Overnight: Still No News

By Greg Peel

As you were

The ASX200 ran up 100 points in the morning yesterday to confirm to sufficient extent that Wednesday’s selling was all about an end-of-quarter portfolio reallocation by a large fund, likely offshore. At that point, arguably, the December quarter began.

It began by halving those gains to the close. As to whether this again reflects some further portfolio adjustment playing out is unclear, given the Dow futures were strongly to the upside in the afternoon and there was no specific influence on the downside.

All sectors closed in the green, but modestly in some cases, and a long way from recovering Thursday’s losses.

Materials won the day (+1.5%) on a big jump in the iron ore price. Iron ore will go quiet for a week now as China is on holiday. Industrials were next best (+1.2%) after Reliance Worldwide ((RWC)) jumped 10.5% to top the index after a well-received investor day.

Consumer discretionary (+1.0%) fared okay while the banks (+0.8%) chocked up some solid index points.

Missing out was consumer staples, which closed flat as investors continue to rethink the milk market, while IT (+0.4%) surprisingly lagged despite a 0.7% gain for the Nasdaq, and a 7.0% jump on the day for Zip Co ((Z1P)).

After a bit of shuffling about, right now it’s more to do with Wall Street (stimulus, election) than domestic issues, it appears, despite further easing of restrictions across the country.

It is not set to be a good day for the resources sectors, with oil down -4% and copper down -3%, although gold has reclaimed US$1900/oz.

Our futures are down -27 points this morning with the S&P500 up 0.5% overnight.

Waiting Game

As I write, Pelosi and Mnuchin are again hard at it. Having failed to reach an agreement on stimulus on Wednesday night, they tried again last night (AM in Washington) and again failed, only to break and start again. No news yet.

The Democrats have decided to go ahead anyway and put their US$2.2trn bill through the House before Congress disbands, despite knowing it will be shot down in the Senate. The move is considered an election campaign advertisement.

Yet even if the US$2.2 trn to US$1.6trn (upped from US$1.3trn) gap between the Democrats and the White House can be closed, whatever is agreed upon still has to be approved by the Senate, which means Trump has to convince Republican senators to vote for it for his own election sake.

Thus while any breakthrough will no doubt have Wall Street surging, it will still not be a fait accompli.

As Wall Street awaits an outcome, the day’s economic data releases were mixed.

Weekly new jobless claims fell to a six-month low 837,000 last week, but there’s a catch. California, the country’s most populous state, has suspended applications due to a backlog and suspicions of wide-spread fraud. So the real number could be anything, and still the number of continuing claims refuses to fall.

In simple terms the number of Americans out of work is over twenty million.

Airlines are preparing to lay off tens of thousands of workers if a stimulus deal can’t be reached, but will reinstate them if a deal eventually is reached.

Consumer spending rose 1% in August as expected to mark the fourth consecutive month of gains, but in a trend that has slid uniformly from 8% in May. Given incomes fell -2.7% as “JobKeeper” payments expired, things don’t look good for September.

The Fed’s core measure of inflation remains at a 1.6% annual rate, which makes one wonder what all the “policy shift” fuss is about.

The US manufacturing PMI fell to 54.6 in September from 56.0 in August.

New York State is seeing alarming case-count increases in many counties, including in New York City.

Last night the Dow opened up 260 points and then chopped around all session. A split of 0.1% for the Dow to 1.4% for the Nasdaq tells a familiar tale.

Growth stocks are the new defensives. The biggest gains among S&P sectors were posted by technology, communication services and consumer discretionary, aka Apple & Microsoft, Facebook & Google and Amazon.

Big falls were posted by the banks, energy and materials.

Commodities

Mining.com reports TD Securities’ head of commodity strategy Bart Melek told S&P Global last night that “following months of steeply drawing inventories resulting from a powerful ‘V-shaped’ recovery in China, combined with a cascading global re-opening and constrained supply amid social-distancing enforcement at operations, the substantial inflows into LME warehouses have eased the near-term tightness that has propelled copper to multi-year highs.”

That explains copper.

While iron ore trading continues in Singapore, with the Chinese on their Golden Week break, there will be little movement in price, if at all.

For oil, it’s a simple matter of concern growing at the same pace as the global case-count, particularly that of the developed world, despite, as last night’s data showed, a surprise fall in US weekly crude inventories.

Also not helping is speculation OPEC-plus members are getting antsy after six months of the latest level of production cuts, and may not hang on.

As re-lockdowns of varying extent are now occurring in the UK, Spain and France, and the US is looking dicey, gold is regaining fans as the US dollar dips.

The Aussie is up 0.2% at US$0.7183.

Today

The SPI Overnight closed down -27 points or -0.5%.

As Wall Street holds its breath on stimulus, in related news September non-farm payroll numbers are out tonight.

The ABS will release August retail sales numbers but a preliminary report was already released last week.

Note that this weekend is a long one in NSW, the ACT and South Australia. While the ASX is open on Monday, FNArena will not be providing a full daily service as there will be little to no broker research to draw upon.

Also note relevant states go onto summer time on Sunday, hence come Tuesday morning the NYSE will close at 7am Sydney time, as will the SPI Overnight.

The Australian share market over the past thirty days…