World Overnight | |||
SPI Overnight (Mar) | 6992.00 | + 12.00 | 0.17% |
S&P ASX 200 | 7049.20 | + 73.10 | 1.05% |
S&P500 | 3345.78 | + 11.09 | 0.33% |
Nasdaq Comp | 9572.15 | + 63.47 | 0.67% |
DJIA | 29379.77 | + 88.92 | 0.30% |
S&P500 VIX | 14.96 | – 0.19 | – 1.25% |
US 10-year yield | 1.64 | – 0.01 | – 0.30% |
USD Index | 98.46 | + 0.18 | 0.18% |
FTSE100 | 7504.79 | + 22.31 | 0.30% |
DAX30 | 13574.82 | + 96.49 | 0.72% |
By Greg Peel
Confidence Builds
On Wednesday the Australian market opened with a flourish following Wall Street’s accelerated rebound, but immediately fizzled. Investors were not yet convinced coronavirus would prove but a blip in the data, it seemed. Yesterday opened in a similar fashion, and similarly fizzled through the morning. But in the afternoon, buyers became more emboldened.
News that China will halve tariff rates on US$75bn of exports to the US on February 14, as per the phase one agreement, provided a boost. While Beijing has held this up as “promoting healthy trade relations”, clearly the Chinese economy now needs all the help it can get.
By the close, the energy sector had led the charge (+1.6%) on anticipated production cuts from OPEC-Plus. On Wednesday Commonwealth Bank ((CBA)) was on the nose as the world’s “most expensive bank”, according to UBS, but by yesterday, no one cared. Financials gained 1.4%.
Materials (+1.2%) have enjoyed a rebound on Chinese stimulus despite a fluctuating iron ore price. Yesterday’s trade data, which showed exports held up in December against higher imports, also provided support.
The standout sector remains healthcare (+1.3%). It is the one sector to have consistently rallied against the trend during the virus scare, yet continues to rally even as virus impact fears ease.
Let’s face it the virus itself hasn’t eased.
Lucky for CBA it wasn’t sold again yesterday, for CSL ((CSL)) may have closed as the country’s biggest company.
Among the defensives, consumer staples, telcos and industrials all chipped in with 0.8% gains but utilities (-0.2%) were the only loser on the day. Consumer discretionary managed 0.7% in the wake of December retail sales data.
Retails sales fell -0.5% in the biggest spending month of any year. Forecasts were for -0.2%. Retailers only have themselves to blame.
While the bushfires would have impacted on spending in December, and will really make their mark in the January numbers, the reality is the trend to embrace another American holiday as a pathetic cash-grab has dragged spending into November from December. The November numbers were surprisingly good, so economists saw this coming. It would not be much of an issue if it weren’t for the fact Black Friday is all about discounts before Christmas.
That said, December quarter sales netted a 0.5% gain after being flat in all three quarters beforehand. IT (+0.3%) was a surprising laggard in yesterday’s rally.
Network builder Service Stream ((SSM)) proved a drag, falling -9.1% on its earnings result. Loser on the day also included all the battery-related miners that had soared on Wednesday, after Tesla fell back -17%.
On the upside, fund managers won the day. Pinnacle Investments ((PNI)) reported earnings and jumped 11.2%. Janus Henderson ((JHG)) produced a delayed 7.1% gain after (some) analysts cheered Tuesday’s earnings result.
Elders ((ELD)) rose 6.1%. Why? Look out the window.
Fatigue Creeping In
On any other day, news that China will halve tariffs would have had Wall Street surging. But Wall Street has already surged almost 900 Dow points in two sessions, so last night traders found it difficult to be overly excited. The US indices chopped around all session without gaining any great momentum.
Trump was acquitted. Blow me down.
It was a positive session but not one of any consequence, other than yet more new highs. Earnings results continued to flow without any major standouts. Boeing (+3%) propped up the Dow, after announcing recertification test flights of the Max will begin in a few weeks.
The Nasdaq again outperformed despite Tesla having the day off (+2%).
The IPO market was back in the spotlight last night as mattress company Casper hit the boards. While the stock rallied on the day, its listing price was half that of the most recent round of capital raising in the private market. Shades of WeWork.
Wall Street has come to realise that just because a business began online, it is not by default a tech company. WeWork, which is just another version of Australia’s Servcorp ((SRV)), spectacularly crashed in perceived value before its IPO was pulled. Disruptor tech companies with strong growth potential attract high PEs, even if they are yet to make a profit. Companies that do no more than lease office space, or sell mattresses, are not tech companies. And not attractive if they haven’t yet made a profit from an old world business.
