LOGIN JOIN SHARECAFE SIGN UP FOR OUR NEWSLETTER ADVERTISE
share cafe logo  
 
SHARECAFE COMMENTARY

Overnight: Have You Checked The Children?
BY GREG PEEL - 12/07/2017 | VIEW MORE ARTICLES FROM FNARENA NEWS

The Dow closed up less than one point while the S&P lost -2 points to 2425 and the Nasdaq rose 0.3%.

The Turn of the Screw

The value of all Australian housing-related lending rose by 1.3% in May to be 4.6% higher over the year. With that number, there is now a distinct trend of investor loans declining and owner-occupiers moving in to fill the gap, although few are first-time buyers. Tighter APRA regulations on investor loans and interest-only loans are beginning to have an impact.

The number of new loans to owner-occupiers rose by 1.0% to be -3.5% lower year on year, although that number is on the rise. The value of these loans rose 2.9% to be 3.1% higher year on year – reflecting still rising house prices. The value of loans to investors fell -1.4% to still be up 8.1% year on year, but that number is falling.

If there is any concern that the Australian economy may fall into recession if support from the housing market wanes, it is not evident in the views of Australian businesses. NAB’s monthly survey for June showed a gain in the conditions (now) index to 15.1 from 10.9 in May – the highest level since February 2008, which was just before the wheels fell off.

But is it a case of make hay while the sun shines? The confidence (ahead) index also rose in June, but at 9.3, up from 7.5 in May, confidence in the future clearly lags confidence in the present. The results are notable for a long-awaited pick-up in mining state confidence, but the bottom line is this level of contentment is not flowing into increased business investment of any great note. That, presumably, reflects the future-present lag.

One wonders just how much of this comparative lack of confidence relates to the government and its capacity to achieve anything at all meaningful, and ditto for the US, and particularly the guy with the launch codes.

The release of NAB’s survey provided a boost for both the local stock market and the currency early on in yesterday’s session, but a 20 point gain was stymied on the release of the housing finance numbers. Thereafter, the index drifted rather aimlessly to a flattish close. Too much market-moving potential later in the week.

If any theme was evident it was a “reflation trade” session, with the banks and resource sectors finishing alone in the green and the likes of health, telcos and utilities making their contributions in the red.

As if one Donald wasn’t enough

For the same looking-ahead reason, Wall Street had been drifting along doing not a lot early in last night’s session before an email exchange between Donald Trump Jr and a Russian lawyer hit the airwaves, suggesting the Russian government was offering dirt on Hillary. The humans on the trading floor rolled their eyes and were about to go back to chatting about baseball when suddenly the Dow dropped 125 points and other indices followed suit.

The finger was immediately pointed once more at computers – specifically algorithms used by high frequency traders that exploit artificial “intelligence” of sorts to read news reports and tweets and so forth and search for key words that might suggest up/down market movements. The problem is, they are all looking for the same words, so in this case, they all tried to sell at once.

Then we likely saw other algos based on momentum trading kick in to follow the herd and the whole debacle becomes self-fulfilling until the adults step in. Last night they stepped in when the 50-day moving average was hit on the S&P500 and started buying, thus turning the computers on their heels. Repeat process, back the other way. The dip began at about 11am and indices were back to square by noon.

The adults then went back to chatting about baseball. You don’t get much flatter than a 0.55 gain for the Dow at the closing bell.

If the Trump the Younger news had broken earlier this year then perhaps there may have been a more nervous reaction on Wall Street, just as there ultimately was when the whole Donald the Elder vs the FBI director thing blew up and cries of “impeachment!” rang out. But that wobble proved only brief once Wall Street realised that it took six year to impeach Nixon and in that case the evidence was far more incriminating.

Hence Wall Street, in organic form, is not paying any attention to the Russia “scandal”. More important will be tonight’s testimony from Janet Yellen, a big data drop on Friday night and the first quarterly results from the big banks.

Commodities

Iron ore is now technically in a bull market. Woohoo! The spot price rose US90c to US$64.70/t yesterday and is now 20% off the June lows. Never mind that it nearly hit the ton only a few months ago.

Drag out the chocolate wheel – it’s that time of the week to play US weekly crude inventory bingo. API data for last week has suggested a drawdown, so West Texas crude is up US$1.23 at US$45.78/bbl. The previous week went the opposite way, as did the oil price.

Copper, nickel and zinc all enjoyed rallies of around 1% in London last night, with a little help from an easing in the US dollar index of -0.3% to 95.75.

Gold also found support, to the tune of $3.10 for $1217.20/oz.

The Aussie is 0.4% higher at US$0.7636.

Today

The SPI Overnight closed down -5 points.

Westpac will release its monthly consumer confidence survey locally today.

The Fed Beige Book is out tonight but no one pays much attention to that any more, and particularly not when the woman herself is being grilled by politicians.

Rudi will host Your Money, Your Call tonight on Sky Business, 8-9pm.



View More Articles By FNArena News

FN Arena is building the future of financial news reporting at www.fnarena.com. Our daily news reports can be trialed at no cost and with no obligations. Simply sign up & get a feel for what we are trying to achieve.




The content of this information does in no way reflect the opinions of FN Arena, or of its journalists. In fact we don't have any opinion about the stock market, its value, future direction or individual shares. FN Arena solely reports about what the main experts in the market note, believe and comment on. By doing so we believe we provide intelligent investors with a valuable tool that helps them in making up their own minds, reading market trends and getting a feel for what is happening beneath the surface. This document is provided for informational purposes only. It does not constitute an offer to sell or a solicitation to buy any security or other financial instrument. FN Arena employs very experienced journalists who base their work on information believed to be reliable and accurate, though no guarantee is given that the daily report is accurate or complete. Investors should contact their personal adviser before making any investment decision.

 

RECENTLY ADDED TO SHARECAFE


 › Thursday At The Close
 › Weekly ETF Market Monitor
 › NextDC Entangled In Push On Data Centre
 › Australian Corporate Bond Price Tables
 › Market At Midday On Thursday
 › Yellen Will Be Remembered For Her Midas Touch
 › The 7-Year Equities Bull Market Lives On
 › Overnight: And Still The Records Tumble
 › NXT - Macquarie rates the stock as Outperform
 › OSH - Deutsche Bank rates the stock as Buy
 › BHP - UBS rates the stock as Buy
 › BHP Production Numbers
 › APRA Sparks Bank Rally
 › BAML Poll Shows Valuation Fears
More ShareCafe   

GET THE SHARECAFE BREAKFAST BRIEFING


Delivered free to your inbox before the market opens each trading day. Sign up below +

SHARECAFE VIDEO


View More Videos