|SPI Overnight (Sep)||6640.00||+ 10.00||0.15%|
|S&P ASX 200||6691.20||– 9.10||– 0.14%|
|Nasdaq Comp||8204.14||+ 57.65||0.71%|
|S&P500 VIX||13.53||– 0.92||– 6.37%|
|US 10-year yield||2.04||– 0.01||– 0.24%|
|USD Index||97.28||+ 0.13||0.13%|
By Greg Peel
Not Quite Reverse
On Thursday night it appeared the Fed was set to cut by -50 points instead of -25 so on Friday the ASX200 rallied 50 points, led by the yield-payers. On Friday night it appeared the Fed would not be cutting by -50 points but only by -25 so by rights the ASX200 should have fallen -50 points yesterday but in a meandering session, it only fell -9.
Yield-paying sectors did reverse to some extent with utilities (-0.9%), telcos (-0.8%) and industrials (-0.7%) leading the exit but the banks only fell back -0.2% and staples held up (+0.1%).
Non yield-paying growth sector IT actually closed unchanged, which is quite simply unheard of.
Healthcare fell -1.2% on a suggestion the flu impact has been overstated, including the number of resultant deaths. This was not positive for vaccine supplier CSL ((CSL)) and too-late-for-a-vaccine supplier InvoCare ((IVC)), which fell -1.2% and -6.5% respectively.
The materials sector rallied on Friday led by a twenty dollar jump for the gold price and by rights should have fallen back yesterday given gold dropped twenty dollars on Friday night. But materials gained 1.0%, led by price rises in iron ore and copper, with gold stocks not reversing, while Persian Gulf tensions had energy also up 1.0%. Resources balanced out the rest.
The local market continues to look like it wants to push on to new highs but currently there are just too many swing factors to be concerned about.
US-China trade talks appear to be going nowhere but US-Iran tensions are simmering steadily. US earnings season ramps up considerably this week. 25 or 50? That is the question for next week. And then our own earnings season begins to quietly ramp up.
Presumably tonight Boris will stir things up in the UK, and we’ll be back to worrying about Brexit again.
The fascinating thing about Boris is that he holds his own seat only by the slimmest of margins. It is not impossible for him to win the Tory party vote comfortably, then lose a vote of no confidence in the Commons as anti-Brexit Tories join Labour and vote against him, then lose his seat in a subsequent general election.
And we start all over again.
Looking ahead today we see Wall Street largely flat overnight outside of the tech sector, base metal prices all lower and iron ore down -3%. And our futures are up 10.
Goldman Sachs upgraded its call on US chip and memory stocks in general last night, which have been hit by both tariffs and the Huawei ban. Morgan Stanley increased its target on Apple ahead of tonight’s result release.
Thus the chip stocks and Apple led the Nasdaq up 0.7% and the S&P up 0.3%, while Apple’s impact in the Dow was offset by further falls for Boeing after credit agency Fitch put the company on negative watch.
In order for investors to jump back into chips, Apple, and indeed the tech sector in general last night they decided to reduce the defensive positions they’ve been building up, to the extent the trade in the likes of REITs, utilities and staples is said to have become overcrowded.
Those sectors would have been greater beneficiaries of a -50 point cut.
This week sees a full one third of all S&P500 stocks reporting earnings. So positions are being squared ahead of the reality avalanche. as the results roll in, the percentage of companies beating on earnings has slipped to 79% from an earlier 83% while beats on revenues have fallen to 63% from 75% but these are still elevated numbers. This week will be particularly telling.
Companies have to beat on earnings to retain their share prices with indices near all-time highs. If they miss, they will be severely punished.
In other news, the US trade delegation will fly to Beijing next week.
There is also talk Congress has agreed to the debt ceiling being suspended for two years so spending increases can go ahead. Wall Street is now well bitten and well shy given past debt ceiling dilemmas have always proven temporary storms in tea cups. Let’s face it, a US debt ceiling is a joke.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1424.00||– 1.00||– 0.07%|
|Silver (oz)||16.34||+ 0.16||0.99%|
|Copper (lb)||2.72||– 0.03||– 0.92%|
|Aluminium (lb)||0.82||– 0.02||– 2.07%|
|Lead (lb)||0.91||– 0.01||– 1.47%|
|Nickel (lb)||6.43||– 0.18||– 2.68%|
|Zinc (lb)||1.09||– 0.01||– 0.64%|
|West Texas Crude||56.22||+ 0.46||0.82%|
|Brent Crude||63.34||+ 0.51||0.81%|
|Iron Ore (t) futures||118.10||– 3.75||– 3.08%|
The brief run-up in base metal prices appears to have hit a wall last night. Iron ore is bouncing around inside a range.
Oil prices continue to creep higher on Persian Gulf tensions.
The US dollar index is up 0.1% and the Aussie is down -0.1% at US$0.7034.
The SPI Overnight closed up 10 points.
The Richmond Fed index is out tonight in the US which might be interesting given neighbouring New York and Philadelphia indices enjoyed sharp rebounds this month, ahead of a supposed Fed rate cut intended to head off an economic slowdown.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ADI||APN INDUSTRIA REIT||Downgrade to Neutral from Outperform||Macquarie|
|ANZ||ANZ BANKING GROUP||Upgrade to Add from Hold||Morgans|
|AVN||AVENTUS GROUP||Upgrade to Outperform from Neutral||Macquarie|
|CIM||CIMIC GROUP||Downgrade to Underperform from Neutral||Credit Suisse|
|COH||COCHLEAR||Downgrade to Sell from Neutral||Citi|
|CSL||CSL||Downgrade to Neutral from Buy||Citi|
|GEM||G8 EDUCATION||Downgrade to Neutral from Outperform||Macquarie|
|MFG||MAGELLAN FINANCIAL GROUP||Downgrade to Underperform from Neutral||Macquarie|
|OGC||OCEANAGOLD||Upgrade to Outperform from Neutral||Macquarie|
|PRU||PERSEUS MINING||Downgrade to Neutral from Outperform||Macquarie|
|REA||REA GROUP||Downgrade to Reduce from Add||Morgans|
|S32||SOUTH32||Upgrade to Add from Hold||Morgans|
|SKI||SPARK INFRASTRUCTURE||Downgrade to Reduce from Hold||Morgans|
|SYD||SYDNEY AIRPORT||Upgrade to Add from Hold||Morgans|
|SYR||SYRAH RESOURCES||Downgrade to Underperform from Outperform||Macquarie|
|URW||UNIBAIL-RODAMCO-WESTFIELD||Upgrade to Neutral from Underperform||Macquarie|
|WSA||WESTERN AREAS||Downgrade to Neutral from Outperform||Credit Suisse|