Overnight: A Tale Of Two Markets

By Greg Peel

Last Day Flurry

As of yesterday’s close, the ASX200 was up 25% from its intraday low on March 23, having fallen -39% from intraday high to low in the correction, to be down -23% from that intraday high. If you want to be technical about it, we’re still in a bear market.

Not that you’d have noticed yesterday. One might have thought the last day of the month, following such a sharp rally from the bottom, might have encouraged the locking in of some opportunistic profits, which is exactly what happened on Wall Street last night. But no, it looked more a case of FOMO ahead of today’s Grand Reopening of the economy.

Which means, in NSW at least, two people may now visit other people.

ANZ Bank ((ANZ)) yesterday reported a -60% drop in profit, the bulk representing provision for bad debts, announced a deferral on a decision regarding an interim dividend until August, when the final dividend announcement is due, but importantly, did not announce a capital raise. That was worth 1.4% for ANZ and another 2.8% for the financials sector, following on from Wednesday’s big gain.

The winning sector on the day was energy, as the WTI price continued its fightback, up 8.2% no less. While the big O&G companies all had strong sessions, sector service provider Worley ((WOR)) stood out with an 18.2% gain.

Energy has its own issues aside from the virus impact, but elsewhere yesterday it appeared anything that had really copped it over March was highly sought after, given the supposed light at the end of the tunnel offered by the Grand Reopening.

Car dealer AP Eagers ((APE)) topped the index winners in rising 25.7%, after informing all its dealerships are still operating as an essential service but 1200 workers are not, having been laid off.

Also among the top five were Nearmap ((NEA)), Credit Corp ((CCP)) and oOh!media ((OML)) all with 16-18% gains. Travel sector? Webjet ((WEB)) rose 14.2%, Helloworld ((HLO)) 12.6% and Flight Centre ((FLT)) 6.7%.

Cars back on the road and planes in the sky? Transurban ((TCL)) gained 4.9% and Sydney Airport ((SYD)) 7.7%. The industrials sector closed up 4.0%.

The only sectors to close in the red, as was exactly the case on Wednesday, were staples (flat), healthcare and utilities.

Fund manager IOOF Holdings ((IFL)) jumped 14.6% after announcing a March quarter increase in funds under management. The stock was carrying a big short position.

Newcest Mining ((NCM)) joined the list of those raising capital, given the gold sector has been hit so hard (?), and logistics company Qube Holdings ((QUB)) has stuck its hand up as well.

Woolworths’ ((WOW)) March quarter sales report echoed that of Coles ((COL)), reflecting hoarding in March and un-hoarding in April, as well as a hit at its petrol stations and pubs.

So we can only hope everyone who feared missing out was relieved at 4pm yesterday, as today is the first of May, and we all know what that means.

The futures are down -123 points this morning.

Symmetry

The S&P500 fell -35% from its high and on Wednesday night closed up 35% from its low. The symmetry was too exquisite, so last night profits were taken. The rally had returned the S&P to be down only -13% from its high, compared to Australia’s -23% as of yesterday. The S&P and Dow booked their best ever month since 1987, despite last night’s pullback.

Another 3.8 million American filed for unemployment benefits last week, taking the total so far to over 30 million.

US personal incomes fell -2.0% in March, and consumer spending fell -7.5%. The Chicago PMI fell to its lowest level this month since 2009.

The eurozone March quarter GDP fell -14.4% year on year, compared to the US on -4.8%. The ECB has upped the ante on its long term refinancing operations, or QE.

The White House is considering what retaliatory action should be taken against China, given its mishandling of the pandemic. Here we go again. Not that the trade war actually ever ended. It just dropped off the front page.

Amazon rose 4% last night ahead of its earnings report release after the bell. The stock is up around 30% year to date. The result featured a beat on revenues but a miss on earnings, attributed to the additional cost of meeting a surge in demand with deliveries, while still keeping workers safe. Amazon is down -4% in the aftermarket.

There was not much to read into last night’s pullback, being more an end of month phenomenon rather than end of rally. Even the energy sector fell back, despite another 24% jump in the WTI price. The only sector to close up was consumer discretionary, wherein lies Amazon.

May will be more telling.

Commodities

China’s manufacturing PMI fell back to 50.8 in April from 52.0 in March, bearing in mind February was China’s shocker month. This appears to have weighed on metals prices, but not iron ore.

The drop in the gold price, despite the US dollar falling -0.5%, is likely also the result of end of month profit-taking.

The Aussie has finally taken a breather, down -0.7% at US$0.6512, probably on the China PMI.

These 20% moves are becoming common for WTI, but it’s still under US$20.

Today

The SPI Overnight closed down -123 points or -2.2%.

Manufacturing PMIs will be out across the globe today/night.

Australia also sees data for April house prices and March quarter PPI.

ResMed ((RMD)) reports quarterly earnings, while Janus Henderson ((JHG)) and Oil Search ((OSH)) hold their AGMs.

The Australian share market over the past thirty days…