Overnight: Everything’s Coming Up Roses

By Greg Peel

Hold Fire

The ASX200 opened with a slight dip yesterday but recovered to be flat by late morning, ahead of the jobs report release. Unemployment fell in September to 5.2% from 5.3%. The index steadily fell throughout the afternoon.

While the 14,000 rise in employment in September was the smallest in seven months, aside from the post-election correction in June, and a fall in the participation rate was the primary driver of the fall in the unemployment rate, that fall still suggests the RBA won’t be going again on Cup Day. The market was not pleased.

Never mind that the RBA had already hinted it was ready to take a breather, as implied by the minutes released on Tuesday. These are fickle times.

Selling was widespread among sectors. Energy (+0.2%) managed to buck the trend on a slightly better oil prices and solid quarterly production reports from both Santos ((STO)) and Woodside Petroleum ((WPL)).

But it was a weak production report from BHP Group ((BHP)) which brought the materials sector undone (-2.0%), with a bit of help from a weak report from gold miner Northern Star ((NST)).

There was consternation in the tech space, as WiseTech Global ((WTC)) fell -10.2% before heading into a trading halt. A Chinese short-seller published a report accusing the company of overstating its profits. Afterpay Touch ((APT)) suffered another day of selling (-5.7%), following UBS’s bearish initiation the day before. Afterpay took peer Zip Co ((Z1P)) with it (-11.1%). IT (-2.4%) was the worst performer on the day.

The banks were not immune either, although the sector “outperformed” on the day in falling only -0.4%. Bank of Queensland ((BOQ)), which incidentally moved up last week into the 10%-plus shorted bracket, fell -2.4% on an earnings result miss and a dividend cut.

Tempering the financial sector’s fall was a positive update from IOOF Holdings ((IFL)) on its ANZ Wealth acquisition, which had that stock winning the session with a 10.8% gain.

So there was quite a bit going on on the micro front yesterday, exacerbating disappointment on the domestic macro front. While a fickle market might be trigger-happy at this time, economists agree the Australian job situation did not look any rosier yesterday than it did the day before. Signs are that the labour market will continue to weaken, and the RBA will be back at it again before too long.

Much amusement, nonetheless, from the Coalition talking themselves up (fall in unemployment) and Labor talking them down (lower participation).

Idiots, one and all.

Progress?

Another relatively sedate session on Wall Street saw the Dow up a hundred points early and back to square mid-session before closing a tad higher.

On the micro front, Morgan Stanley rounded out a full suite of positive results from the US Big Banks with its earnings report, rising 1.5%. Netflix had reported after the bell on Wednesday night, but its initial 7% jump was pared back in the day-session to only 2.5%.

US industrial production fell -0.4% in September – its biggest drop since April – while new home construction dropped -9%. The Philadelphia Fed manufacturing index fell to 5.6 from 12.0, not matching a gain for the New York State equivalent reported earlier in the week.

Wall Street is nevertheless not quite sure these days whether bad news is good (Fed rate cut) or bad news is bad (R-word).

In the wider scheme of things, hope springs eternal on the Brexit front as a “tentative” agreement has been reached between Boris and the EU. Not sure why this is positive, given the UK parliament has to agree tomorrow night and already the Irish are baulking.

White House chief economic advisor Larry Kudlow said last night the US and China have come “further than we ever have before” with regard trade negotiations, implying a “phase one” deal may yet be signed. If a promise to buy more soybeans in exchange for a withdrawn tariff rate hike is further than ever before, what the hell have they been doing up to now?

Trump plans to meet with Xi at the APEC summit next month in Chile for a formal signing. Trump has also decided next year’s G7 meeting, to be hosted by the US, will not be held in Washington, or New York, or anywhere else obvious, but at his resort in Miami.

He won’t be profiting though, of course. Just showing off.

As we head into Friday, Saturday’s Brexit vote in the UK parliament is front and centre, amidst ongoing US earnings reports.

Commodities

Nickel remains volatile, while the slide in iron ore is persisting for now.

The US and Turkey have reached a temporary cease-fire pact in Syria, supporting oil prices.

Forex traders are clearly short Aussie again, as usual, given its up 0.9% to US$0.6825 on the jobs numbers, aided by a -0.4% fall for the greenback.

Today

The SPI Overnight closed down -13 points or -0.2%.

China reports September quarter GDP today, with 6.1% growth forecast.

September retail sales, industrial production and fixed asset investment numbers are also due.

Bond proxy darling Sydney Airport ((SYD)) reports quarterly traffic numbers.

The Australian share market over the past thirty days…