Overnight: No Imminent Threat
The Dow closed down -36 points or -0.2% while the S&P was flat at 2474 and the Nasdaq lost -0.3%.
Commonwealth Bank ((CBA)) CEO Ian Narev had probably been looking forward to announcing the company’s near $10bn profit but instead he is under attack from all sides. To his credit he appears to be accepting all invitations for a media grilling, not that that excuses him.
It was a solid result which led to some tentative buying of CBA (+0.5%) after a couple of days of scandal-related selling. The financials led the local market up yesterday with a 0.7% gain ahead of National Bank’s ((NAB)) quarterly report tomorrow and the other two later in the month.
Materials (+0.6%) enjoyed the benefits of strong base metal price gains overnight while energy (-0.9%) went the other way on a lower oil price. Both sectors should feature to the upside today on an overnight safe haven push into both oil and gold.
Healthcare (+0.7%) is beginning to make a recovery as the Aussie slips away from US80c despite the ongoing selling of Mayne Pharma ((MYX)). The US generic drug industry is in disarray, it would seem, as prices, volumes and, subsequently, share prices, tumble. Mayne (-7.5%) continues to be hammered.
Consumer discretionary (-0.5%) suffered as a result of the weak consumer confidence survey.
All in all a mixed bag of sector-specific moves and no indication of any rush to the fallout shelters.
Westpac’s consumer confidence index had fallen -1.5% this month to be down -5.5% year on year, to the lowest level since April last year. As fast as business confidence is rising, consumer confidence is falling. Interesting that the stand-out element of business confidence is currently the employment sub-index, which in theory should make consumers more confident.
There is, of course, a lot of fear and loathing pervading with regard house prices. Demand for loans nevertheless continues to prove resilient, with the number of loans to owner-occupiers rising 0.5% in June and to investors rising 1.6%. The pace of growth is, however, easing, with owner-occupier loans down -4.0% year on year and investor loans up 5.7% but slowing.
Safe Haven Flows
I did have the pleasure, in my younger days, of travelling to Guam – the jump-off point for diving the wonderful islands of Micronesia. I do hope it stays with us a bit longer.
The US Secretary of State is playing the adult in suggesting North Korea poses “no imminent threat” but Donald Trump is fuelling the fire by boasting about the size of his arsenal and what he can do with it. From Tokyo to Seoul to Washington everyone wished he would just shut up. The US has no ambassador in Pyongyang which makes things difficult.
Wall Street started to feel uneasy on Tuesday night and there was a lot of expectation last might see quite a rush to the exits as geopolitical tension gets past the point of being a mere distraction. But it was not to be. The Dow did open down -88 points but thereafter recovered, and the S&P closed flat.
It was a different situation in out-of-range Europe, where the major indices fell -1-1.5%.
We can also suggest the Dow actually closed flat on 29 stocks, with Disney accounting for all of the -36 point fall. The company posted a weak result and announced it would pull its content from Netflix and start up its own streaming service. Like another one is needed.
While the US stock market held its ground, there was clear evidence of a shift to safe havens elsewhere. Gold is up US$16, the US ten-year yield fell -4 basis points to 2.24% and the VIX is up modestly. Money is flowing into the so-called safe haven currencies of the Swiss franc and yen. Oil is up 1.5%.
The irony is what many a Wall Street commentator is worried about is that fact the US stock market does not seem worried. The run of negligible changes to the broad market index continues. The fear is that such complacency means that when the dam finally does break, the torrent will be substantial.
But try and find a commentator who does not believe a “healthy” pullback is a welcome buying opportunity. Which is why one never comes.
The US dollar index is down -0.1% at 93.51 and gold is up US$16.20 at US$1276.90/oz.
Nickel rose 1% in London as lead fell -1%, with the other metals moving little.
Iron ore is unchanged at US$74.90/t.
West Texas crude is up US75c at US$49.71/bbl.
The Aussie is down -0.3% at US$0.7886 largely as a result of the cross-rates against safe havens.
The SPI Overnight closed up 8 points.
The materials sector will be boosted by gold stocks today but note that Rio Tinto ((RIO)) goes ex-dividend, and that will distort the result.
The government is now trying to appear to control electricity prices because it looks good in the forums so we’ll see what AGL Energy ((AGL)) has to say today when it releases its result.
Rudi will appear twice on Sky Business today. First from 1-2pm, then again on Switzer TV between 7-8pm.
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