The Overnight Report: Merry Christmas

Christmas Cheer

Stricter restrictions apply, but Christmas has not been cancelled in Sydney. Unless you’re north of the Narrabeen Bridge, in which case you’re truly on the Insular Peninsula. But this is not what drove the local market higher yesterday.

The ASX200 shot up 60 points early in the session and in fact fell back after Gladys laid down the new rules. I pondered yesterday whether Tuesday’s sharp sell-off may have simply represented one big sell order, and foreign at that, given the futures showed up 45 points before the open yesterday and the Aussie has rebounded sharply as well after falling 0.9% on Tuesday.

Yesterday’s open did have an “as you were” feel about it. There was good news in the form of France reopening its border with the UK, but this was countered to some extent later in the day by news Trump has vetoed the US stimulus bill. More on that below.

Wall Street hasn’t blinked, and our futures are up another 47 points this morning. Maybe Santa isn’t going to sit it out this year after all.

All sectors closed in the green yesterday in a general reversal of Tuesday’s selling, except for materials (-0.4%), which was impacted by a big blow-off drop in the iron ore price and falls in base metals and gold. The top four index losers yesterday were all gold miners.

Among the winners were Mesoblast ((MSB)), recovering 9.2% after its big fall this week, and Smartgroup Corp ((SIQ)), up 7.6% on a trading update.

Kitchens & bathrooms remain in favour as GUD Holdings ((GUD)) jumped 5.6%, while UR Westfield ((URW)) reflected the news from London (+5.3%), as did Flight Centre ((FLT)), up 4.5%, with the Sydney situation not looking so dire.

As we head into today’s abbreviated session (ASX closes 2.30pm), base metal, gold and oil prices have rebounded overnight. Iron ore is down again, but not by as much.

Wall Street has posted a solid gain, and given today typically records very low volumes, the 47 point gain suggested by the futures may be easy enough to achieve, assuming Gladys has no shock news at 11am.

Expecting Santa?

It took six agonising months for the two parties to agree on a US$900bn stimulus bill, but it provided much relief to those set to otherwise lose their unemployment support tonight. The Republicans had to come up from their stubborn US$500bn bid, and the Democrats had to come down from US$2.2trn just to get something done.

Now, in what appears to be one last desperate attempt to remain relevant, Trump has vetoed the bill. But the irony is in so doing he is actually attacking his own party. Trump wants the US$600 hand-outs within the bill to be raised to US$2000, calling US$600 an “unsuitable disgrace”.

Nancy Pelosi has welcomed the move. But the problem is, Congressional members have all gone home for Christmas. Will they have to be recalled?

One might have expected Wall Street to tank on the news but no – investors shrugged it off last night as ast ditch grandstanding; trying to look like the good guy when so many hold him responsible for America’s disastrous covid response. There is also a risk any obstruction on Trump’s part might not help the two Republicans candidates in the Georgia Senate run-offs.

It appears Wall Street rather focused on the stats – specifically the fact US stock markets have rallied an average 77% of the time between Christmas and New Year. The famed Santa Rally.

It was a reversal of the theme over the past few sessions. This time the stay-at-homes were overrun by value and cyclicals, evident in the Dow rallying 0.4% to the Nasdaq’s -0.3% fall, with the S&P back in the middle. Other than the news of the UK being reopened to Europe, there was no specific trigger for this sudden shift in sentiment.

Economic data on the day showed positive signs, but also negative. After two weeks of consecutive increases, weekly new jobless claims dropped down to 803,000 last week. Note that’s dropped down to and not by.

But personal incomes fell -1.1% in November and spending fell -0.4%. Michigan Uni’s consumer sentiment measure fell to 80.7 from 81.4 despite the stimulus bill being passed in the period. New home sales fell -11% in November. At least durable goods orders rose 0.9% to mark a seventh monthly gain.

There was also likely a positive response to the news the US has secured another 100m doses of Pfizer’s vaccine, although on Tuesday America recorded its third worst daily death toll this year.

It’s also a short session tonight on Wall Street, with the NYSE closing at 1pm. Volumes will be similarly low.

As for next week, bearing in mind there’s no Boxing Day in the US, I suppose it’s all up to Santa.

Commodities

The news from Europe had metal and oil prices rebounding last night, after they fell on the initial news of a new strain of virus and border closures.

Gold has also picked back up.

That only leaves iron ore as the loser, and there may still need to be few Chinese speculators needing to sort out the new rules before normal programming is restored.

The US dollar is down -0.3% but the Aussie has leapt back up 0.6% to US$0.7572 after falling -0.9% the day before.

Today

The SPI Overnight closed up 47 points or 0.7%.

As noted, early closes on the ASX today and NYSE tonight.

This is the last Overnight Report of 2020. I’ll now be taking my annual break, returning later in January.

FNArena’s daily service will also take a break, returning on January 7 with limited service before full service recommences on January 11. The website will be fully accessible at all times.

Merry Christmas to all, and let’s hope the New Year will be a good one.

The Australian share market over the past thirty days…