Overnight: Beyond 3000

By Greg Peel

Busy Day

A close of up 2 points for the ASX200 suggests it was a quiet day on the local bourse but this belies an all-day fightback and a lot of movement in individual stocks.

Wall Street had taken risk off the table on Friday night ahead of the weekend, perhaps with due cause given the rejection of the Brexit deal. The computers clearly saw this as a sell-signal from the ASX open yesterday and the index plunged -37 points in the first eight minutes.

It immediately spun around, and then chopped its way back to flat by the close.

From the macro perspective, the computers might have overlooked comments on Saturday from the Chinese vice premier suggesting, “China and the U.S. have made substantial progress in many aspects, and laid an important foundation for a phase one agreement,” which were likely to read as positive when Wall Street opened last night.

From the micro perspective, there was a lot going on.

Having gone into a trading halt after investment company J Capital suggested it was overstating its profits, WiseTech Global ((WTC)) posted a rebuttal and returned to the market. J Capital proffered a second round of accusations, so WiseTech fell another -12.3% yesterday before again going into a trading halt.

Add in ongoing falls for the BNPL players and the IT sector closed down -2.2%.

The CEO responsible for turning Treasury Wine Estates ((TWE)) around from dregs to special reserve announced his retirement yesterday – ultimately in 2021 – so that stock fell -11.8% and consumer staples fell -1.8%.

Yes, wine is a staple.

Seven West Media ((SWM)) announced the sale of its magazines division to Bauer Media for $40m and jumped 11.7%.

Stockland ((SGP)) has been struggling under the weight of perception the residential boom is over but an update silenced the doubters, and it rose 6.5%.

So there were a lot of moving parts yesterday, for once based on some actual news out of companies and not global/macro/geopolitical speculation and posturing.

Those were the days.

Apple-Powered

The Brexit vote may have been a setback but the pound did not fall back against the greenback last night despite having run up hard on the possibility of a deal being struck. This suggests the market remains hopeful. Although last night saw Johnson’s request for another vote rejected.

Overriding were the aforementioned remarks from the Chinese vice premier, and a follow-up from Trump suggesting it was “coming along great”.

It always is.

Boeing again dragged down the Dow last night, which again explains the disparate 0.2% gain for the price average against the S&P500’s 0.7%, which took the broad market index back above the 3000 mark for the first time in a month.

US banks are enjoying an ongoing revival as the ten-year bond yield recovers – it was up 5 basis points last night to 1.79% — and the two-ten spread creeps back from the brink of inversion (now out to 17 points).

Other than perennial trade hope, ongoing positive earnings reports remain the focus on Wall Street. With the S&P stock count at 75, 83% have beaten forecasts against a long-run average of 65%. But we shall check in again at the end of this week, in which 25% of S&P companies report.

Apple has been a primary driver of Wall Street gains over the past few sessions, again hitting a new all-time high last night and reclaiming the biggest stock mantle from Microsoft. Investors continue to wrestle with whether Apple is just a hardware company or whether its services divisions are now more important, while at the same time looking forward to what 5G might do for iPhone sales.

Apple is of course in all three major indices and has recently left FANG in its dust. It also has the third highest nominal share price among the Dow components, so its influence in the price average is also overweighted.

So for now it’s all about earnings, until there is any more news on trade and until the Fed meets next week. Oh yes, and Brexit.

Commodities

Again not a lot going on in commodity markets, other than the usual volatility for nickel.

Any recovery in the iron ore price is still absent.

The Aussie continues to march higher, last night rising 0.3% to US$0.6866 despite the greenback being unmoved. A US-China trade deal would likely send the Aussie surging, which really would have the RBA looking at QE.

Today

The SPI Overnight closed up 20 points or 0.3%.

Cochlear ((COH)), McMillan Shakespeare ((MMS)) and Super Retail ((SUL)) are among those companies holding AGMs today, while Independence Group ((IGO)), Oil Search ((OSH)) and Whitehaven Coal ((WHC)) issue production reports.

The Australian share market over the past thirty days…