Overnight: Pass the Burgers

By Greg Peel

Out of Breadth

Another day, another 30-odd point rally for the ASX200 to another post-GFC high. However, this time the bulk of the market sat it out and watched the banks and healthcare do all the work.

Financials rallied 1.0%, flipping to outperformers in the recent rally having been a little sluggish up to this point. Healthcare kept on keeping on, rising 1.1%.

Recent gains in healthcare are largely down to sector heavyweight CSL ((CSL)), as this year’s flu outbreak proves to be a particularly nasty one, and not just in Australia.

As for the banks, well I suppose we can make a connection between tax cuts and mortgage affordability.

As to whether we can soon make a connection between tax cuts and consumer spending is yet to be seen. Yesterday’s retail sales data were again weak, showing a mere 0.1% gain in May after April’s -0.1% drop. Economists had forecast +0.2%.

There is a possibility consumers put off buying anything pricey ahead of the mid-month election, but the reality is year on year growth declined in May for a third straight month, to 2.4%.

Once upon a time a healthy sales growth rate was considered to be something above 3%, and back before 2007 Australian sales were growing for a time at 6%.

Utilities (+0.9%) had another good session on the yield play while on the flipside, it appeared bank purchases were funded by taking profits in materials (-0.4%), as the iron ore price trended down during the day.

At the individual stock level, SpeedCast International ((SDA)) finally hit the earth and bounced, up 9.9%.

A debate is ranging among bank analysts as to whether the independent investment platforms will be forced to lower margins in the face of RBA rate cuts, as returns on cash allocations on platforms threaten to fall into the negative net of fees. Both Netwealth ((NWL)) and Hub24 ((HUB)) have been weak in recent times on fee competition and net funds outflows across the industry.

Yesterday Hub24 shares jumped 8.7% as the company’s response to the ASX effectively rubbished the analysis published by Macquarie and the likes, suggesting do your homework, boys, you’re not seeing the wood for the trees.

On the other side of the ledger, increasingly weak lithium price forecasts have Pilbara Minerals ((PLS)) on the slide, down another -5.8% yesterday.

Yesterday gave us a sign the local market is beginning to lose breadth as the air gets thinner at new post-GFC highs, with the 2007 high looming just over a hundred points away (or over 150 if you take the intraday high of November 1).

Next week we’ll see the first of the resource sector quarterly production reports, which will provide a clue as to whether miners in particular are deserved of today’s lofty valuations.

Those reports will roll out over July, and then we’re into earnings season proper, in which all will be revealed.

In the meantime, it’s Friday, there’s no Wall Street to follow, and the futures are down -2.

Commodities

Evidence of increased Chinese production had the zinc price tumbling on the LME.

Iron ore had to have been due a pullback.

The oils are posting a lot of ups and downs without going anywhere much.

The Aussie has stabilised, down slightly at US$0.7024.

Today

The SPI Overnight closed down -2 points. It’s bound to be a quiet one today, ahead of tonight’s critical US jobs numbers.

Locally we’ll see the construction PMI.

The Australian share market over the past thirty days…