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Overnight: Summer Daze
BY GREG PEEL - 09/08/2018 | VIEW MORE ARTICLES FROM FNARENA NEWS

World Overnight
SPI Overnight (Sep) 6204.00 – 3.00 – 0.05%
S&P ASX 200 6268.50 + 14.60 0.23%
S&P500 2857.70 – 0.75 – 0.03%
Nasdaq Comp 7812.01 + 9.33 0.12%
DJIA 25583.75 – 45.16 – 0.18%
S&P500 VIX 10.85 – 0.08 – 0.73%
US 10-year yield 2.97 – 0.00 – 0.07%
USD Index 95.09 – 0.09 – 0.09%
FTSE100 7776.65 + 58.17 0.75%
DAX30 12633.54 – 14.65 – 0.12%

By Greg Peel

And Exhale

Earnings results from Commonwealth Bank ((CBA)) and AMP ((AMP)) yesterday were pretty bad but as well they might be, yet not any worse than feared. CBA actually managed to tick up its dividend while AMP had already flagged a poor result.

Both stocks had been sold down in the couple of session prior on pure anxiety so yesterday saw share price rebounds for both – CBA up 2.6% and AMP up 3.9% — with both houses promising to clean up their acts and restore the faith.

The financials sector thus rose 0.5% yesterday to provide the bulk of the modest gain for the ASX200. Materials rose 0.6% on stronger commodity prices while utilities (-0.5%) provided an offset.

Other sector moves were unremarkable.

Chinese exports rose 12.2% year on year in July, it was revealed yesterday, when 10.0% was forecast. Imports surged 27.3% but the bulk of that reflects this difference in the oil price over the year. Indeed, the price difference outweighed what were actually reduced imports of oil in the month

The tariff war escalated last night, and it appears China now has US oil & gas in its crosshairs. More below.

June housing finance numbers were out in Australia yesterday, and don’t make for encouraging reading. Total housing finance fell a full -1.2% in June, to be down -8.4% year on year. The slide in investor loan demand (or capacity to be granted a loan under tighter standards) continues, with that segment falling -2.7% to be down -18.1% year on year.

Owner-occupiers had been shoring up the defences in recent months but but with a -0.2% drop in June, year on year OO loan demand has now tipped into the negative at -0.1%.

The silver lining to what is an increasing depressed outlook was a 5.4% jump in first home buyer loans. FHBs accounted for 13.3% of all new demand in the month, the highest since mid-2012, helped by stamp duty relief in NSW and Victoria. At least the housing affordability issue is being addressed.

But the overall numbers are not expected by economists to do anything other than get worse from here. Initial drop-off in demand reflects tighter lending restrictions put in place by APRA over the past two years. The banks themselves have already begun anticipating the next round of restrictions expected to be imposed as a result of the RC, which is still in session.

In individual stock news, EclipX ((ECX)) bounced back 10.6% yesterday having fallen -40% on Tuesday following a profit warning. Of the six FNArena database brokers covering the stock, four held onto their Buy ratings (well you’d have to after a -40% fall wouldn’t you?) and two downgraded, but only to Hold.

Tabcorp ((TAH)) enjoyed a 7.6% jump after releasing its earnings numbers. If only there were a World Cup every year.

More Tariff Manoeuvering

In episode 2, we see the SEC asking of Tesla the questions everyone assumed it would have to ask: Why did you choose to make this privatisation announcement on Twitter and do you indeed have the funding you claim to have? In the former case, social media is actually a legal means of corporate notification, but Wall Street is hanging out for an answer to the second question.

Tesla is just a sideshow to the main game of tits and tats. Yet even as the main game escalates, Wall Street seems bored with the story.

Last night the White House announced a 25% tariff will be placed on a further US$16bn of Chinese imports, as had previously been flagged back when the initial US$35bn (which is separate to the steel and aluminium and other tariffs imposed early on) came into effect. The US$16bn will mostly impact on industrial goods such as tractors, speedos (four cars, not to swim in) and chemicals. The new tariffs take effect at midnight August 23.

At 12.01am, 25% tariffs of US$16bn worth of US imports into China will come into effect. These will target coals and cars, among other items.

The US$200bn tranche the White House has planned will, assuming no resolution in the interim, still hit in early September. The Chinese, in retaliation, are considering within their tit response for that tat to target imports of US oil and LNG.

This particular news is telling. Back when the war began, US and Chinese delegates quickly sat down to negotiate, suggesting the whole show would be over by Christmas. Agreement was supposedly reached that in order to restore some balance, China would import more of America’s oil and LNG, given it is a substantial importer of both. Other pledges were made, but in the meantime absolutely nothing has happened.

Trump economic advisor Larry Kudlow has been candid in suggesting all agreements have hit a brick wall at President Xi.

Oil prices fell over -3% last night, due to this new development, and signs in China’s July trade numbers that less oil and gas was being imported, and a lower than expected drawdown on US crude supplies, as noted by the weekly data.

Balancing out the impact of a weak energy sector, more strong earnings numbers ensured Wall Street posted a largely flat session overall, in further summer-lite trading.

Those numbers again: 80% of the S&P500 has reported for over 80% beats and a run-rate of 22% earnings growth and 10% revenue growth. Analysts continue to be astounded.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1213.50 + 3.00 0.25%
Silver (oz) 15.40 + 0.07 0.46%
Copper (lb) 2.77 + 0.02 0.73%
Aluminium (lb) 0.94 + 0.02 2.60%
Lead (lb) 0.96 – 0.01 – 0.55%
Nickel (lb) 6.30 + 0.10 1.62%
Zinc (lb) 1.20 + 0.00 0.12%
West Texas Crude (Sep) 66.88 – 2.21 – 3.20%
Brent Crude (Oct) 72.21 – 2.30 – 3.09%
Iron Ore (t) 69.40 – 0.10 – 0.14%

Outside of oil, metal markets continue to hold their ground after solid trade-related falls over the past couple of months. The flipside to the trade war is greater stimulus from Beijing targeting infrastructure construction in particular.

The US dollar index has ticked down and the Aussie is up 0.2% at US$0.7432.

Today

The SPI Overnight closed down -3 points.

Chinese inflation data are out today.

Locally, earnings reports are due from AGL Energy ((AGL)), Crown Resorts ((CWN)), Magellan Financial ((MFG)), Mirvac ((MGR)), Orora ((ORA)) and Suncorp ((SUN)), among others.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A2M A2 MILK Downgrade to Sell from Neutral Citi
ECX ECLIPX GROUP Downgrade to Neutral from Buy Citi
    Downgrade to Neutral from Outperform Credit Suisse
FBU FLETCHER BUILDING Downgrade to Underperform from Outperform Credit Suisse
RRL REGIS RESOURCES Upgrade to Hold from Reduce Morgans
SEK SEEK Upgrade to Hold from Reduce Morgans
VCX VICINITY CENTRES Upgrade to Outperform from Neutral Credit Suisse

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



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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.

 

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