Overnight: Reaching Out

By Greg Peel

Oil-Based

The ASX200 indeed opened weaker yesterday morning as the futures had suggested, dropping -20 points from the open, but the computers were off the mark yet again and twenty minutes later we were back to almost square.

At that point traders might as well have gone home.

The flat close nevertheless belies the fact that were it not for the energy sector the market would have indeed been weak. That sector rallied another 1.8%, following Tuesday’s 2.0%, as oil prices rise on the Florence threat.

Healthcare finally posted a gain after several sessions of profit-taking, rising 2.6%, while smaller gains for industrials and consumer discretionary added to the positive side.

The negative side featured all the banks, materials, telcos and consumer staples which together offset energy. Not huge moves, but collectively suggesting a weak market outside of oil. There were of course ex-divs at play as well.

There was nothing earth shattering to report among individual stocks.

Hence there is little more to say.

We might have expected at least some improvement in sentiment this morning given the White House has invited China in for another round of trade talks, spurring solid bounces in base metal prices (but not iron ore) and a bit of a boost for gold, with oil also up again, but no.

The futures are showing down -17.

Three Times Ten

Apple unveiled no less than three new iPhones last night – all variations on the iPhone X.

Whacko.

As far as I can tell, the XS is a slight improvement on the X, the XS Max is the same but with a bigger screen, and the XR is an economy version for those not willing to pay four figures. A new version of the iWatch was also unveiled. If you fall over and don’t get up, this watch will call 911.

Apple shares fell -1.2%. As is typical with annual Apple product launches, the diehards lauded the company’s growing “portfolio” of products while the non-believers wondered just what growth this new range would provide, given nothing particularly new. The features of the watch, which also include FDA-approved heart monitoring technology, seems a concession to the fact millennials don’t wear watches. Why would they? They can’t tell analogue time.

Yet those worried about falling over would never be able to work out how to use such a high-tech gadget.

Apple helped the Nasdaq to a dip on the session but it were largely the chip-makers which saw renewed selling after Goldman Sachs downgraded one of the bigger names.

The Dow nevertheless suddenly ran up over 160 points late morning on news the White House had “reached out” to Beijing for another round of trade talks in coming weeks, supposedly to give China a chance to discuss the Trump’s threat of tariffs on everything. The usual suspects led the rally, being the big global industrials.

But then one of that group – 3M – poured cold water on renewed hope when it warned Wall Street not to ignore rising inflation, as evidenced by rising raw material costs for the maker of sticky tape and Post-It notes.

The Dow fell back to square.

3M’s warning would come of little surprise to those having just been through the Australian results season, in which one recurring theme was that of raw material cost inflation for everyone from miners to diversified industrials. However interestingly, the US PPI for August came out last night and at -0.1% marked the first decrease in wholesale inflation in eighteen months. Forecasts were for +0.2%.

The annual PPI rate fell to 2.8% from 3.3% in July and the “party finished and raw material” segment of the index eased, suggesting perhaps inflation experienced to date has now levelled off. But economists do note certain segments within the index can be highly volatile, so don’t count your chickens.

The Fed Beige Book also came out last night and guess what? “Moderate” growth. Although the Fed did note a slowing of growth in some regions due to project delays based on trade policy uncertainty and a shortage of skilled labour.

Last night’s trade news sent the US dollar index a bit lower, by -0.3%, but it again looks like the US ten-year bond yield just does not like it above 3%.

The ECB and BoE meet tonight.

Commodities

The news from the White House came out in the morning, giving LME traders a chance to respond. Aluminium played wood duck, but the other base metals had strong sessions.

I knew if I said yesterday 1200 is a cap for gold it would breach that level last night.

The oils were again moderately higher as there is no change to the expectation that Florence could prove to be a storm like no other before it.

Any glimmer of hope on the trade front sparks short-covering in the Aussie. It’s up 0.7% at US$0.7170.

Today

The SPI Overnight closed down -17 points or -0.3%.

Aside from tonight’s central bank meetings, the US CPI is due.

Locally we see August jobs numbers.

There are a lot of stocks going ex-dividend today, including many ASX200 stocks such as Woolworths ((WOW)) and South32 ((S32)). Check out the calendar for the full list.

Rudi is ready to travel to Surry Hills and appear on Sky News Business from noon till 2pm today.

The Australian share market over the past thirty days…