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

Overnight: Confusion Meets Quarter-End
BY GREG PEEL - 28/06/2018 | VIEW MORE ARTICLES FROM FNARENA NEWS

World Overnight
SPI Overnight (Jun) 6127.00 – 11.00 – 0.18%
S&P ASX 200 6195.90 – 1.70 – 0.03%
S&P500 2699.63 – 23.43 – 0.86%
Nasdaq Comp 7445.09 – 116.54 – 1.54%
DJIA 24117.59 – 165.52 – 0.68%
S&P500 VIX 17.91 + 1.99 12.50%
US 10-year yield 2.83 – 0.05 – 1.84%
USD Index 95.30 + 0.63 0.67%
FTSE100 7621.69 + 83.77 1.11%
DAX30 12348.61 + 114.27 0.93%

By Greg Peel

Fickle

The closing move for the ASX200 yesterday suggests nothing at all happened, and indeed while there were some sups and downs through the session, the range was fairly limited. But as was the case in Tuesday’s slightly weaker session, there was plenty going on underneath among the sectors.

Except yesterday saw a complete reversal of Tuesday. Everything that went up/down on Tuesday went down/up yesterday. Yet other than pointing to ongoing US trade uncertainty, nothing changed in the interim.

Commodity prices obviously influenced a turnaround for the resources sectors, with energy up 1.2% and materials up 0.6%, but consumer discretionary was down on Tuesday and up 0.9% yesterday, staples were up on Tuesday and down -0.2% yesterday.

IT was sold off with the Nasdaq but rebounded 0.6% yesterday, and telcos looked like a defensive option on Tuesday but went back to being sold yesterday, down -1.5%. The banks were up and yesterday they were down again.

What can we glean from the two sessions? Nothing. It will be unclear until we get into clean air next week as to what the direction of the market is. We have to get through month/quarter/year-end. The argie-bargie is on, and there are two more sessions to go.

At the individual stock level, Australian Pharmaceutical Industries ((API)) has topped the ASX200 leaders’ board all week, and was up another 4.5% yesterday to make it 22% for the month, following its announced acquisition of a 50.1% stake in Clearskincare Clinics, moving to full takeover by 2021.

Obviously there’s plenty of complementary accretion on offer.

Having announced a capital raising to fund its acquisition of HT&E’s ((HT1)) Adshel business, oOh!media ((OML)) dropped -5.9% yesterday on dilution, to be the biggest loser. Poor old Metcash ((MTS)) is finding it hard to convince the punters, having reported earnings on Monday. The stock was down -5.7% to be down -24% for the month.

Now that HT&E has lost its outdoor advertising business, will it now become just H&T?

More of the Same

Early in last night’s session in New York, a White House statement was released that appeared to imply a more moderated approach by the president to curb Chinese investment in US technology companies. The suggestion is existing laws will be relied upon rather than new restrictions being imposed.

Having been sold down on such fears on Tuesday night, the Dow jumped almost 300 points in the first hour.

But that was it for the day. Whether or not the doubters moved in to sell on the rebound, or whether quarter-end book squaring was the trigger, was unclear.

There’s still a lot of consternation in the global auto market, with tariffs being threatened left, right and centre, on top of tariffs that already exist. Add in US tariffs on steel and aluminium, and the industry is in a state of turmoil. The big three German carmakers, Daimler, BMW and VW, have been sold down all week, and last night Toyota warned of substantial price increases ahead for its cars produced in the US – never mind imported vehicles – due to increased costs brought about by the tariff tit-for-tat.

It’s one reason trade war fears and uncertainty linger, and the whole IP thing, which doesn’t actually involve tariffs per se, is even more confusing. Reason enough to sell.

But the give-away is the Russell small cap index, which was the worst performer among the major indicators last night in falling -1.7%. In the weeks prior, the Russell was hitting consistent all-time highs as a trade war safe haven.

