Overnight: Tech Fights Back

By Greg Peel

Come in Norway

A public holiday in Victoria had volumes on the ASX a little softer yesterday as the selling from Friday carried over into the new week. The ASX200 was down over -30 points mid-afternoon before buying appeared, most of which was quashed by the close.

The big news of the day was that Norway’s Government Pension Fund is preparing to divest of all its oil & gas exploration and production companies within the fund in what it describes as an ESG move (environment, social, governance). ESG is a growing movement worldwide to which FNArena has this year dedicated a separate news section.

We won’t mention that Norway’s economy is heavily reliant on oil production from the North Sea, and that such a divestment diversifies away from double-whammy risk were the price of oil to structurally decline.

We will mention that the fund holds not insignificant stakes in the likes of Woodside ((WPL)), Santos ((STO)), Caltex ((CTX)) and Beach Energy ((BPT)). The local energy sector was down a standout -1.6% yesterday.

On the subject of fund managers, perpetual underperformer Perpetual ((PPT)) jumped 12.3% yesterday and nobody knows why. Someone must know something, and I’m sure ASIC will be trying to find out who, if speculation of an M&A deal is indeed true.

The financials sector closed down -0.2% nonetheless, as an attempt by the banks to rally late in the day failed. All sectors closed in the red yesterday, except telcos (+0.3%).

Materials also closed down -0.2% despite four of the top five ASX200 winners yesterday being gold stocks, on a revival in the gold price. OZ Minerals ((OZL)) went ex.

Not much point in discussing the day’s trade any further when the futures are up 38 points this morning after a rebound in sentiment on Wall Street.

And the Mexicans are back.

FOMO

On the subject of Mexico, the White House put forward its 2020 budget last night which included a 5% increase in defence spending, funded from cutbacks to Medicare, and included US$8.6bn to fund The Wall. The forecast budget deficit is so many trillions the human mind simply cannot conceive.

The budget is of course an exercise in utter time-wasting, as it will be DOA at the Democrat-led House. The Democrats were not prepared to give Trump the US$5.7bn he originally wanted for his Wall, so what’s the point of US$8.6bn?

The highly anticipated January retail sales data were released last night and as presumed they beat expectations after a shock December number. But a 0.2% rise when 0.1% was expected is hardly retribution when not only did December sales fall -1.2%, that fall was revised down to -1.6%. This, coming off the back of Friday’s shock jobs number, is not the stuff of a Wall Street rebound after a five-day losing streak.

That came down to chipmaker Nvidia, which announced the acquisition of Israeli data centre company Mellanox. The significance of the deal – Nvidia’s biggest – was evident in a share price rally for both stocks, as well as a flow-on effect into the whole US tech sector. In short, Nvidia lit a fire under a market that had gone cold.

The Nasdaq subsequently jumped 2% and the S&P 1.5%. Within the Dow, 29 of the 30 stocks closed in the green. The odd stock out was Boeing, which suffered a -6% in the wake of the Ethiopian air disaster. On a share price basis, Boeing is almost twice the price of the next Dow stock and thus the most influential in points terms in the average.

Also providing comfort to investors was a 60 Minutes interview on the weekend with Fed chair Jerome Powell, in which he stayed on-message in sounding quite dovish.

I noted yesterday that while Wall Street did suffer its worst week of the year last week, in terms of five consecutive down-days, falls were fairly modest given weak openings consistently brought in buyers. The suggestion is that Wall Street’s bounce from Christmas to recover most of what was lost in December was so swift that many investors were caught napping.

They don’t want to miss out (FOMO), so any dip in indices provides a catch-up opportunity. Last night the US indices opened lower, on Boeing and the retail sales number, before the buyers stormed in. Nvidia fired the gun.

So never mind a supposedly weak US consumer (evidence from the private sector continues to suggest otherwise), a very weak jobs number (which no one is prepared to actually believe), slowing global growth and a budget put forward by the White House which has another shutdown written all over it, investors want to play the upside.

Then there’s trade.

Commodities

It was a mixed bag in metals prices last night although gold has failed to go on with it and iron ore continues to falter.

News that the Saudis plan to keep oil production “well below” 10m barrels per day and cut exports to under 7m barrels per day had oil prices on the hop. The Saudi oil minister suggested there would be no change to OPEC/Non-OPEC’s agreed production quotas before a meeting in June.

The US dollar index fell a mere -0.1% last night but the Aussie is up 0.5% at US$0.7067. Looks like the shorts have once again been caught out by a failure to drop through 70.

Today

The SPI Overnight closed up 38 points or 0.6%, just as things were looking grim.

Australian housing finance data for January are out today. NAB will release its monthly business confidence survey.

The US will see CPI numbers tonight.

The bigger stocks on today’s list of ex-divs are News Corp ((NWS)) and Sims Metal Management ((SGM)).

GWA Group ((GWA)) holds an EGM.

The Australian share market over the past thirty days…