|SPI Overnight (Mar)||6182.00||+ 20.00||0.32%|
|S&P ASX 200||6161.20||– 13.60||– 0.22%|
|Nasdaq Comp||7643.41||+ 52.37||0.69%|
|S&P500 VIX||13.41||– 0.36||– 2.61%|
|US 10-year yield||2.61||+ 0.01||0.23%|
|USD Index||96.47||– 0.47||– 0.48%|
By Greg Peel
The local futures swung to be slightly weak yesterday morning despite a small rally on Wall Street, possibly in deference to Theresa May’s failed Brexit deal. By 15 minutes in the ASX200 was down -30 points.
By the close the index recovered half that loss, but not before falling in a big hole at lunchtime, down almost -50 points, and then crawling out again. Must have been a big sell order.
The economic news of the day is that Australian consumers have become pessimistic. The Westpac index of consumer confidence has fallen to 98.8 from 103.8 in February. Throughout 2018, consumers were mildly optimistic, such that the index posted numbers just above 100, but in 2017 they were on average more pessimistic than 98.8.
The reason for the sudden case of the jitters, according to Westpac, was the weak December quarter GDP result implying less than 1% growth in the second half of 2018, and the hullaballoo the media made over this implying a “per capita recession”, in which economic growth fails to outpace population growth.
Chicken Littles they may have been, but considering that within the confidence index, the house price expectations segment fell further to 85.4 – the lowest on record since the survey began in 2009, and the unemployment segment registered an 8.9% increase, suggesting more consumers fear job losses in the year ahead, one cannot dismiss the R-word completely.
The signs aren’t flash.
Investors swung into defensive mode yesterday, buying telcos, utilities and staples while selling banks and energy, with materials closing flat. Healthcare fell -0.7% but there were a couple of exogenous factors, one being CSL ((CSL)) going ex-dividend.
The other was a rejection by the board of Sigma Healthcare ((SIG)) of a cash/scrip offer from rival Australian Pharmaceutical Industries ((API)). The API board said it is now “reviewing” its 12% stake in Sigma hence Sigma shares fell -12.3%. API lost -3.6%.
Before Theresa May put her latest Brexit deal to UK parliament, she warned that were it to fail a vote on “no deal” would follow, implying it’s “this deal or no deal”. May hoped “anarchy in the UK” fears would tip the balance but she was wrong, and again faced defeat this morning as “no deal” was rejected, albeit by a slim margin.
Some of her cabinet ministers voted against her, so heads may possibly roll, one of which might be hers. The rejection now leads us towards an extension of the March 29 deadline, but that assumes the EU is willing to extend. Earlier signs were that it was. It also potentially sets the UK up for a general election, or even another referendum, although no one’s quite sure a second referendum on a same topic is even legal.
What it does imply, presumably, is that this soap opera could go on for years, and years, and…
…and hence there’s been little response from markets. Wall Street didn’t blink, as was the case on Tuesday night when May’s deal was rejected. The pound nonetheless rallied, given the potential of “no deal” calamity has been averted for now.
The US dollar index is down -0.5%.
Dollar weakness can also be attributed to the US PPI for February, which showed 0.1% growth when 0.2% was forecast. Annual wholesale inflation fell to 2.3% from 2.5% in January, well below a peak of 3% six months earlier.
Durable goods orders nevertheless surprised to the upside, rising 0.4% in January when a dip of -0.1% was expected. Core capital goods orders rose 0.8% after falling in the previous two months.
It was this number that provided Wall Street with further impetus, safe in the knowledge weak inflation will keep the Fed at bay. Having fallen five days in a row last week, Wall Street is this week up three days in a row and counting.
The laggard continues to be Boeing. Last night the president issued an emergency order, grounding all Boeing 737 Max 8s and 9s at their point of destination, with many still in the air at the time. Initially it looked like Trump has muscled in and overruled the FAA, who had previously called the planes safe, having watched everyone from China to Europe and Australia grounding the planes out of caution.
But the FAA issued a new statement thereafter, informing that new satellite and ground evidence had implied that a grounding would be advisable to reflect “an abundance” of caution.
Boeing shares initially fell, again, on the news, but recovered to a slight gain by the close. Having fallen -14% since the Ethiopian disaster, Boeing shares are looking attractive to some investors who recall that airlines always eventually recover from such setbacks.
Hence the gains across the three major US indices were more consistent last night. This despite Trump saying he is in no hurry to hammer out a trade deal with China.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1309.90||+ 8.40||0.65%|
|Silver (oz)||15.43||+ 0.02||0.13%|
|Copper (lb)||2.96||– 0.00||– 0.03%|
|Aluminium (lb)||0.85||+ 0.01||1.41%|
|Lead (lb)||0.95||+ 0.01||1.08%|
|Nickel (lb)||5.91||– 0.04||– 0.70%|
|Zinc (lb)||1.31||+ 0.01||0.76%|
|West Texas Crude||58.35||+ 1.43||2.51%|
|Brent Crude||67.65||+ 0.96||1.44%|
|Iron Ore (t) futures||84.10||– 0.95||– 1.12%|
The drop in the US dollar helped push gold higher once more when by rights the aversion of a “no deal” Brexit (for now at least) should have eased some of the geopolitical risk built into the recent rally.
Industrial metals did little last night.
The WTI price jumped on the usual weekly US inventory lottery.
The Aussie keeps backing further away from the swinging sixties, up another 0.2% to US$0.7097.
The SPI Overnight closed up 20 points or 0.3%. What will support such optimism?
Maybe Chinese data. Today sees February numbers for industrial production, retail sales and fixed asset investment.
There is a long list of stocks going ex-div today but no sizeable names.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ANZ||ANZ BANKING GROUP||Downgrade to Neutral from Outperform||Credit Suisse|
|APX||APPEN||Upgrade to Buy from Neutral||Citi|
|IPH||IPH||Upgrade to Outperform from Neutral||Macquarie|
|SGR||STAR ENTERTAINMENT||Upgrade to Outperform from Neutral||Credit Suisse|
|STO||SANTOS||Downgrade to Neutral from Buy||UBS|
|WPL||WOODSIDE PETROLEUM||Downgrade to Neutral from Buy||UBS|