Overnight: A Glimmer

By Greg Peel

And the Winners are…

Ansell ((ANN)) provided a business update yesterday and announced unchanged full-year guidance. The surge in latex glove sales the company has experienced has offset the loss of industrial glove sales due to shuttered factories and closed borders. The stock rose 25%.

Challenger ((CGF)) announced unchanged full year guidance and assured the market its capital position was sound. That was worth 12%.

Insurance Australia Group ((IAG)) assured unchanged full year guidance despite announcing a raft of customer support measures, from deferred premium payments to refunded travel insurance and maintenance of full business insurance cover. The company sold its interest in an Indian insurer, helping to boost its balance sheet. That was worth 11%.

Nine Entertainment ((NEC)) provided an update confirming fear sells newspapers and advertising. It rose 11%.

Bit of a theme here. The last couple of weeks have been all about companies lining up to withdraw guidance amidst virus uncertainty. Uncertainty means Sell. Suddenly yesterday we had companies maintaining guidance, and the flood of guidance withdrawals began to ease.

The net result was a market that started slowly but picked up momentum as the session wore on. It was a tentative start as US futures again opened down, but they turned around as the day progressed to bolster sentiment.

Leading the charge was anything “health”. Mayne Pharma ((MYX)) jumped 27% to top the ASX200 because it has “pharma” in its name. CSL ((CSL)) rose 12% (50 index points), Ramsay Health Care ((RHC)) 12% and ResMed ((RMD)) 7%. Estia Health ((EHE)) jumped 16%. Because it has “health” in its name?

The healthcare sector closed up 11.4%.

APRA will ease the pressure on the banks to comply with new capital requirements, extending the deadline by a year. Financials, which includes insurers, closed up 8.8%.

Both consumer sectors added around 8%. Graincorp spin-off United Malt ((UMG)) rose 15% because everyone’s at home drinking beer.

All sectors closed in the green with the only “laggards” really being energy, up only 3.7% on ever falling oil prices, and industrials, up only 3.5%, as Sydney Airport ((SYD)) remains a ghost town and Transurban ((TCL)) is only collecting a few tolls a day.

On a 7% gain for the ASX200, we’d have to call it a Manic Monday, and that included another suspicious 120 point gain in the post-bell “match-up”, after profit-taking appeared towards the death. The truth is, volume was light. Particularly light compared to last Monday when we fell -11%. This suggests sellers were backing away, rather than being overrun by buyers.

As Tom would say, it’s not unusual. Everything else about life at the moment is unusual, but so far the stock market continues to follow a well-worn bear market trajectory.

All the Way with J&J

So much for Trump’s plan to reopen the US economy by Easter. Last night he extended social distancing requirements to April 30.

Not that anyone was surprised. Wall Street accepts that the economy’s revival depends entirely on the virus trajectory. To that end, last night WHO confirmed signs of a slowing in the pace of new cases in Italy and Spain, with Italy reporting its smallest increase in two weeks.

Johnson & Johnson announced it had identified a lead candidate among potential vaccines it has been testing and will fast-track trials with the goal of having a vaccine ready by early 2021, assuming it works. This seems like a long time in Virus World, but would be historically astounding in terms of timeline, the medical industry ensures, if it were successful.

Johnson & Johnson shares jumped 8%, despite the company declaring its vaccine efforts not for profit. In other areas of the healthcare sector, Abbott has developed a virus test that can produce results in as little as three minutes. Big Pharma companies are donating their inventories of the old malaria drugs that have shown some hope. FedEx is rushing test kits out across the country. No one is trying to profit. (They’d be damned forever if they did.)

These glimmers of hope, that offer a light at the end of the tunnel of “flattening the curve”, were enough to push Wall Street into tentative buying last night, in the wake of Trump signing the US$2.2bn fiscal package into law after the close on Friday night.

I say “tentative” because in the scheme of things, 690 Dow points is a quiet day.

The challenge for the Trump Administration now is getting the promised handouts to the right people and businesses within a short enough time frame. As the month ticks over, the bills start coming in. With the first cheques not anticipated until May, households and businesses will need to rely on the companies sending those bills being gracious.

We have one more day of the month, and the quarter. If fund managers are in rebalancing their 60/40 balanced funds by buying equities, then Wednesday’s trade will be telling. We might yet be fooled.

Commodities

As China slowly gets back to work, all the iron ore that lay idle will now be consumed, before more is needed.

The OPEC-plus production cuts that have lasted two years will end in early April. Let the games begin.

It should be noted, nonetheless, that WTI again traded under US$20/bbl last night and was again frightened, quickly scampering back.

The brief US dollar plunge, on the back of QE infinity and government Monopoly money, halted last night.

The Aussie is relatively steady at US$0.6170.

Today

The SPI Overnight closed up 66 points. As it’s the last day of the quarter, quite frankly anything could happen.

China will report manufacturing and service PMIs for March today. We recall that February’s numbers were the lowest since the GFC for manufacturing and the lowest ever for services.

The US will see monthly consumer confidence.

Australia will see private sector credit numbers for February, for what they’re worth.

Syrah Resources ((SYR)) has scheduled a quarterly report.

The Australian share market over the past thirty days…