lower from the opening bell, sending the Dow down 50 points, but as soon as the oil price found a bottom, so did Wall Street. Not only did energy stocks recover, they quickly became the leaders in a rally which took the Dow up to the 18,000 mark for the first time since last July. The suggestion is the market had set itself short oil and short oil stocks ahead of Doha, expecting a big plunge when no agreement was reached. As soon as buying appeared, a short-covering scramble was triggered. Oh no, we got it wrong.

I don’t buy that argument. I believe nobody expected an agreement in Doha and on that basis, WTI at 40 was already pricing that reality in. All that happened last night is that buyers stood aside in the oil and stock markets to let a few wood ducks make fools of themselves early, providing an opportunity for the smarter money to take advantage. WTI is at 40 because US production is on the decline. It’s got nothing to do with OPEC.

There is also a suggestion a strike by oil workers in Kuwait overnight was actually oil’s saviour. Nah.

Meanwhile, in US economic news, an index of housing sentiment held steady at 58 for the third month running, suggesting modest but consistent optimism. In earnings news, Morgan Stanley became the fifth major US bank to release a less-bad-than-expected earnings result. Pepsico also beat on earnings, while Disney had a strong session following solid weekend box office on the release of its Jungle Book remake.

I remember going to see the original when knee-high, at the Sky studios in North Ryde. Of course back then it was a drive-in.

On last night’s rally the Dow is now a mere 300-odd points shy of its all-time high. The S&P, which is the “real” market, is about 40 points shy. The Dow has reclaimed the psychological level of 18,000, while the S&P only needs a few more points to retake its psychological level of 2100, above which traders see only upside.

With the Yellen Put in place, and on the assumption the less-bad theme continues throughout the US earnings season, traders are feeling pretty confident. This week is an important one for earnings as the first of the big multinational industrials release their numbers.

Commodities

West Texas is down US37c at US$40.05/bbl and Brent is down US13c at US$42.93/bbl.

An increasingly more volatile iron ore price has bounced back a solid US$2.40 to US$59.90/t.

Aluminium, copper and zinc all rose around 0.5% on the LME and nickel managed 2%, while tin fell 1%.

Gold is relatively steady at US$1232.50/oz despite the US dollar index being down 0.3% at 94.46. The Aussie is nevertheless up 0.3% as a result to US$0.7749 – above where it was before Doha.

Today

The SPI Overnight closed up 53 points or 1.0%.

Presumably today we’ll see a recovery in the local energy sector after the safety game played yesterday. We should also see a reversal in the materials sector’s fortunes thanks to iron ore. And Dow 18k will likely in itself provide optimism the local market might just now have the capability to push through to the 5400 mark chartists have been adamant about for some time. Although it will depend on further US earnings reports.

And last night it was all but confirmed Australia is headed to, as the Brick would call it, a “double dis-allusion” election. While history shows stock markets are indifferent to political stripe, the prospect of a government being able to govern without the hindrance of senate cross-benchers resembling a bowl of mixed nuts should be a positive for sentiment, if that’s how things play out.

Back in the real world, Rio Tinto ((RIO)) and Oil Search ((OSH)) both report quarterly production today, Burson Group ((BAP)) hosts an investor day and Recall ((REC)) hosts an EGM with regard the Iron Mountain takeover offer, which has now been given the green light by the FIRB.

The minutes of the April RBA meeting will also be released today, with the market wondering what the central bank might ultimately do about the Aussie. Glenn Stevens will speak tonight in New York, which probably won’t be a forum for offering currency hints.

Rudi will Skype-link up with Sky Business at 11.15am today to discuss broker calls.

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Regis Resources Outlook Hinges Fresh Production

-Potential for mine life extensions
-But does this add up for valuation?
-Limits to further cost reductions

By Eva Brocklehurst

Regis Resources ((RRL)) has reached a more reliable level of production, with a better realised price for its gold in the March quarter improving margins and lifting cash flow. Brokers observe the company's Duketon operations in Western Australia are now more stable and there is potential for exploration to yield reserve extensions and replace depleted mine output.

Exploration results continue to improve the outlook for all the Duketon operations, Credit Suisse observes, particularly in terms of the short life for Moolart Well. The broker cobbles together imagination and hope and suggests a ten year or more mine life is possible, but models for 6-7 years.

March quarter production was 75,656 ozs at an all-in sustainable cost of $856/oz. Year to date production means the company only needs to deliver 48,000 ozs to reach the bottom end of guidance in the June quarter. Once again, a strong performance at Rosemont supported the outcome driven by grade, with positive reconciliation a highlight after the problems in the past.

Overall, Morgan Stanley notes production appears on track for the upper end of guidance at 275-305,000 ozs and the broker lifts FY16 forecasts by 4.0% to 303,000 ozs. The broker likes the cash being generated but prefers Evolution Mining ((EVN)) on that basis.

