The Overnight Report: Congressional Lockdown

By Greg Peel

Victorious

It was a strong open for the ASX200 yesterday with some help from Wall Street but by mid-morning it looked like the index might tip over again. That was until the November jobs numbers were released.

Australia added 90,000 jobs in the month, mostly full-time, when economists had forecast 40,000. We should put that into context however – Victoria represented 74,000 of those jobs, mirroring job losses when the state was in lockdown.

Josh was still grinning nonetheless, particularly as the number was sufficient to bring the unemployment rate down to 6.8% from 7.0% even as the participation rate rose. The underemployment rate fell to 9.4% from 10.4%.

Josh was still grinning when he delivered a mid-year economic and fiscal outlook (MYEFO) that suggested an FY21 budget deficit of only $198bn, down from the earlier $214bn forecast in October.

Let’s party.

The treasurer has been surprised by the strength of Australia’s economic rebound to date, which has even led to JobKeeper payments being halted by those back in business.

Despite a warning that it’s still a very long road back, investors sucked it up with glee to post the best session in three weeks. Although by no means the biggest percentage gain, financials led the index higher with 1.1%.

Ongoing strength in metal prices, including gold, had materials up 1.6% while recent selling in energy abated, with oil prices grafting higher, sending that sector up 2.0%.

Technology stole the percentage show with 3.3%, as Afterpay ((APT)) rose another 5% ahead of today’s official inclusion in the ASX top 20. Australia’s bitcoin.

Healthcare was not, for once, a funding source and defied another jump in the Aussie to gain 0.8%. All sectors posted solid gains, with only consumer staples (+0.3%) felling a little left out.

There were no standouts among individual stock movers to the upside. Funds management platform Netwealth ((NWL)) topped the table with 6.8%, followed by a couple of gold miners, a mining services company and GWA Group ((GWA)).

That stock’s been on a bit of a tear this month, and up another 5.1% yesterday. Is everyone getting a new kitchen and bathroom for Christmas?

On the downside, many are not going to wait to find out whether Service Stream ((SSM)) will be granted the NSW and Victoria contracts from the NBN. It fell another -11.9%.

China-dependent concerns hit Blackmores ((BKL)), down -7.1% as peer, in the context, a2 Milk ((A2M)) went into a voluntary trading halt to reassess its FY21 guidance. You don’t go into a halt if the news is going to be good.

The new Sydney cluster had Corporate Travel Management ((CTD)) down -4.4% and Webjet ((WEB)) down -3.0%, and other states once again getting the razor wire ready.

Oh and Whitehaven was in amongst it as well of course.

With Wall Street unspectacular overnight and after yesterday’s solid gains, our futures are down one point this morning.

Weekend Work

As one can appreciate, every day people die in hospital of cancer, heart disease and other conditions and in a country of 330 million people, that average daily rate is substantial. On Wednesday the daily US covid death toll hit 3,600, surpassing the daily average of all other hospital deaths combined.

Two week’s ago US weekly new jobless claims turned upward again for the first time since the initial lockdowns, marking 862,000. Last week, with many parts of the country re-entering lockdowns, that figure was 885,000.

Bad news is good news for Wall Street in the context, because it supposedly gives Congress a hurry-up to get this goddamn stimulus package over the line.

But no, not yet. McConnell last night told the Senate it was highly likely lawmakers would have to stay over the weekend to reach a deal. Congressional leaders are reportedly now considering a deal worth US$900bn, which is a step up from the prior US$748bn package that looked like it could just be a winner.

Is this why there’s still no deal?

The government runs out of money tonight so I hope the negotiating teams have candles ready. The plan remains to attach the stimulus package to the US$1.4trn government budget requirement to create one bill, but the way things are going another extension must be on the cards.

Meanwhile, the weather outside is frightful.

On the balance of possibilities, Wall Street opened higher and stayed there all day, with just a small bias to the Nasdaq.

Commodities

Another percent up for copper, iron ore and the oils, and another twenty bucks for gold.

The US dollar index fell -0.5% to slip under the 90 level which was not helpful for an Aussie already buoyed by jobs and MYEFO. It’s up 0.7% at US$0.7619.

Today

The SPI Overnight, which has now rolled into the March expiry contract, closed down one point.

The Bank of Japan meets today.

As noted, the changes to the ASX/S&P indices announced last Friday come into effect today.

National Bank ((NAB)), Incitec Pivot ((IPL)) and Nufarm ((NUF)) hold AGMs today.

Sydney Airport ((SYD)) releases its latest traffic stats, which will underscore why the company revealed yesterday it would not be paying a final dividend.

The Australian share market over the past thirty days…