Overnight: Fire & Fury
The Dow closed down -33 points or -0.1% while the S&P lost -0.2% to 2474 and the Nasdaq fell -0.2%.
What event shook the world at 10.15am yesterday after the ASX200 opened up 20 points? Nothing. The index reached 5792 and the first movers among the short term traders decided that’s close enough to the top of the three month range to start taking profits on stocks bought at the previous bottom of the range. The buyers stood aside, seeing no reason to stand in front of the train.
Two hours and -70 points later, the index finally bottomed out, before limping to an unconvincing close. Every sector finished in the red – there were no standouts. The Aussie dollar slept through the whole thing.
We could argue that the way the very early local results season is shaping up, it could be the worst season in years. Fund manager IOOF ((IFL)) managed to show it was not the basket case it was considered to be several months ago, and led the few winners on the day with a 6% gain on a strong earnings outlook. But Transurban ((TCL)) and James Hardie ((JHX)) kept the earnings misses flowing, and fell -2% and -6% respectively.
We could argue that investors once again became nervous about the banks; Commonwealth ((CBA)) in particular, but there are also now fears they’re all going to get caught with coding errors. But at -0.4%, the financials sector did no more than join in with the crowd.
We could argue that China’s July trade numbers disappointed, but it was around about the time of their release the ASX200 bottomed out and recovered. Exports rose 7.2% year on year when 10.9% was forecast and imports rose 11.0% when 16.6% was forecast. But was it so bad?
The response from ANZ’s economists was “China’s imports of commodities for July came in better than expected, with the normal seasonal downturn seemingly delayed for another month…Overall the trade data continues a run of better-than-expected data which should be taken positively by the market”.
Which it was, given the index then turned a -50 point loss into a -30 loss. Although there does not appear to be any correlation to be found between yesterday’s market performance and reality. Take yesterday’s NAB business confidence survey as a case in point.
NAB’s business conditions index rose to 15.0 last month from 14.0 in June and confidence rose to 11.7 from 8.4. These are the best numbers since the GFC. Most notable in the details was an ongoing increase in profitability, i.e earnings. We shall soon see whether this translates into the world of publically listed companies.
Meanwhile, a lot of short term traders, most of them of the digital variety, have either made or lost a lot of money these past few weeks. Investors might as well have spent the whole time in Thredbo, and avoided the frustration.
Call that a Warhead?
The Dow was up around 60 points at midday last night in New York, on track for its eleventh straight up-day, and having hit a new record in the previous session, the S&P500 had jumped 10 points. Then the WSJ posted a report suggesting North Korea had developed a miniaturised nuclear warhead to stick on top of the ICBM’s it’s been firing off lately, and could have up to sixty of the blighters.
It was arguably the first time Wall Street seemed legitimately rattled by the North Korea situation, choosing previously to assume it was all a lot of bluster from the mad child king. The US indices turned around and headed back down.
When Donald Trump suggested the North Korea threat would be met with “fire and fury like the world has never seen,” investors ran to the sidelines, fearing just what the mad old king might do next.
But it wasn’t exactly panic. The Dow broke its ten-day winning streak, which was always going to happen at some point. Gold rose a whopping three bucks. The VIX leapt 10%, to 11.
For the S&P, it remains the “quietest” period of trade, in terms of extent of daily moves, since 1965. Fire and fury aside, Wall Street is patiently waiting for tax reform. Or any sort of reform really. Commentators continue to discuss just how long it’s been since the market has had a pullback.
Meanwhile, a heretofore largely overlooked measure of the US labour market – the Job Openings and Labour Turnover Survey (JOLTS) – hit its highest ever level in June. Coming in the wake of the strong July non-farm payrolls result that had Wall Street talking Fed rate hike once more.
The US ten-year yield did not much respond nevertheless, rising 3 basis points to 2.28%.
If the Chinese trade numbers were considered to be weak, there was certainly no disappointment on the LME. Aluminium jumped 3.5% last night, nickel and zinc 2% and copper and lead 1%.
After Monday’s surge, iron ore fell back -US$1.20 to US$74.90/t.
West Texas crude lost -US35c to US$48.96/bbl, despite the standout import into China last month being oil.
Gold is up US$3.40 at US$1257.30/oz. It’s a rather muted reaction to the threat of nuclear holocaust but that seems to be the way of things these days. The US dollar index is up 0.2% at 93.63.
The Aussie is “unch” at US$0.7912.
The SPI Overnight closed up 4 points.
China releases inflation numbers today.
Locally, Westpac releases its monthly consumer confidence survey and housing finance numbers are due.
It should be a fun old time when CBA releases its earnings result today. Carsales ((CAR)) will also be at the plate.
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.