Overnight: Thrown A Bone

Supposed progress on trade talks provided Wall Street with a counterbalance to bond market concerns last night, albeit not with any great conviction. Dow up 91.

By Greg Peel

Big Buyer?

Recent trading in the local market had been directionless, hindered by global growth concerns, before those concerns manifested in a plunging US bond rate. As US bonds look for stability, the local market was again trying to figure out where to go next, and despite a positive session on Wall Street, and the futures unchanged, the ASX200 was down -20 points around 11am yesterday.

At that point the index swung into the positive and then tracked a near perfect straight line through to 4pm to close on its high. It was a 60 point swing.

The sudden change in sentiment, with no obvious trigger, the orderly nature of the rally and the fact every sector finished in the green suggests a market-wide buy program from someone with a bit of clout. Redeployment of dividends perhaps? Or could we point the finger at stock option expiry day?

While all sectors closed positive, IT (+0.1%) was the laggard, possibly because it’s devoid of any large caps, while telcos (+0.2%) had already outperformed in a falling market to this point.

Consumer discretionary (+1.4%) posted the biggest gain at a time consumer confidence is under pressure, while materials (+1.1%) belied recent strength and energy (+1.0%) turned around after a bad week.

The big-cap bank (+0.4%) and healthcare (+0.4%) sectors made solid contributions.

Among individual stocks, only one move in the ASX200 stood out on the day.

Lithium miner Pilbara Minerals ((PLS)) released three announcements this week – a scoping study of its Pilgangoora project that was very encouraging, an offtake agreement with the Chinese, and, yesterday, a declaration of first commercial production at Pilgangoora. The stock was, as of last week, over 9% shorted and yesterday jumped 15%.

Beyond the Pilbara, individual stock movements up and down were inconsequential within the index.

Yesterday the index fell as low as 6115 and it appears 6100 is offering strong support. Resistance is solid at 6200 and bar one brief pop up to 6260 in early March, the index has bounced around in this range since the beginning of February.

Today we see the futures suggesting down -1 point despite another positive session on Wall Street. It is understandable that futures traders are unprepared to commit at the moment, given the market keeps confounding.

The spanner in the works today will be the gold mining sector, given the gold price has tumbled close to twenty dollars. Otherwise, it’s Friday, and the last day of the quarter.

Trade Hopes Spring Eternal

The US December quarter GDP result was revised down last night to 2.2% from an initial 2.6%, which is not what you want to hear when global growth concerns are rife, bond yields are crashing and the R-word is being thrown about. But the good news? Bond yields didn’t fall further.

The ten-year did move around a bit but ultimately closed a point higher at 2.39%, adding weight to the argument the readjustment has now been made and initial panic buying of bonds has subsided.

The slowing US economy remains a worry, and March quarter GDP growth estimates start with a one. But there is something that might brighten the picture.

Reuters reported last night that the Chinese made “unprecedented proposals” to resolve the long running tariff dispute with the US, aimed at ending accusations of intellectual property theft. We recall that big guns Lighthizer and Mnuchin are in Beijing as we speak.

So still Wall Street is holding out for a positive trade resolution. March has been all about consolidation following the 20% rebound from December, with the Fed now priced in. Last night’s trade can best be described as lacklustre.

Across The Pond, having seized control of the process, the UK parliament has failed to reach a majority on every one of eight separate Brexit proposals, including everything from May’s Third Deal to second referendum. Why does one feel an agreement will never be reached?

That would mean “no deal”, despite the parliament voting against “no deal”. The April 12 deadline approaches, with protesters in the streets loudly proclaiming we had no idea what Brexit actually entailed and what the ramifications would be, could we start again please?

Commodities

The madness in Westminster finally weighed on the pound last night, sending it down over a percent. The US dollar index is thus up 0.3%.

Gold had been looking a bit wobbly as the greenback rebounded and last night gave way altogether, falling over eighteen dollars. It seemed like a big capitulation at a time of global uncertainty, but apparently two big sell orders hit the Comex futures.

Base metals prices remain largely resilient, bar nickel, with recent data suggesting the Chinese are still consuming at a solid rate despite a slower economy, and inventories are low.

The Aussie is down -0.1% at US$0.7077 on greenback strength.

Today

The SPI Overnight closed down one point.

Locally we’ll see private sector credit data today, while a raft of data will be delivered by Japan. Beijing will release its official March PMIs on Sunday.

Tonight in the US sees the catch-up release of January personal income and spending numbers, including the Fed’s preferred PCE inflation measure.

The Australian share market over the past thirty days…