Overnight: Feeling Ill

By Greg Peel

Uncertainty

“Uncertainty” was the oft-used word in yesterday’s RBA policy statement, qualifying what was an otherwise relatively upbeat appraisal suggesting the worst of the global economic contraction has now passed. It was noted the bank had not purchased government bonds (QE) for some time.

However…

“The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that fiscal and monetary support will be required for some time.”

More sleepless nights for Josh.

More interesting was what was not mentioned – lockdowns in Melbourne, the closure of the NSW border, and the frustrating strength of the currency. It wasn’t till late in the afternoon the Victorian premier announced all of Melbourne will now be locked down.

I probably should now lay off Victorians. This is getting serious. And it’s a bit scary to know Collins Class submarines are patrolling the Murray.

The ASX200 had opened with a flurry, blindly following Wall Street as usual to be up over 60 points in ten minutes. A bit after an hour later it was back to flat, at which point the RBA statement was released, and the market did nothing.

Then at 1pm, suddenly it shot up again. Big buy order? Whatever it was, it was ill-timed. When the premier made his announcement the index plunged back to flat again, aided by a -200 point fall in the Dow futures.

Sector-wise it was a mixed bag. Energy (-1.5%) was the worst performer despite a recently stable oil price, no doubt given it’s not just Melbourne locking down again in the global picture. Materials countered (+1.7%) thanks to gold miners.

The banks (-0.8%) and utilities (-1.3%) were weak on renewed assumptions of mortgage and power bill stress in the country’s second largest city, although phone bills are fine apparently, with telcos up 0.9%. TPG Telecom ((TPG)) rose 6.7%. Staples (+0.7%) anticipated a new rush on toilet paper.

Tech rose 1.0% even as Afterpay ((APT)) went into a trading halt pending a capital raising. Carpe diem. The two founders will sell 10% each of their stakes, which will pocket them about $125m each. It’s been a fruitful four years.

Among individual stocks, it was miners all the way on the upside but for TPG. On the downside, Lord knows what goes on with oOh!media ((OML)), up 9% on Monday and down -6% yesterday. Rarely a day goes by when the stock’s not in either the winners or losers column. As crazy as its name.

Otherwise the Melbourne lockdown also has ramifications for retail landlords, with Charter Hall Retail ((CQR)), Vicinity Centres ((VCX)) and Scentre Group ((SCG)) among the losers, along with car dealer AP Eagers ((APE)).

Futures traders have obviously decided that we closed flat yesterday despite strong gains on Wall Street, so last night’s drop on Wall Street is only good for -23 points for our futures this morning.

It is nonetheless ominous that some Victorians have made it through the barbed wire, with a couple of cases already found in Albury. The border did not close until midnight last night, about six hours after the full Melbourne lockdown was announced, which will not start until midnight tonight.

How many got through?

Finally

Boston and Chicago have now joined the tri-state area of New York, New Jersey and Connecticut in requiring travellers or returnees from interstate to quarantine for fourteen days. San Francisco has paused its reopening plans.

The US case-count is approaching three million, and Texas, Arizona and California are worried their hospitals are filling up fast.

The White House has told Congress it wants to cap the next fiscal stimulus package at US$1trn.

It also “started the clock” on its one-year exit timetable from the WHO, which thus withdraws WHO’s prime source of funding for those countries unable to afford such government support.

After a “damn the torpedoes” five day rally, Wall Street finally succumbed last night.

The Atlanta Fed president pointed out to those that hadn’t perhaps twigged yet that the virus may be threatening the pace of economic recovery, raising doubts over a V-bounce.

Dr Fauci noted last night that unlike Europe, the US is now seeing “the consequence of community spread, which is even more difficult to contain”.

Consumer staples was the only S&P500 sector to close in the green last night, after Wal-Mart announced it was taking on Amazon Prime in the subscription gold-star customer market, offering same-day grocery delivery for US$98 a year. The stock rose 7%, and is also in the Dow.

You know it’s a bad day when Tesla only rises 1.3%.

Experience since April suggests the S&P can rapidly retreat, by as much as -5%, before once again finding support and resuming the rally. The Nasdaq simply won’t fall that far.

Yet.

Commodities

It’s gold all the way, helped by the US ten-year yield slipping again.

One might have expected oil prices to join Wall Street’s risk-off session, but marginal producers are dropping like flies, reducing supply.

Metals prices are looking to the East.

The Aussie is down -0.3% at US$0.6950.

Today

The SPI Overnight closed down -23 points or -0.4%.

Today’s calendar is all but blank.

The Australian share market over the past thirty days…