Overnight: Mild Enthusiasm

By Greg Peel

Industrial Crunch

The local futures showed up 53 points yesterday morning which while matching the S&P500’s overnight move in percentage terms, still looked a little ambitious for our market. Sure enough, the ASX200 did clock up a 50 point rally in the first hour, but that was it.

From eleven till lunchtime we drifted steadily back to halve that gain and then traded sideways for the rest of the session. Indeed, the first week of February got us back over the 6000 mark and as result season has played out, the index has drifted sideways ever since.

All the action has been in individual stock moves related to earnings results and a seemingly steady stream of last minute profit warnings ahead of result releases.

Take Bingo Industries ((BIN)) for example.

The recycler is due to report in a week’s time but yesterday downgraded earnings growth guidance to flat from a prior 15-20%, blaming a faster than expected decline in residential construction, a decision not to increase prices and a reconfiguring of development projects. Bingo shed half its value on the day. There was no chance to sell on the way down – the stock closed on Monday at $2.30 and opened yesterday at $1.39, closing at $1.17.

Also issuing a profit warning, although not due to report until after the regular result season was Bank of Queensland ((BOQ)), which warned profits could fall by as much as -10% year on year. The share price fell -6.3%, having already been thumped last week when peer Bendigo & Adelaide Bank ((BEN)) delivered a weak result.

Bingo topped the ASX200 leaders’ board yesterday, unsurprisingly, and BOQ came in third. In second place was employee management SaaS company Smartgroup Corp ((SIQ)), which disappointed with its result and fell -9%.

Another stock to disappoint was travel agent Helloworld ((HLO)), not in the index, which fell -7% after downgrading guidance. But the day wasn’t all about disasters.

Automotive Holdings ((AHG)) fell -8.2% on Friday following its result, which included a write-down of the company’s albatross, being its refrigerated logistics business. It seems investors then had a think about it, and yesterday Auto Holdings jumped 8.6% to top the leaders’ board. Note that 8% up from the bottom does not get you back to where you fell -8% from the top.

Kitchen & Bathroom specialist GWA Group ((GWA)) took out the silver with its result release, rising 4.4%, while latex safety gear supplier Ansell ((ANN)) got the bronze with 4.1%.

Outside the index, it’s been uncertain times for investment platforms in the wake of the RC, and an early train wreck in this result season was Praemium ((PPS)). But yesterday peer Netwealth ((NWL)) jumped 7% following its result.

From a sector perspective, industrials was the only loser on the day in falling -0.7%. Consumer discretionary closed flat, but all other sectors finished in the green. The banks only just got there, with Westpac’s ((WBC)) benign trading update helping to counter BOQ’s fall from grace.

Energy (+1.6%) starred yet again as the oil price keeps rising while Materials (+1.0%) is caught in the updraught of US-China optimism.

Yesterday the coin came up heads for both Telstra and CSL. Telcos rose 1.0% and healthcare 0.8%.

Nothing ambitious about the futures call this morning, down -3 with Wall Street closed. From here on the day’s list of reporting companies begins to get very, very long.

Commodities

Not a lot to report.

Copper, iron ore, gold and oil continue to rise on the trade optimism theme, helped by another -0.1% dip for the US dollar index.

The Aussie is flat at US$0.7130.

Today

The SPI Overnight closed down -3 points.

The minutes of the February May RBA meeting – the first for this year – are due today. We recall that the shift in stance to neutral from a prior latent hawkishness was revealed by Dr Lowe in a speech subsequent to the release of the February statement, not in the statement per se.

BHP Group ((BHP)) is in the earnings frame today, along with Cochlear ((COH)), Coles ((COL)), IOOF Holdings ((IFL)), Oil Search ((OSH)) and Seven West Media ((SWM)), along with many others.

The Australian share market over the past thirty days…