Overnight: Open For Business
The Dow closed up 142 points or 0.6% while the S&P rose 0.8% to 2832 and the Nasdaq gained 1.0%.
The question being asked at the end of 2017 with respect the Australian stock market was as to whether global underperformance could be addressed in 2018. Could we play catch-up? A lot will depend on commodity prices, but then a lot, also, will depend on the banks. Can the ASX200 push to new highs without the banks?
If yesterday’s trading on the local bourse is anything to go by, the answer is no. The futures market suggested an opening of up 30 points yesterday morning, but that was before Citi downgraded Commonwealth Bank ((CBA)) to Sell, citing slowing underlying momentum at a time remediation costs for all the bank’s transgressions are going to weigh. CBA fell -1.2% and the financials sector fell -0.8%.
One reason momentum is slowing in bank-land, or is expected to, is a cooling property market. Or at least, expectations of a cooling property market, given the signs remain contradictory at this point. In data terms, the property market remains buoyant. At street level, shares in listed real estate agency McGrath ((MEA)) are down -40% since August – a time when APRA was further tightening the lending screws. McGrath fell another -12% yesterday, as half the board headed for the life boats.
A lot of faith has been put in a company which runs ads for McGrath and co, but apparently there’s only one man on the planet who can run that company and play David to the Goliath that is REA Group ((REA)). Domain Group ((DHG)) CEO Antony Catalano resigned yesterday and the stock fell -17%. Catalano might almost feel chuffed at that response, but then he probably owns a share or two.
It was not a good day for property on the Australian market, and when we talk property, we talk banks. Citi is not the only broker with a Sell on CBA. Among the eight major stockbrokers in the FNArena database, Morgan Stanley also has a Sell equivalent. All other ratings are no better than Hold.
In yesterday’s Report I was noting movements in various markets since I’d been on my break. One market I neglected to highlight was US Treasuries, and the fact the US ten-year yield was at 2.40% late last year and is now at 2.65%, with a bullet.
Thank God for the supermarkets. We left 2017 with punters coming to believe the Amazon threat, particularly in staples, was overblown, not to mention the Germans as well. (I mentioned it once, but I think I got away with it.) Consumer staples were making a comeback late in 2017 and yesterday rose another 0.8%, having risen 0.8% on Friday.
Media was in the frame yesterday. As traders bailed out of Domain, the value of 60% shareholder Fairfax Media ((FXJ)) fell in concert, sending those shares down -10%. That money appears to have shifted into Seven West Media ((SWM)), up 4.5% yesterday, while stronger ratings results had Nine Entertainment ((NEC)) up 7%. On the leaders’ board, 9 and 7 were 1 and 2.
Yesterday the futures suggested up 30 at the open and we closed down -13. This morning the futures are up 32 with Wall Street stronger, iron ore down -3%, and other commodity prices relatively steady.
Yesterday’s close represented a breach of support at 6000.
Shutdown, shut up!
On Friday night, Wall Street did not sell off on a risk of the US government shutting down. Last night, the Senate agreed to vote to keep the government open until February 8 and assuming that vote passes, the House will then vote. Assuming the House is on-side, America will reopen.
On all those assumptions, all three major US indices hit new all-time highs last night. Get on, or get out of the way.
Much has been made of the fact that prior shutdowns have impacted the US stock market only briefly. This one has had no downside impact at all. Rather than sparking selling, risk of a shutdown simply stalled the buying for a moment. There’s still the matter of the debt ceiling to overcome, and other procedural matters of the “Only in America” variety, but in the meantime, Wall Street doesn’t care.
Netflix shares were bought up 7% last night, ahead of its result due after the bell. They’re up another 3% as I write, so the result must have been okay. Netflix shares are up 21% year to date. And 80% in twelve months.
That about sums up Wall Street at present. And the December quarter corporate results are pre-tax cut.
Aluminium and lead both rose 1% in London. Other base metal price moves were small.
Iron ore fell -US$2.40 to US$75.90/t.
The US dollar index is down again, by -0.2% to 90.41. Gold is up US$3.50 at US$1334.10/oz and the Aussie is up 0.2% at US$0.8012.
West Texas crude is little moved at US$63.49/bbl.
The SPI Overnight closed up 32 points or 0.4%.
The Bank of Japan holds a policy meeting today and global markets will pay keen attention. The slightest hint of any thought of a step towards normalisation will send the yen soaring, and the greenback lower still.
ResMed’s ((RMD)) quarterly earnings result is due tonight.
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