The Nasdaq has more of an excuse to fall on IP confusion but was also hitting new all-time highs before this week. It is quite obvious, commentators suggest, selling in small caps and tech is simply a quarter-end phenomenon – one sells the winners and puts that money into the losers to square off for the quarter ahead.

The other point to note is next Wednesday is the Fourth of July, meaning US markets are closed and trading is broken up into two two-day sessions in the week. A lot of market participants base their summer vacation around this holiday. Volumes will thus be thin and many an investor will be reluctant to play in earnest until probably the week after, which leads into the quarterly result season.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1251.60 – 7.00 – 0.56%
Silver (oz) 16.01 – 0.26 – 1.60%
Copper (lb) 3.03 – 0.02 – 0.62%
Aluminium (lb) 0.98 + 0.01 0.89%
Lead (lb) 1.10 + 0.01 1.16%
Nickel (lb) 6.74 + 0.13 2.02%
Zinc (lb) 1.33 + 0.01 0.93%
West Texas Crude (Aug) 72.30 + 1.62 2.29%
Brent Crude (Aug) 77.40 + 0.75 0.98%
Iron Ore (t) 63.80 – 0.85 – 1.31%

Commodity prices had to fight a 0.7% jump in the US dollar last night but this didn’t seem to have much impact, except in gold. Iron ore is down but is typically not a dollar-driven mover.

Nickel is back to its old yo-yo self and metal-specific issues are colliding with trade war uncertainty to create volatility on the LME at present.

If Tuesday night’s reaction to the US ban on Iranian oil imports from November was an overreaction, it wasn’t evident last night as WTI jumped another 2.3%.

Stand by for two elements to be citied as excuses for misses this upcoming US earnings season – the dollar and the cost of fuel.

The Aussie is off another -0.6% at US$0.7343.

Today

The SPI Overnight closed down -11 points or -0.2%.

The RBNZ holds a policy meeting this morning.

The last revision of US March quarter GDP is out tonight.

Locally, individual stocks options expire on the ASX.

Most importantly, there is an enormous list of ex-divs today, and the bulk of those are bond-proxy stocks such as REITs, property developers and infra funds, which all pay high yields. This ensures the ASX200 will start with a handicap this morning irrespective of sentiment.

Rudi will appear on Sky News Business from noon until 2pm.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
CCP CREDIT CORP Upgrade to Add from Hold Morgans
    Upgrade to Accumulate from Hold Ord Minnett
CKF COLLINS FOODS Upgrade to Buy from Hold Deutsche Bank
DMP DOMINO'S PIZZA Downgrade to Hold from Add Morgans
DWS DWS Upgrade to Hold from Lighten Ord Minnett
EPW ERM POWER Upgrade to Neutral from Underperform Macquarie
MHJ MICHAEL HILL Downgrade to Neutral from Buy Citi
MTS METCASH Downgrade to Sell from Hold Deutsche Bank
NST NORTHERN STAR Upgrade to Buy from Sell UBS
RRL REGIS RESOURCES Downgrade to Neutral from Outperform Macquarie
SAR SARACEN MINERAL Downgrade to Neutral from Outperform Macquarie
SBM ST BARBARA Downgrade to Neutral from Outperform Macquarie

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.



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.

 

SHARECAFE VIDEO


Ironbark Karara discuss Altium (ASX:ALU)

More video   

RECENTLY ADDED TO SHARECAFE


 › Djerriwarrh Undershoots But Holds Dividend Steady
 › Emeco Turnaround Fails To Inspire Investors
 › Whitehaven Overcomes Coal Port Congestion
 › Tuesday At The Open
 › Marcus Today End Of Day Report
 › Monday At The Close
 › Australian Listed Real Estate Tables
 › Market At Midday On Monday
 › Groupon Becomes Its Own Groupon
 › Australian Dollar Takes Another Beating
 › How Spain's Economy Collapsed
 › MLX - Macquarie rates as Outperform
 › IDR - Morgans rates as Hold
 › PRU - Citi rates as Buy
More ShareCafe   

GET THE SHARECAFE BREAKFAST BRIEFING


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