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The Overnight Report: Off The Boil

World Overnight
SPI Overnight (Sep) 6201.00 – 11.00 – 0.18%
S&P ASX 200 6262.70 + 17.60 0.28%
S&P500 2804.49 – 11.13 – 0.40%
Nasdaq Comp 7825.30 – 29.15 – 0.37%
DJIA 25064.50 – 134.79 – 0.53%
S&P500 VIX 12.87 + 0.77 6.36%
US 10-year yield 2.85 – 0.03 – 0.97%
USD Index 95.16 + 0.07 0.07%
FTSE100 7683.97 + 7.69 0.10%
DAX30 12686.29 – 79.65 – 0.62%

By Greg Peel

Pause for Thought

The ASX200 rallied through the morning yesterday until around 11am when it stalled, before trading largely sideways for the rest of the session.

In terms of sectors, “risk on” appeared to be the theme given other than energy, which was flat, telcos, utilities and consumer staples were the only sectors to close lower while industrials, IT and materials provided the leadership. Banks and healthcare were also slightly positive.

In terms of stocks, there were some big individual moves behind the sector moves.

Payment system disruptor Afterpay Touch ((APT)) rallied 24% following a trading update which revealed a 289% jump in sales processed in the June quarter. Earlier in the year the stock was in the doghouse and heavily shorted but short positions have since contracted to 5.6% as of last week, and just as well it seems.

Shorts are negligible in construction company Cimic ((CIM)) but it jumped 17% following a solid earnings result.

On the flipside, a broker downgrade meant Bega Cheese ((BGA)) was on the nose, falling -6%, while positions two to four on the ASX200 losers’ board were held by richly priced gold miners providing production reports this week.

Yet materials still managed a 0.6% gain as commodity prices stabilised (for a moment).

The economic news of the day was a very strong June jobs report, which showed 50,900 jobs were added in the month, 41,200 of them full-time. An increase in the participation rate meant the unemployment rate remained steady at 5.4%. Female participation hit an all-time high.

The numbers were enough to send the Aussie higher on the day to over US74c once more, but things have changed overnight.

The ASX200 seemed hesitant yesterday to continue its push back to the 6300 high and today may see a bit of a pullback.


Intel posted a strong result but it wasn’t enough last night to prevent the Dow and S&P from falling, with the Nasdaq down as well and investors rushed back into the small caps.

Travellers (Dow) missed expectations, as did Domino’s Pizza Inc, but the big falls were reserved for eBay (-10%) and Alcoa (-13%) on weaker June quarter guidance, the latter citing tariffs amongst the headwinds.

A large regional bank also posted disappointing numbers which sent all banks big and small into reverse following a strong week to date.

US earnings season is only just ramping up and so far the numbers have been net positive, but with the S&P pushing back towards its all-time high it’s clear a beat needs to be solid to overcome sell-the-fact, and a miss will get you crucified.

President Trump caused a stir last night, would you believe, breaking with longstanding protocol in declaring that he doesn’t like what the Fed is doing, that is raising rates. Trump couldn’t care less, he noted, that presidents are not meant to pass comment on the independent central bank.

Name one politician who likes higher rates?

But Trump is not without his supporters, and the issue ties back to the trade war. In isolation, 4% economic growth, 2% inflation and 4% unemployment is a clear signal rates should go up, but the US is not operating in isolation. The EU is keeping its currency down with persistent QE and the Chinese currency is “falling like a rock,” as the president noted.

Why should the US have to suffer higher rates, alone, in such global circumstances?

In other news, following up from advisor Larry Kudlow’s suggestion on Wednesday night that America is going to be very pleased with the deal reached with the EU, yet to be announced, Trump last night threatened “tremendous retribution” against the EU if he did not get the deal he wants.

Kudlow had also suggested progress towards a trade resolution with China had been blocked by President Xi, which drew harsh rebuke from Beijing yesterday.

And just to top things off, Trump has asked his staff to organise a visit from his best mate Vlad later this year. Putting out a fire with gasoline.

