Overnight: Holding Fast

By Greg Peel

Hold the Phone

The market giveth, up 40 on Friday, and the market taketh away, down -30 yesterday. A weak lead from Wall Street was enough to send the ASX200 lower from the open but thereafter it was once more a story of micro news.

For resources stocks it was a tit for tat session. Materials rose 1.6% on iron ore price strength related to the latest Brazilian dam disaster, this time impacting BHP and Rio’s major rival Vale. Energy fell -1.4% on a lower oil price, driven by a jump in the US rig count.

The biggest loser on the day was healthcare, again led down by former pin-up ResMed ((RMD)). The stock fell -12% on Friday following a miss on quarterly sales and that move was described by one major broker as “short-sighted and overdone”. ResMed then promptly fell another -10% yesterday. Healthcare fell -2.5%.

On the other side of the ledger, remember were you were yesterday so you can tell your grandkids you were there the day Telstra ((TLS)) topped the ASX200 leaders’ board. They won’t believe you of course. Telstra jumped 7.8% yesterday and telcos 5.0%.

The move came after TPG Telecom ((TPM)) announced it had halted plans to become Australia’s fourth mobile service provider because Huawei was to provide the 5G system. Now there’s a company that seems to make a lot of news. Interestingly, TPG share rose 3%, suggesting the market was never that keen on the idea of being a fourth player in an already competitive landscape that even Telstra has been struggling in.

Telstra’s move went a little way to offsetting weakness in the banks, but not enough. The banks rose on Friday and fell -1.7% yesterday to provide the bulk of the -30 point index fall. There was no obvious reason, other than the RC report is pending. The government will get its hands on the report on Friday and then sit on it until after market close on Monday.

EclipX ((ECX)) is a financial, and it fell -16.5% yesterday after downgrading expectations and bringing into focus risks surrounding the proposed “merger” with McMillan Shakespeare ((MMS)). But EclipX is too small to move the financials sector -1.7%. It was all about the usual suspects.

Elsewhere, sector moves were are down around -1% with the exception of utilities, which held firm.

Not helping sentiment was sentiment. NAB’s monthly business survey revealed that business conditions – how business are feeling about things currently – fell off a cliff in December along with the stock market. The conditions index fell to 2.2 from 10.6 in November and 13.4 in October.

That’s the lowest level since 2014 and below the long-run average. The biggest segment drop was that of retail, in the month that brings us Christmas.

Confidence – how businesses feel about the future – fell to 2.8 from 3.2 and had long been tracking below conditions.

But try and pick this market. Wall Street is largely flat this morning but our futures are up 23 points.

Strange Fruit

The fun part about writing the Overnight Report in the southern summer is that I’m doing so as Wall Street is closing, which can make it tricky in volatile sessions. Last night was not a volatile session, which is largely due to squaring up ahead of tonight’s Fed statement, but also the aftermarket release of what is basically considered the most important earnings result of all, that of Apple.

As you read this, Apple’s result, released at 8.30am Sydney time, is known. As I write, it’s not yet 8.30. It will be by the time I finish, so consider this Report “live”.

While Caterpillar has been the poster child for Trump’s tariffs and the trade war in with China, sending Wall Street lower on Monday night, Apple is even more of a bellwether and given its size is influential in all three major indices and held by just about every passive investment vehicle there is. It was once said what’s good for General Motors is good for America. Those days are long gone, now it’s Apple.

The rift between Washington and Huawei has now widened beyond just the fraud charges against one executive. Huawei has been accused by the Trump administration not just of violating sanctions on Iran but also of stealing US intellectual property. All ahead of this week’s trade negotiations.

Meanwhile, US consumer confidence has fallen to the lowest level since July 2017, dropping to 120.2 from 126.6 last month on the Conference Board index.

The Conference Board is not a government agency. The latest news regarding economic data prepared by government agencies is that it will all be rescheduled, but no timetable has yet been drawn up. It is likely those numbers being delayed will include the first US GDP estimate.

In terms of the FNArena Calendar, I’m just going to leave it as is, but bear in mind the bulk of those releases will not happen until a later date.

It’s out! And Apple shares are up around 2% in the aftermarket. Mind you, they fell -1% in the session last night and also the night before, so this is a bit of a square outcome. March quarter guidance has fallen a little short of expectation.

It’s not going to move the index dial much tonight, one presumes. So it’s over to the Fed and the trade talks.

Commodities

The iron ore price has continued higher following the dam disaster.

Base metals are modestly higher, without much movement in the US dollar. China’s latest stimulus package continues to provide support.

Gold has hit an eight-month high without help from the greenback. Notwithstanding moves in other currencies (the pound, for example, is flying around on daily Brexit developments), the US dollar is hampered by the fact there are no US data releases to respond to.

I noted yesterday that oil prices had fallen -3% in the session on a higher US rig count but recovered somewhat in the electronic session on the news of the sanctions against Venezuelan oil. That recovery kicked on last night, sending prices back up around 2%.

The Aussie is -0.2% lower at US$0.7149.

Today

The SPI Overnight closed up 23 points or 0.4%.

Australia’s December quarter CPI numbers are out today. Look for 1.7% annual, down from 1.9%.

Westpac’s consumer confidence survey is due.

We will see ADP private sector jobs numbers in the US tonight ahead of no non-farm payrolls report this week.

GUD Holdings ((GUD)) reports earnings today.

Independence Group ((IGO)), Newcrest Mining ((NCM)), Sandfire Resources ((SFR)), Senex Energy ((SXY)) and Syrah Resources ((SYR)) all publish production reports.

The Australian share market over the past thirty days…