The broker also suspects the market is factoring in gold prices and/or a mine life projection for Regis Resources that are well above current levels. Organic growth could add mine life to Moolart Well, but this is already factored in, while Baneygo could add another two years to Garden Well. Results from Idaho and Tooheys Well suggest potential but their development carries risk, the broker adds.

In summary, for Morgan Stanley's valuation to reach the current share price, more than 1m ozs in additional gold is needed. Hence, for the medium term, the broker retains an Underweight rating and $2.00 target.

UBS disagrees, believing the growing potential from satellite deposits, which can add to mine life and grades, is not fully accounted for yet in its price target of $2.30. The cash balance is growing and FY16 guidance is an easy target with the company well positioned to compete in the mid tier gold segment, the broker contends. UBS has a Neutral rating.

Macquarie has few qualms about Idaho and Tooheys Well and, based on recent drilling, expects both will enter the production profile. The grade at Tooheys Well looks particularly attractive and the broker estimates it could deliver a minimum of 150,000 ozs at 1.6g/t. The maiden reserves at both Baneygo and Gloster in the March quarter were released with plans to bring both into production in the near term.

Macquarie expects head grade at both mills will improve around 10% although this is largely traded off by an increase in strip ratio assumptions. It is this increase in strip ratio assumptions for a number of future satellite pits that results in a downgrade of 4-9% for the broker's FY17-20 estimates.

The company has stated that further cost cutting will be limited although recent diesel hedges should limit any fuel-driven cost inflation. The company has hedged around 60% of its diesel consumption over the next 18 months. Macquarie acknowledges the company is wringing the last drops out of cost reductions, with benefits form the lower oil price and consumable costs.

Deutsche Bank attributes a further $100m in nominal exploration value to future opportunities but still finds the stock's valuation stretched. Significant savings are noted stemming from the re-negotiated Moolart Well mining contract and lower fuel, reagent and grinding media costs.

Better throughput at mills and positive grade reconciliation should also drive out-performance at Rosemont and Deutsche Bank expects this to continue for at least the next year. Still, while the free cash flow and the dividend outlook is robust, it doesn't add up enough to warrant the broker changing its Sell rating.

FNArena's database shows two Buy, two Hold and three Sell ratings. The consensus target is $2.34, signalling 9.2% downside to the last share price. Targets range from $2.00 (Morgan Stanley) to $2.84 (Citi).

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The Monday Report

By Greg Peel

No Deal in Doha

Shock horror. The meeting of OPEC and non-OPEC oil producers in Doha last night has failed to reach any agreement on a coordinated production freeze. The first market to respond this morning to the stunning news is the Aussie dollar, which fell from around US77.2c to under US76c in a heartbeat.

But in almost as short a space of time, the Aussie is currently back at US76.6c.

As to why the meeting in Doha even went ahead is a mystery. All year Saudi Arabia has said it will only freeze production if all relevant oil-producing nations, including Iran, freeze production, and all year Iran has said no. Heading into the meeting, Saudi Arabia maintained its position. As it turned out, Iran didn’t even bother to attend.

The question now is as to whether, heading into the meeting, oil and other markets had accepted the fact the whole thing was going to be a farce or whether today will bring substantial moves in response, in particular a plummeting oil price. Perhaps the Aussie has provided a clue. Were the initial response in oil prices to be a plunge, the buyers may well be ready to jump on the opportunity and damage will be limited.

There can hardly be any excuse for being surprised.

And then there’s China

Notably, the only sector not to finish in the green on the local market in Friday’s trade was energy. A slight dip suggested squaring up for Doha.

The banks and the materials sectors both had quieter sessions after their solid runs last week, up 0.5% each. This left the rest of the market, which had mostly taken a back seat last week, to pick up the ball and have a run. The consumer sectors, healthcare, telcos and utilities all posted gains of around 1% or more, with industrials just off the pace. It was a choppy session, but in the end the 0.8% gain for the ASX200 was mostly a market-wide effort.

The highlight of the day was the release, mid-session, of Chinese economic data.

China’s GDP grew by 6.7% in the March quarter, smack on expectation. That’s down from 6.8% in December, and, as the headlines in the populist press will be quick to point out, the slowest pace of growth since 2009. It may be a fact but it’s also an ignorant comparison. China’s economy has grown substantially since 2009, such that to achieve the dollar value of additional GDP represented by 6.7% growth today would have required a growth rate in 2009 well into double digits.

In the month of March, Chinese industrial production grew by 6.8% year on year, up from 5.4% in February and ahead of 5.9% forecasts. Retail sales grew by 10.5%, up from 10.2% and ahead of 10.4% forecasts. Year to date fixed asset investment grew by 10.7% over the same period last year, beating expectations of 10.3%.