Commodities
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 1566.90 | + 9.90 | 0.64% |
Silver (oz) | 17.80 | + 0.22 | 1.25% |
Copper (lb) | 2.60 | – 0.01 | – 0.31% |
Aluminium (lb) | 0.78 | + 0.01 | 1.49% |
Lead (lb) | 0.84 | + 0.01 | 0.77% |
Nickel (lb) | 5.90 | – 0.02 | – 0.26% |
Zinc (lb) | 1.00 | – 0.02 | – 1.53% |
West Texas Crude | 51.09 | + 0.01 | 0.02% |
Brent Crude | 55.13 | – 0.40 | – 0.72% |
Iron Ore (t) futures | 82.15 | + 1.60 | 1.99% |
Base metal prices also ran out of steam last night while iron ore now seems to have adjusted down to the low eighties for the time being. Cyclone Damien is approaching the Pilbara.
Gold found some renewed buying despite the US ten-year yield closing flat.
The oil market awaits news of just what level of productions cuts OPEC-Plus will decide upon.
The Aussie’s -0.2% fall to US$0.6734 matches the greenback’s gain.
Today
The SPI Overnight closed up 12 points or 0.2%.
China will release January trade numbers today. Grain of salt, I’d suggest.
The RBA will release a quarterly Statement on Monetary Policy and the governor will provide a testimony to parliament.
US jobs numbers out tonight.
News Corp ((NWS)) and REA Group ((REA)) have reported earnings overnight.
The Australian share market over the past thirty days
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
ANZ | ANZ BANKING GROUP | Upgrade to Neutral from Underperform | Credit Suisse |
Upgrade to Overweight from Equal-weight | Morgan Stanley | ||
AQG | ALACER GOLD | Upgrade to Outperform from Neutral | Credit Suisse |
BAP | BAPCOR LIMITED | Upgrade to Add from Hold | Morgans |
BLD | BORAL | Upgrade to Buy from Neutral | UBS |
BOQ | BANK OF QUEENSLAND | Upgrade to Neutral from Sell | Citi |
CBA | COMMBANK | Downgrade to Underperform from Neutral | Credit Suisse |
CIM | CIMIC GROUP | Upgrade to Outperform from Neutral | Macquarie |
CSR | CSR | Upgrade to Buy from Sell | UBS |
FDV | FRONTIER DIGITAL VENTURES | Downgrade to Hold from Add | Morgans |
FXL | FLEXIGROUP | Upgrade to Add from Hold | Morgans |
GMA | GENWORTH MORTGAGE INSUR | Upgrade to Outperform from Neutral | Macquarie |
HT1 | HT&E LTD | Upgrade to Neutral from Underperform | Macquarie |
Downgrade to Neutral from Outperform | Credit Suisse | ||
HVN | HARVEY NORMAN HOLDINGS | Upgrade to Equal-weight from Underweight | Morgan Stanley |
Upgrade to Buy from Neutral | UBS | ||
ILU | ILUKA RESOURCES | Upgrade to Neutral from Sell | Citi |
JBH | JB HI-FI | Upgrade to Neutral from Sell | UBS |
JHG | JANUS HENDERSON GROUP | Upgrade to Buy from Neutral | Citi |
Upgrade to Outperform from Neutral | Macquarie | ||
MGX | MOUNT GIBSON IRON | Downgrade to Sell from Neutral | Citi |
MTO | MOTORCYCLE HOLDINGS | Downgrade to Hold from Add | Morgans |
NCM | NEWCREST MINING | Upgrade to Hold from Lighten | Ord Minnett |
NHC | NEW HOPE CORP | Upgrade to Buy from Neutral | Citi |
NHF | NIB HOLDINGS | Upgrade to Equal-weight from Underweight | Morgan Stanley |
NST | NORTHERN STAR | Downgrade to Hold from Buy | Ord Minnett |
OSH | OIL SEARCH | Downgrade to Neutral from Outperform | Macquarie |
SCP | SHOPPING CENTRES AUS | Downgrade to Hold from Accumulate | Ord Minnett |
SEK | SEEK | Upgrade to Outperform from Neutral | Credit Suisse |
Downgrade to Reduce from Hold | Morgans | ||
SGR | STAR ENTERTAINMENT | Upgrade to Neutral from Underperform | Credit Suisse |
WBC | WESTPAC BANKING | Downgrade to Underweight from Equal-weight | Morgan Stanley |
WES | WESFARMERS | Upgrade to Equal-weight from Underweight | Morgan Stanley |