Overnight: Mixed Messages

By Greg Peel

Thanks!

Yesterday’s performance on the local bourse suggests investors may be beginning to see the light with regard the tenuous Wall Street-Bridge Street correlation. There were rays of hope on Wednesday but yesterday’s performance, in which all sectors bar one closed in the green, was a lot more emphatic.

And this was despite the fact Wall Street’s session on Wednesday night looked like a failed rally, and at such times when sentiment is on edge, failed rallies tend to engender more fear.

Witness European markets last night – Germany down -0.9% and London down -1.3% — which commentators blamed on that failed Wall Street rally (the Dow had been up 200 before closing flat) and the fact the S&P500 had experienced its worst three-day run into Thanksgiving in seven years.

Another dip for the oil price didn’t help either.

But yesterday’s local trade was led by a third consecutive up-day for the banks (+0.8%), which is a rare occurrence in 2018, as both the Westpac ((WBC)) and Macquarie Group ((MQG)) CEOs managed to walk out of the RC unscathed.

Biggest winner on the day was healthcare (+2.7%) as the buy-the-dip bandwagon rolled on for beaten-down CSL ((CSL)) and Cochlear ((COH)), while Primary Health Care’s ((PRY)) AGM was worth 8.0%.

Consumer staples rose 1.3% despite Woolworths ((WOW)) being little changed, Coles ((COL)) yet to trouble the scorer and Wesfarmers ((WES)) continuing its post demerger slide. It was all about the China-facing stocks, with solid gains posted by the milk and cheese stocks and particularly Blackmores ((BKL)).

Yes, who knew that eye of newt was a staple?

The big news of the day came from the lithium sector – far and away the most volatile of all sub-sectors this year along with graphite, cobalt, rare earths and anything else that can be linked to batteries and EVs.

The debate has been raging among analysts all year as to whether the demand trajectory in a post combustion engine and coal-fired world is such that lithium and friends (which includes nickel) are get-in-now investments or whether the rush to build mining and processing capacity in these metals means a glut is in the offing. Well, yesterday was one for the bulls.

Mineral Resources ((MIN)) announced it has (possibly) sold half of its Wodgina lithium mine in WA to US lithium giant Albermarle into a 50:50 joint venture. Based on the price cited, MinRes shares leapt 26.6%.

Unsurprisingly, all lithium boats were duly floated. Galaxy Resources ((GXY)) jumped 9.2%, Kidman Resources ((KDR)) 8.7% and Pilbara Minerals ((PLS)) 7.6%. Orocobre ((ORE)) rose 1.7%. Mustn’t have got the memo.

The bounce in oil prices lifted energy (+0.9%) after a tough week and utilities (+1.1%) as well. The Nasdaq closed in the green on Wednesday night thus so did our IT sector, up 0.7%.

Telstra ((TLS)) went back to its typical contra-play so telcos fell -0.4%.

All up a positive session that left the 5650 support level behind. But whereto now?

Typically, when Wall Street is closed, traders with no other lead tend to look to Europe. As noted, Europe had a bad night and oil prices have dipped again. So our futures are down -24 points this morning despite the fact Europe has only responded (other than oil) to that which was known to us yesterday.

Commodities

Nothing to see here, really, other than to note a smallish dip in oil prices would at any other time elicit a shrug but with nerves also raw among oil traders, a cause for concern.

The Aussie is down -0.1% at US$0.7253.

Today

The SPI Overnight closed down -24 points or -0.4%.

A handful of skeletons will man Wall Street for half a session tonight. The NYSE closes at 1pm. The only highlight up to that point we can predict is a rolling Black Friday sales tally.

Japan is closed today.

BlueScope Steel ((BSL)) and Western Areas ((WSA)) feature among today’s list of AGMs.

DuluxGroup ((DLX)) goes ex.

The Australian share market over the past thirty days…