While drawing upon the usual grain of salt, we may conclude from the data that the stimulus measures undertaken by Beijing last year and into this year are finally starting to see some results. But once again the caveat is the impact of volatility around the Lunar New Year break.

The Chinese numbers helped lift a wobbly ASX200 to a stronger close on Friday but it was not the sort of performance one might have expected in times past when China reported Street-beating numbers. The local resource sectors had a muted session.

Wall Street

Wall Street’s session on Friday was mostly about waiting for Doha. The WTI price fell a dollar to sit poised near the US$40 mark in anticipation. US oils stocks similarly saw a square-up.

Citigroup was the last of the major US commercial banks to report on earnings on Friday and just as had been the case for its counterparts throughout the week, Citi reported a result that was weak but not as weak as forecast. All up Wall Street finished slightly lower on Friday night but higher for the week, led by the rebound in bank stocks.

On Friday night the Dow closed down 28 points or 0.2% while the S&P fell 0.1% to 2080 and the Nasdaq lost 0.2%.

US data releases for the session were weak. Industrial production fell a greater than expected 0.3% in March to mark the sixth monthly decline in seven. The Michigan Uni fortnightly measure of consumer sentiment showed a fall to 89.7 from 91.0 at end-March, suggesting a fourth consecutive month of decline.

Bucking the trend, The Empire State activity index rose to 9.6 from 0.6 last month, to post its strongest reading since January 2015. But this series has become increasingly volatile, and could just as easily be negative next month.

Either way, Wall Street is currently supported by the Yellen Put. Weak data only serve to push out the expected timing of the next Fed rate hike.

Commodities

On Saturday morning, West Texas crude was sitting at US$40.42/bbl, down US$1.03 from Thursday night, and Brent was down US81c at US$43.07. We await tonight’s reaction to Doha.

We can say the same for base metal prices, given the direction of oil has this year been a significant factor in sentiment on the LME. Moves were mixed on Friday night, with zinc’s 1% gain the standout as copper fell 0.7%.

Iron ore fell US$1.10 to US$57.50/t.

The US dollar index had slipped 0.2% by Saturday morning to 94.70, which helped the Aussie up 0.4% to its pre-Doha level of US$0.7726. Gold rose US$6.50 to US$1234.10/oz.

The SPI Overnight closed down 4 points on Saturday morning, but that’s no longer relevant.

The Week Ahead

The US earnings season steps up a gear this week, as a range of Dow components across all sectors take centre stage. Morgan Stanley and Goldman Sachs will round out the investment banking performance, while everything from Johnson & Johnson to Google, Caterpillar and General Electric will offer a more widespread indication of the state of the US economy.

Economic data releases will come thick and fast as well, but as suggested, they lack any real clout above the Fed’s safety net.

Tonight sees housing sentiment, tomorrow housing starts and Wednesday existing home sales, while Thursday brings house prices, leading economic indicators, the Philadelphia Fed activity index and the Chicago Fed national activity index. Friday will see a flash estimate of April’s manufacturing PMI.

Japan and the eurozone will also flash on Friday. The ECB will hold a policy meeting on Thursday but no one is expecting anything new.

It’s a quiet week for Australian data, but the RBA will be in the frame nonetheless. The central bank’s Financial Stability report, released on Friday, suggests concerns over Australia’s apartment construction bubble. Glenn Stevens will speak on Tuesday, and the minutes of the April RBA meeting will be released.

There’s plenty of action on the local stock front this week. The resource sector quarterly production report season ramps up in earnest, with highlights this week featuring Oil Search ((OSH)) and Rio Tinto ((RIO)) tomorrow, BHP Billiton ((BHP)) and Newcrest Mining ((NCM)) on Wednesday, OZ Minerals ((OZL)) and South32 ((S32)) on Thursday and Santos ((STO)) on Friday.

Outside of resources, quarterly reports will be forthcoming from Transurban ((TCL)) today and Brambles ((BXB)) and Challenger ((CGF)) on Thursday. Wesfarmers ((WES)) will report quarterly retail sales on Thursday.

Cimic ((CIM)) and Woodside Petroleum ((WPL)) will hold AGMs on Thursday.

Watch the price of Woodside this morning.

Rudi will appear on Sky Business on Tuesday around 11.15am, via Skype-link, then again on Wednesday, to host YMYC 8-9.30pm, then twice on Thursday (12.20-2.30pm and Switzer TV between 7-8pm), and then again via Skype-link on Friday, usually around 11.05am.

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

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Tag Archives: Precious Metals

The Overnight Report: Growth Has Slowed

Newcrest Overvalued?

The Overnight Report: Waiting Game

The Monday Report (on Tuesday)

The Overnight Report: What Goes Up

The Overnight Report: Quiet Achievement

The Overnight Report: Just Like Old Times

The Overnight Report: Doha Indifference

Regis Resources Outlook Hinges Fresh Production

The Monday Report