The US ten-year bond yield fell -3 basis points last night to 2.85% while the US dollar was relatively steady, but the real fallout from Trump’s comments and threats was big falls for base metal prices overnight, as is the case every time “trade war” is an issue on the day.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1222.30 – 4.80 – 0.39%
Silver (oz) 15.28 – 0.24 – 1.55%
Copper (lb) 2.73 – 0.04 – 1.49%
Aluminium (lb) 0.92 – 0.02 – 1.65%
Lead (lb) 0.94 – 0.04 – 3.81%
Nickel (lb) 6.00 – 0.15 – 2.38%
Zinc (lb) 1.17 – 0.03 – 2.31%
West Texas Crude (Aug) 69.44 + 0.46 0.67%
Brent Crude (Sep) 72.59 – 0.43 – 0.59%
Iron Ore (t) 64.70 + 0.95 1.49%

All base metals took somewhat of a pounding last night. Iron ore tried to save the day.

The oil market was a tale of two influences last night. Amidst all the debate over increased production from OPEC/Russia to offset Iran/Venezuela, Saudi Arabia’s OPEC governor said last night production would likely be lower next month so as not to risk oversupply.

This sent the WTI price higher but the end to a strike by Norwegian oil-workers, who operate in the North Sea from which Brent crude is sourced, meant the Brent/WTI spread is now right back to a mere US$3/bbl give or take, with US$2 considered about average.

The Aussie may have jumped on the local jobs number yesterday but more trade war talk is always enough to spark selling, hence the currency is down-0.6% this morning at US$0.7355.


The SPI Overnight closed down -11 points or -0.2%.

In a very empty Friday calendar, Sydney Airports’ ((SYD)) monthly traffic stats are about the only scheduled highlight.

Rudi will connect with Sky News Business via Skype at around 11am.

The Australian share market over the past thirty days…

AGI AINSWORTH GAME TECHN Upgrade to Neutral from Underperform Macquarie
CAB CABCHARGE AUSTRALIA Downgrade to Sell from Neutral UBS
CIM CIMIC GROUP Upgrade to Accumulate from Hold Ord Minnett
CLW CHARTER HALL LONG WALE REIT Downgrade to Hold from Accumulate Ord Minnett
FMG FORTESCUE Upgrade to Buy from Sell Citi
FNP FREEDOM FOODS Downgrade to Reduce from Hold Morgans
FXJ FAIRFAX MEDIA Downgrade to Neutral from Buy UBS
MND MONADELPHOUS GROUP Upgrade to Hold from Sell Deutsche Bank
NST NORTHERN STAR Downgrade to Lighten from Hold Ord Minnett
NWL NETWEALTH GROUP Downgrade to Hold from Buy Ord Minnett
OSH OIL SEARCH Downgrade to Hold from Accumulate Ord Minnett
PPS PRAEMIUM Upgrade to Add from Hold Morgans
SKI SPARK INFRASTRUCTURE Downgrade to Hold from Add Morgans
SXY SENEX ENERGY Upgrade to Neutral from Sell Citi
    Upgrade to Accumulate from Hold Ord Minnett
WHC WHITEHAVEN COAL Downgrade to Neutral from Outperform Credit Suisse
WOR WORLEYPARSONS Downgrade to Hold from Buy Deutsche Bank

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

View More Articles By FNArena News

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The content of this information does in no way reflect the opinions of FN Arena, or of its journalists. In fact we don't have any opinion about the stock market, its value, future direction or individual shares. FN Arena solely reports about what the main experts in the market note, believe and comment on. By doing so we believe we provide intelligent investors with a valuable tool that helps them in making up their own minds, reading market trends and getting a feel for what is happening beneath the surface. This document is provided for informational purposes only. It does not constitute an offer to sell or a solicitation to buy any security or other financial instrument. FN Arena employs very experienced journalists who base their work on information believed to be reliable and accurate, though no guarantee is given that the daily report is accurate or complete. Investors should contact their personal adviser before making any investment decision.



Key movements in the Australian ETF market

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