Overnight: The Ups And Downs Of Brexit

By Greg Peel

Upward Drift

The ASX200 got off to a stumbling start yesterday before establishing a slow grind higher, ultimately closing just off the highs. It was the first day for a long time in which sector volatility was lacking. Only one sector moved by 1% or more.

And only +1.05%, that being materials. There were no overnight commodity price moves to support gains in the big miners yesterday which suggests a bit of bargain hunting in a sector that has underperformed most recently. The iron ore price has come off from US$120/t to US$85/t but the futures were up a tad yesterday. Were there some progress on trade, the sector would be back in favour.

Mixed miner South32 ((S32)) had been on a steady decline these past six months but jumped 6.6% yesterday to post the second best index stock performance.

Top spot went to CYBG ((CYB)), up another 9.6% as confidence that some sort of Brexit deal is nigh continues to grow.

Only three sectors closed in the red, and each had an individual stock story behind it.

Consumer discretionary fell -0.3% after a Super Retail ((SUL)) trading update which revealed increased revenues but at the expense of margins. It fell -8.6% to be the worst index performer on the day.

Cochlear ((COH)) fell -5.5% after the company reiterated guidance at its AGM. Management also lowered longer term growth guidance. Healthcare fell -0.1%.

And the WiseTech Global ((WTC)) issue continues to hang over the IT sector, which fell -0.4%.

But for these micro factors, yesterday would have been a modest session of market-wide buying, with some outperformance from the miners.

Wall Street has closed modestly weaker overnight on Brexit problems, but our futures are down a mere -2 points this morning.

It’s a quiet day today on the local stock market calendar ahead of a very busy Thursday.

Rule Britannia

Trying to keep with British parliamentary process is a bit of a head spinner, but having rejected Johnson’s Brexit deal on the weekend, the Commons voted in favour of the bill last night by a decent margin.

This was enough to send Wall Street higher from the open, to within spitting distance of the all-time high.

But the vote merely allowed Johnson’s Withdrawal Agreement Bill to proceed to the next stage, during which amendments could be made. And then MPs voted against the PM’s intention to wrap up debate within three days, ahead of the weekend EU meeting which will consider the UK’s extension request. Johnson had threatened to call an election were the rapid timetable not agreed to, but later backed down.

It appears as if those who voted against the Brexit deal on the weekend but for it last night saw the opportunity to push for amendments, and the opportunity to gain more time for the bill to be debated, thus suggesting it was all a bit of a furphy.

The Dow was up 120 points around 2pm in New York in the wake of the first vote, only to drop -140 points when the second vote failed. An attempt to rally from that point was quashed by late selling.

Beyond British politics, the focus was on a slew of earnings reports, and the day’s scorecard was largely one of beats and misses netting out. Or at least, positive and negative responses netting out.

Among the Dow stocks, McDonalds fell -5% and Travelers -8% while Proctor & Gamble rose 2.5% and United Technologies rose 2%.

Two companies that stood out as trade war victims were toymaker Hasbro, which fell -17% and warned things will get worse if the planned December tariffs are implemented, and a company called Tile Shop Holdings, which fell -66% and announced its de-listing.

After the bell, chip maker Texas Instruments is down -10% in aftermarket trade after posting a miss, which does not bode well for the influential semi-conductor sector tonight.

In other developments, the number of state attorneys general joining in the antitrust suit against Facebook now numbers 47. Not sure who’s left, although one of the 47 is Guam.

A new bill is also being put to Congress to make it easier for users to migrate away from the likes of Facebook, Snapchat and Twitter to other platforms.

It was not a great session for the social media heavyweights.

Commodities

A report suggesting OPEC+ members will discuss making further production cuts when they meet in December, in the face of slowing global demand, had oil prices back in the green last night.

Nickel continues its downs and ups.

Iron ore has finally posted a gain.

The Aussie finally stopped rising, dipping -0.2% to US$0.6858.

Today

The SPI Overnight closed down -2 points.

Cimic ((CIM)) reports quarterly earnings today. Atlas Arteria ((ALX)) provides a quarterly update.

The Australian share market over the past thirty days…