Overnight: Softly Softly

By Greg Peel

Off with their heads

Straight out of the AMP playbook – no intention of resigning, public outcry, share price collapse, capitulation. Off goes the Westpac CEO with the chairman to follow. Not enough heads for some (yet) but it was worth 1.7% to the Westpac ((WBC)) share price.

The bargain hunters moved in on all the banks yesterday, following this latest swoon, and the sector rose 0.8% to help underpin another solid day of comeback buying on the ASX.

There will be those wondering why they sold certain healthcare stocks last week in the Westpac-triggered pullback, as healthcare (+2.0%) returns as market leader.

For the second day in a row, consumer discretionary has sagged as all about have recovered. There has been no one standout stock causing the weakness, so perhaps we’re not looking forward to a merry Christmas.

Everything else went up, including the bond proxies, although telcos had a breather after leading on Monday. Energy was the other primary driver, with a 1.8% gain, following the announced takeover offer for Caltex Australia ((CTX)) by a Canadian convenience store chain. The shares rose 13.4% before going into a trading halt.

Coming out of a trading halt was Bank of Queensland ((BOQ)), after its capital raising, which forced a -5.8% drop. The bank is as yet unable to say what it intends to do with the money.

Wealth management SaaS company Bravura Solutions ((BVS)) said the right things at its AGM and jumped 11.8% to be second best performer on the day, in an untypically quieter session for IT.

The ASX200 closed a mere 17 points short of the high marked a week ago on RBA rate cut exuberance, and 58 points below the all-time high marked in July.

On the subject of the RBA, last night the governor made a much anticipated speech regarding unconventional monetary policy. In it we learned the board would take the cash rate down as far as 0.25% (two more cuts) but not beyond, and certainly not negative. QE would be considered thereafter, but would only involve buying government bonds, on the secondary market, and not corporate bonds.

Philip Lowe does not believe we’ll get there, but the RBA is prepared if its employment and inflation objectives do not look like being met.

The resounding conclusion from economists across the globe, after the ten-year experiment, is that QE doesn’t work. (My words, not his).

Final Throes

President Trump pardoned the White House turkey last night. If you were watching, the turkey was left of screen.

At a typically light-hearted and family-friendly ceremony, Trump took the opportunity to make a couple of visceral snipes at the Democrats and the media, and bang on about how great America is with him as president. He had also previously declared that a phase one trade deal was in its “final throes”.

Among the adults, the Chinese Commerce Ministry last night revealed the Chinese premier and US trade delegates had spoken on the phone, and that the two sides had discussed “solving issues regarding each other’s core concerns, reached consensus on properly resolving related issues and agreed to maintain communication on remaining issues in consultations on the phase one deal”.

Yes Minister.

But Wall Street liked it all enough to inch all three major indices into further blue sky territory, despite there still being no clue about the December 15 tariffs, which are becoming an increasingly anxious topic of conversation as time ticks away.

The tariffs focus on consumer goods, and would be a kick in the guts for Santa. Notably, the monthly Conference Board index of US consumer confidence showed a drop to 125.5 from 126.1 to mark the fourth straight decline.

New home sales also fell, but in terms of consumer confidence in general, economists note that 125 is still an elevated number (100 neutral), and overall housing data still indicate a positive trend.

Disney led the Dow last night, rising 1.3% on news the company is signing up subscribers at the rate of a million a day to its new streaming service. Apparently there’s some pretty bad weather across the US at the moment (they think they’ve got problems), which would lead to wanting something to do indoors.

Commodities

Inventories of lead have more than doubled at the Shanghai exchange in two months. Zinc has similar issues.

Iron ore appears nervous about the nineties.

Wall Street might be becoming more excited about a trade deal, but the US ten-year yield ticked down -2 points last night to 1.74% and the gold price rose for the first time in a while.

The Aussie is 0.2% higher at US$0.6788.

Today

After yesterday’s surge, the SPI Overnight closed down -8 points this morning.

On the day before Thanksgiving, the US will see data for durable goods and PCE inflation while the Fed Beige Book will be released and another revision of September quarter GDP will be published.

Here we’ll see September quarter construction work done, ahead of our own GDP next week.

Collins Foods ((CKF)) and Fisher & Paykel Healthcare ((FPH)) report earnings today. Telstra ((TLS)) and Perpetual ((PPT)) host investor days.

Harvey Norman ((HVN)) is among those holding AGMs. Amcor ((AMC)) goes ex-div.

The Australian share market over the past thirty days…