Overnight: Sidelines Look Good
|SPI Overnight (Jun)||6054.00||– 8.00||– 0.13%|
|S&P ASX 200||6057.30||+ 32.20||0.53%|
|S&P500||2770.37||– 1.98||– 0.07%|
|Nasdaq Comp||7635.07||– 54.17||– 0.70%|
|S&P500 VIX||12.13||+ 0.49||4.21%|
|US 10-year yield||2.93||– 0.04||– 1.41%|
|USD Index||93.45||– 0.17||– 0.18%|
|FTSE100||7704.40||– 7.97||– 0.10%|
|DAX30||12811.05||– 19.02||– 0.15%|
By Greg Peel
It was a strong session for the ASX200 yesterday and a rare session in which initial strength was seen in the opening rotation, as is often the case, but this time the market went on with it. All the way to 45 points higher at lunchtime before a typical afternoon drift.
The resources sectors one again provided the leadership. Materials (+1.3%) enjoyed a rise in the iron ore price while energy (+1.3%) ignored a fall in the oil price, albeit that has swung back up again overnight. The big miners are back in favour as the global economy again looks healthy, particularly the US.
There was nevertheless some concern over Fortescue Metals’ ((FMG)) decision to throw its hat into the ring in the chase for the Lazarus of low-grade iron ore mining, Atlas Iron ((AGO)). Mineral Resources’ ((MIN)) offer to date has been uncontested and Fortescue shares fell -1.3%.
There was little concern over a greater than expected fall in Australian exports in April, down -2.2% when -0.9% was forecast, given the strength of the first quarter. The iron ore price has come off a bit and both the coal price and export volumes have dipped.
Consumer staples (+1.0%) also led from the front following Wesfarmers’ ((WES)) analyst briefing, which was unremarkable other than confirmation the Coles spin-off is planned for FY19.
Smaller rises were booked in other sectors, including a rare 0.5% gain for telcos and a 0.2% graft for financials despite AMP ((AMP)) once again appearing in the ASX200 top five losers’ board, following the announcement of a fourth class action.
Utilities (-0.1%) are out of fashion and the only real loser yesterday as IT took a breather following a strong few sessions.
Outside the ASX200, the announcement Mick McMahon will no longer rule the roost at Inghams ((ING)) had the feathers flying, sending that stock down -9% despite a near 7% short position.
While it was a solid performance, volume was low and will no doubt be lower today as we head into the long weekend. It’s a big week in geopolitics and monetary policy considerations next week, and already Wall Street is moving to the sidelines.
G7 leaders are in Canada ahead of the weekend’s meeting, at which trade is destined to be the hot topic. As to whether anything comes out of the meeting is anyone’s guess. Usually they’re little more than photo-ops, but this time might be different.
The G7 meeting will give way to the North Korean summit and three central bank policy meetings. The Fed is booked in for a rate rise but all eyes will be on the ECB.
After a four-day winning streak, the Nasdaq turned modestly lower last night as traders extracted their FANG winnings ahead of potential volatility. The Russell small cap also fell slightly after a very strong recent run.
The Dow managed to post a gain with a bit of help from McDonalds, which announced it was jettisoning a load of middle management and subsequently rallied 4%, and the big oil companies, given a sharp bounce back in oil prices.
The S&P500 summed up the broader market in falling -0.1%.
Having earlier dipped on rising US crude inventories, WTI jumped back 1.5% last night after several European oil companies announced plans to withdraw from Iran lest they be hit with US sanctions, and data showed Venezuela is nearly a month behind on its delivery contracts.
Iran will no doubt be another agenda item at the G7, given no other members are keen to support the US on sanction reimpositions. Corporations clearly intend to play it safe, nonetheless.
The US ten-year bond yield was about to reclaim 3% before last night falling back to 2.93% to underscore the market’s desire to play safe ahead of next week. The US dollar index fell -0.2%.
It was not a “risk off” session per se, driven by any fear, but simply a square-up after a strong few days with plenty ahead to consider.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1296.80||+ 0.90||0.07%|
|Silver (oz)||16.67||+ 0.02||0.12%|
|Copper (lb)||3.28||+ 0.04||1.27%|
|Aluminium (lb)||1.04||– 0.01||– 1.40%|
|Lead (lb)||1.15||+ 0.00||0.38%|
|Nickel (lb)||7.01||– 0.05||– 0.72%|
|Zinc (lb)||1.45||– 0.00||– 0.01%|
|West Texas Crude (Jul)||65.95||+ 0.94||1.45%|
|Brent Crude (Aug)||77.34||+ 1.54||2.03%|
|Iron Ore (t)||65.15||– 0.05||– 0.08%|
Copper’s ascendency continues while aluminium bounces back and forth.
I doubt iron ore’s going to scare anyone today, while gold appears to have gone into hibernation.
The Aussie is off -0.6% to US$0.7623 on the weaker trade data, having shot up earlier in the week on the stronger (but older) trade data.
The SPI Overnight closed down -8 points. I wouldn’t expect much out of today’s pre-holiday session.
China will release its May trade numbers today and inflation data tomorrow.
S&P/ASX will today announce promotions/relegations within the local indices in the regular quarterly rebalance. Such adjustments have to be matched by index-tracking funds, typically before they come into effect next Friday.
Rudi is ready to connect with Sky News Business, via Skype, and appear at around 11am to talk share market and broker calls.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|AGI||AINSWORTH GAME TECHN||Downgrade to Underperform from Neutral||Macquarie|
|ALX||ATLAS ARTERIA||Downgrade to Hold from Add||Morgans|
|CYB||CYBG||Upgrade to Outperform from Neutral||Credit Suisse|
|DLX||DULUXGROUP||Upgrade to Neutral from Sell||Citi|
|JIN||JUMBO INTERACTIVE||Downgrade to Hold from Add||Morgans|
|MGR||MIRVAC||Downgrade to Sell from Neutral||UBS|
|RHC||RAMSAY HEALTH CARE||Downgrade to Underperform from Neutral||Credit Suisse|
|STO||SANTOS||Downgrade to Sell from Neutral||UBS|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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