Overnight: Groundhog Day

By Greg Peel

Stairs & Elevators

It took the ASX200 two and half months to get from 6160 to a new post-GFC high over 6350 and two days to go back there again. Such is the nature of markets. With the futures again showing down -25 points this morning it looks like previous lows around 6000 might be the only safety net.

It was another Sell Australia session yesterday, with all sectors closing in the green bar one.

Highly volatile Telstra ((TLS)) bounced 3.3% and the sector thus likewise after management provided a downbeat update that was not as downbeat as had been feared, particularly regarding the ultimate cost of the NBN delay.

On the other side of the ledger, standout losses were marked by healthcare, down -3.9%, and IT, down -3.2%. What we see in these sectors is straightfoward profit-taking following stellar runs for the likes of CSL ((CSL)) and the latest market darlings of new world tech. Throw in Macquarie Group ((MQG)), and we see another rush to lock in gains on a recent sweetheart.

But the financials sector only fell -0.6% and in so doing outperformed the market. Commonwealth Bank ((CBA)) and ANZ Bank ((ANZ)) moved to follow Westpac ((WBC)) in raising mortgage rates yesterday, by 0.15% and 0.16% respectively to Westpac’s 0.14%.

Stand by for National Bank ((NAB)) to announce 0.17% today.

Materials fell in line with the market, losing -1.1%, but BHP ((BHP)) was actually slightly higher net of its dividend.

Beyond these stories, and an -11.7% loss for Sigma Healthcare post result, and we simply saw market selling.

Arguably the sell-off was triggered on Tuesday by a build-up of tension over global trade and emerging market impacts and by the fact the ASX200’s run to the new high had been pretty sharp over a week or so. As soon as one punter decides it might be wise to lock in profits, it doesn’t take long for the herd to follow.

We also had what one might deem a misleadingly positive GDP result on the day, suggesting those Australian households not already excessively indebted had just about run out of savings, wages growth is non-existent and non-mining business investment is going backwards.

Tuesday’s trade locked in a classic “double top” on the index chart, marking two failed attempts to push beyond 6350 (closing price), the other being around two weeks ago. So profit-taking begat technical selling.

Technical selling then fired up the momentum trade, a lot of which does not involve humans and also happens rather fast. Fuelling the momentum trade is the panic of those who were caught napping on Tuesday, or assumed it would be a one-day wonder, or are trapped in an investment platform that only provides for next-day trading.

Given the futures are down -25 this morning we can only assume more of the same until the first bargain hunters, alongside traders who took successfully profits and are happy to get back in, step up to the plate. We can at least look to copper, iron ore and gold, which all had positive sessions last night.

Chips off the table

There’s a largely similar story playing out simultaneously in the Nasdaq.

FANG & Co also had a very strong August – parabolic in some cases — and we might suggest the day Amazon kissed the trillion dollar mark a bell was rung. Next social media was in the spotlight as testimony was being made to Congress, suggesting the first move towards regulation, and it was time to lock in profits.

Last night chip-maker Micron issued a downbeat update, suggesting lower prices for chips ahead, and selling in that sector, which had already begun on Tuesday night, accelerated last night. Chip-makers aren’t rock stars like Facebook and Amazon, but they are another New World, high-flying story given their important role in autonomous vehicles, the “internet of things”, AI and so on.

So the Nasdaq has fallen around -1% two sessions in a row a la the ASX200. History shows the tech stocks never fall that far before the buyers move back in again, but in specific cases, such as Facebook, we do see “bear market” falls over recent weeks.

Energy led the broader market down last night as the oil price continued to fall with tech hot on its tail, while the defensives of REITs, utilities and telcos (yes, in the US the telcos are actually defensive) provided the offset.

The Dow was again relatively steady as the market continues to await news on trade.

For the record, the ADP private sector jobs number for August came in a bit soft, but Friday night’s non-farm payrolls, with 200,000 additions expected, is the real benchmark.

And no one on Wall Street seems to care much about All The President’s Men II.

Commodities

The US dollar was steady last night but traders suggest the bounce in the copper price, after a tough few sessions, was due to hedge funds covering short positions.

Short-covering was also blamed for gold’s slight bounce-back.

The oils appear now to be back focusing on the trade war rather than immediate demand/supply. The weekly US crude inventory lottery came out with a “surprise” fall, although one presumes the next set of numbers will include the impact of Tropical Storm Gordon on refinery demand and thus crude supply.

But each time WTI hits 70, it tends to fall back again.

The Aussie is also steady at US$0.7196.

Today

The SPI overnight closed down -25 points or -0.4%.

Housing finance numbers are out today locally and S&P/ASX will announce the result of quarterly index rebalancing — promotion and relegation – to become effective next Friday.

US jobs tonight, and tomorrow China releases trade numbers.

Dacian Gold ((DCN)) is set to report earnings today while the biggies in today’s somewhat smaller list of companies going ex-div are Adelaide Brighton ((ABC)), Amcor ((AMC)) and BlueScope Steel ((BSL)).

Incitec Pivot ((IPL)) hosts a strategy day.

Rudi will connect with Sky News Business via Skype at around 10.45 this morning to talk share market sell-off, stocks and broker calls.

The Australian share market over the past thirty days…