|SPI Overnight (Sep)||6241.00||– 53.00||– 0.84%|
|S&P ASX 200||6329.00||+ 29.40||0.47%|
|S&P500||2818.37||– 21.59||– 0.76%|
|Nasdaq Comp||7774.12||– 96.78||– 1.23%|
|DJIA||25162.41||– 137.51||– 0.54%|
|S&P500 VIX||14.64||+ 1.33||9.99%|
|US 10-year yield||2.85||– 0.04||– 1.49%|
|USD Index||96.70||+ 0.02||0.02%|
|FTSE100||7497.87||– 113.77||– 1.49%|
|DAX30||12163.01||– 195.86||– 1.58%|
By Greg Peel
Well, yesterday it looked like we’d finally done it. The ASX200 dropped around -20 points on the open but that was due to dividends, with Commonwealth Bank ((CBA)) going ex worth a full -14 points. By 11am we were back at 6300, we wavered, and then at 2pm we kicked. The close of 6329 is a new post-GFC high.
What a shame. The futures are down -53 points this morning.
I have been saying recently that given the macro headwinds facing global markets – the last being the Turkish crisis – it would take a strong local earnings season to see the ASX200 punch through 6300 resistance. And with a little help from an easing of Turkish fears on Wall Street, that’s exactly what happened.
All hail CSL.
Blood products company CSL ((CSL)) was up 44% year to date before yesterday’s earnings result. Too rich for some. But yesterday saw the stock rally another 6.4%, taking the healthcare sector up a solid 4.6% to be the catalyst required to finally secure the break-out.
Wesfarmers ((WES)) chimed in with a 3.2% gain post-result, sending staples up 1.7%.
Seek ((SEK)) helped industrials up 0.8% in rising 3.1% post-result.
Materials (-0.9%) had to cope with commodity price falls, but also a -21% shellacking for packaging company Pact Group ((PGH)), which posted a big miss on rising input costs.
In IT (+2.3%), Computershare ((CPU)) led the way with a 3.5% gain post-result while Afterpay Touch ((APT)) surged 8.5% for no apparent reason other than today is “Afterpay Day”, akin to Amazon’s Prime Day.
In isolation, it was a cracker of a day for the earnings season, and things are only just beginning to hot up. Alas, markets movements overnight have poured cold water all over us.
All a Game?
On Tuesday China released weal monthly economic data. Commodity prices slipped as a result but stock markets here and in the US didn’t blink.
On Tuesday night the Turkish lira bounced and Wall Street posted a relief rally. Last night the lira was up again on news Qatar has come in as the white knight, offering US$15bn in investment.
But despite widespread calls that Turkey is an isolated issue, emerging market currencies from Indonesia to India and Argentina have begun to slide. Turkey has set off contagion, if only in sentiment, while there’s no denying persistent US dollar strength. China’s currency, too, is being marked further down, but of course trade is the big issue there.
Then last night brought the bombshell. Chinese internet giant Tencent posted an earnings miss for the first time in over a decade. Omigod, this is a disaster. One by one Chinese tech stocks began to tumble – your Alibabas, Baidus and so forth which are also listed in the US – and the Shanghai index had yet another bad day.
Suddenly drawing upon Tuesday’s weak Chinese data, and this shock from Tencent, the Chicken Littles ran around shouting “China is slowing! China is slowing!”
The Dow dropped -330 points early in the session. The Nasdaq fared worse. Commodity prices have tanked. See below.
A big part of Tencent’s business is gaming. The Chinese government is now clamping down on gaming for social reasons, fearing the promotion of violence and increased gambling. And fair enough too. It was weak gaming revenue that drove Tencent’s miss.
So last night the world went into a tailspin because Beijing does not like computer games.
By the afternoon, Wall Street had begun to figure this out. Hence the Dow only closed down -137. The biggest losers in average were the old guard of Boeing and Caterpillar, which are strongly linked to Chinese economic growth, and Chevron, on the oil price fall.
There is no denying China’s economy is slowing. There is no denying the strong greenback is putting a lot of pressure on emerging market economies. But in summer-thin northern hemisphere trading, this looks like one almighty overreaction.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1174.70||– 19.00||– 1.59%|
|Silver (oz)||14.41||– 0.62||– 4.13%|
|Copper (lb)||2.63||– 0.10||– 3.57%|
|Aluminium (lb)||0.91||– 0.00||– 0.08%|
|Lead (lb)||0.87||– 0.06||– 6.20%|
|Nickel (lb)||5.81||– 0.20||– 3.34%|
|Zinc (lb)||1.05||– 0.06||– 5.73%|
|Iron Ore (t) futures||67.72||– 1.68||– 2.42%|
The table below speaks only of carnage. The US dollar index was steady last night, so that was not the issue. I’d hazard a guess that the acceleration in metals price falls probably set off stop-loss orders, and perhaps the need for commodity funds to bail.
The gold price move is telling in that respect.
The Aussie made its big move down on Tuesday night. Last night it rebounded 0.6% to US$0.7240 despite the commodity crunch.
Certainly there was nothing to impact the Aussie in yesterday’s June quarter wage price index number. It showed 2.1% year on year growth. In March it was 2.1%. In December it was 2.1%.
The SPI Overnight closed down -53 points or -0.8% which, if accurate, suggests prior resistance at 6300 will not be there to offer any support as one would otherwise expect.
Australia’s July jobs numbers are out today.
Who can save us?
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|AZJ||AURIZON HOLDINGS||Downgrade to Neutral from Outperform||Credit Suisse|
|Downgrade to Neutral from Buy||UBS|
|BPT||BEACH ENERGY||Downgrade to Underperform from Neutral||Macquarie|
|CGF||CHALLENGER||Downgrade to Neutral from Outperform||Credit Suisse|
|DMP||DOMINO’S PIZZA||Downgrade to Lighten from Hold||Ord Minnett|
|GPT||GPT||Downgrade to Neutral from Buy||Citi|
|Downgrade to Neutral from Outperform||Credit Suisse|
|Downgrade to Neutral from Outperform||Macquarie|
|Downgrade to Hold from Accumulate||Ord Minnett|
|IGO||INDEPENDENCE GROUP||Upgrade to Neutral from Underperform||Macquarie|
|JHX||JAMES HARDIE||Upgrade to Hold from Lighten||Ord Minnett|
|MMS||MCMILLAN SHAKESPEARE||Upgrade to Buy from Neutral||Citi|
|NHC||NEW HOPE CORP||Downgrade to Hold from Add||Morgans|
|ONT||1300 SMILES||Downgrade to Hold from Add||Morgans|
|REA||REA GROUP||Upgrade to Neutral from Underperform||Macquarie|
|Upgrade to Add from Hold||Morgans|
|SGF||SG FLEET||Upgrade to Buy from Neutral||Citi|
|SUN||SUNCORP||Downgrade to Neutral from Buy||Citi|
|WTC||WISETECH GLOBAL||Downgrade to Neutral from Buy||Citi|