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Overnight: Jay Day

World Overnight
SPI Overnight (Mar) 6050.00 + 35.00 0.58%
S&P ASX 200 6042.20 + 42.40 0.71%
S&P500 2779.60 + 32.30 1.18%
Nasdaq Comp 7421.46 + 84.07 1.15%
DJIA 25709.27 + 399.28 1.58%
S&P500 VIX 16.17 – 0.32 – 1.94%
US 10-year yield 2.86 – 0.01 – 0.42%
USD Index 89.88 – 0.03 – 0.03%
FTSE100 7289.58 + 45.17 0.62%
DAX30 12527.04 + 43.25 0.35%

By Greg Peel

Banking on it

Another day, another 40 point move up for the ASX200. This results season is proving to be a very solid one against a backdrop of support from Wall Street’s recovery post-correction.

But yesterday was not just about earnings results. Only one company reporting on the day made it into the top five winners list and only one into the losers, albeit the losers did feature stocks that had reported last week.

The big contributor to yesterday’s gains was financials, up 1.2%, aided by a 1.2% gain for Commonwealth Bank ((CBA)) as it landed a blow back on Austrac during yesterday’s inquiry proceedings.

Otherwise, topping the ASX200 leaders board was plumbing supplier Reliance Worldwide ((RWC)), up 6.9% on the strength of its result, while topping the losers board was childcare centre operator G8 Education ((GEM)) for the opposite reason, leading to a -7.9% fall.

The top five losers also included pullbacks for three stocks that had rallied on Friday on the strength of their results, being Mayne Pharma ((MYX)), MYOB ((MYO)) and Tassal Group ((TGR)), while it’s an up one day, down the next story for WiseTech Global ((WTC)) since reporting last week, which fell -4.9% yesterday as investors clearly struggle to assess the stock’s valuation.

Outside of the top fives we saw mixed results elsewhere for some big reporting names. BlueScope Steel ((BSL)) rallied 2.2% and QBE Insurance ((QBE)) fell -3.3%.

Among the sectors, telcos (+1.0%), healthcare (+0.9%) and energy (+0.8%) offered support to the banks while IT fell -1.0% and a -0.4% drop for consumer staples reflected Wesfarmers ((WES)) going ex.

There are more earnings reports to flow today, Wall Street has posted yet another strong rally and the futures are again up over 30 points this morning. At this rate we should be back at the 6140 high before the end of the week.

Although ex-divs really are now starting to drag.

Cyclical Buying

The new Fed chair Jerome Powell makes his maiden testimony to Congress tonight and could send shock waves through Wall Street by suggesting a more aggressive stance on rate hikes is needed. But the Dow’s up another 400 points.

No one expects Powell to say that – indeed, “steady as she goes” is the bookies’ choice – but it is not often Wall Street moves with such gay abandon ahead of an important Fed event. The suggestion is that perhaps investors are beginning not to care whether the Fed hikes three times or four in 2018. If it does, it just means the economy’s strong.

The US earnings season now completed tends to suggest higher rates are not that much of a drag. It was another strong season, and the Fed hiked three times last year. And 2018 brings tax cuts.

As noted yesterday, Friday’s session was the first in the week which did not see sellers coming in in the afternoon. Hence the Dow jumped over 300 points. Sellers were nowhere to be seen last night, so the Dow’s up 400 points. While we don’t like to focus too heavily on the anachronistic price average, it is notable that last night the Dow outperformed the S&P500 and Nasdaq.

The highlights that the biggest movers on Wall Street were the big cap cyclical stocks – banks and industrials for the most part – which rather puts us back where we were before the correction began. The Big Tech names have also been enjoying a bounce off the correction low but not to the extent that they were flying up in January.

Perhaps investors have now learned to be a little more realistic about their FANGs.

The US ten-year yield ticked down another one basis point to 2.86%, but here we might have seen a market going quiet ahead of the Fed testimony.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1333.10 + 4.70 0.35%
Silver (oz) 16.61 + 0.11 0.67%
Copper (lb) 3.22 + 0.03 0.84%
Aluminium (lb) 0.98 + 0.01 0.55%
Lead (lb) 1.17 + 0.02 1.94%
Nickel (lb) 6.30 + 0.10 1.66%
Zinc (lb) 1.62 + 0.02 1.02%
West Texas Crude (Apr) 63.92 + 0.38 0.60%
Brent Crude (Apr) 67.50 + 0.21 0.31%
Iron Ore (t) 79.95 + 0.75 0.95%

It was a rare green-on-screen session for commodity prices last night with all of the above ticking up quietly, despite the US dollar index being only a tad weaker at 89.88.

The iron ore price is nearing a ten-month high on expectations China’s steel production curbs will be extended.


The SPI Overnight closed up 35 points or 0.5%.

Aside from the Fed chair’s testimony, the US will see a lot of data releases tonight including durable goods orders and consumer confidence.

Not a lot of huge names reporting today, but Caltex ((CTX)) and Iluka Resources ((ILU)) are among them. Perhaps of more note is the number of stocks going ex today. They include Amcor ((AMC)), Alumina ltd ((AWC)), Challenger ((CGF)), Lend Lease ((LLC)) and WorleyParsons ((WOR)).

Rudi will connect with Sky News Business today at around 11.15am, via Skype, to discuss broker calls, company results and the share market.

The Australian share market over the past thirty days…

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