Overnight: Earnings Trump All

By Greg Peel

Near Miss

The Australian market gave back most of Wednesday’s mild recovery from Tuesday’s coronavirus-led fall yesterday as fears resurfaced. Solid falls once more in the likes of Webjet ((WEB)) and IDP Education ((IEL)) along with selling in Sydney Airport ((SYD)) told the tale.

An earlier playing down of the seriousness of the virus outbreak has begun to look possibly misguided as the case count and death toll grow exponentially. Having initially decided against doing so, last night WHO declared coronavirus a global emergency.

Perhaps strange, then, that the biggest sector fall on the ASX200 came from healthcare (-1.4%). But then it had to happen eventually. Profit-taking saw CSL ((CSL)) down -1.8% after having risen 12% for the month and 60% in twelve.

The banks (+0.4%) provided the bulk of the balance against selling, despite global bond yields turning lower once more. Commonwealth Bank ((CBA)) rose 1% after announcing a move into the BNPL space.

Elsewhere it was a bit of a mixed bag.

Consumer staples and telcos (both +0.3%) played safe haven but utilities fell -0.9%. Consumer discretionary held its ground (+0.1%) despite being virus impact central.

Selling in materials (-1.0%) continued.

On Wednesday it was Treasury Wine, yesterday it was Nearmap ((NEA)). The ever volatile tech company yesterday reduced its full year annual contract value guidance to $102-110m from a prior $116-120m and promptly fell -29.8%.

A nod to those who had Nearmap 12.4% shorted as of last week.

On the other side of the ledger, gold miners again crowded the leaders’ board, while Treasury Wine Estates ((TWE)) managed a 5.3% rebound to take silver.

But just when you thought the virus impact might be about to send the index on another leg lower today, a big intraday turnaround on Wall Street has our futures up 37 points this morning with a little help, I’d wager, from Amazon’s after-the-bell earnings release.

As you were.

Stay Calm and Carry On

British Airways and Canada Air have now cancelled flights to China. United Airlines has suspended some flights into China given a lack of demand. Starbucks said last night it was just about to raise its earnings guidance but has now held off, given the virus has shut half its stores in China.

Coronavirus is having an undeniable impact, yet Wall Street is trying to maintain a brave face. While the Dow was down -245 points late morning, it closed up 125 as traders paid more attention to earnings releases.

Tesla jumped 10% on its earnings release, despite having flown to the moon in past months. The company now has a market cap greater than the Big Three US automakers combined.

Microsoft (Dow) jumped 2.8% and Coca-Cola (Dow) 3.8%.

Facebook, on the other hand, fell -6%, citing a maturing business and the impact of privacy regulations.

Fedex rival UPS fell -6.8%. If we need a clue as to what is impacting on parcel services we might look to Amazon’s result, which was posted after the bell. Amazon is up 13%.

Which suggests a solid session tonight, ceteris paribus.

In economic news, US GDP grew by 2.1% in the December quarter, last night’s first estimate suggested, beating expectations of 1.9%. The US consumer again led the charge, along with a solid housing market.

So far, suggestions the US economy will lead the world in 2020 appear robust.

Commodities

The falls were relatively minor last night, but base metal prices continue to slide away.

It was only one day’s reprieve for iron ore.

Gold was steady last night despite another -4 basis point drop in the US ten-year yield to 1.56%.

The oils, too, are slipping again. Aforementioned airline news won’t help.

And after stalling since Monday night’s sell-off, the Aussie has fallen -0.5% to US$0.6720.

Today

The SPI Overnight closed up 37 points or 0.5%.

Australia reports December quarter PPI numbers today, along with monthly private sector credit.

The last day of the month is typically the day Beijing releases its PMI numbers, but as to whether that’s going to happen is unclear. Chinese markets were due to reopen after LNY today but won’t, and at this stage are also closed on Monday pending further updates.

Monday is when China’s monthly “data dump” is due.

The eurozone reports its GDP tonight.

ResMed ((RMD)) reported earnings this morning and GUD Holdings ((GUD)) also reports today.

I might be jumping the gun – not till 11pm GMT – but Happy Brexit.

The Australian share market over the past thirty days…