Overnight: Manufacturing Malaise

By Greg Peel

Super Thursday

At the macro level, it was a bit of a nothing day on the local market yesterday. The ASX200 opened higher and did little more than wobble around that level to the close. At the micro level it was a different story – the biggest day in the reporting season calendar.

Sector moves were quite mixed and showed no real trend, thus largely reflecting specific stock moves on the day. And there were lots of them, based on earnings releases.

Within the index, Pro Medicus ((PME)) won the day, jumping 16.1%. Vocus Group ((VOC)) saw 9.6% and Nine Entertainment ((NEC)) 8.0%. After crashing on its result earlier in the week, oOh!media ((OML)) rebounded 9.3%, while it looks like the shorts in Costa Group ((CGC)) may have cold feet as that stock rose 7.7% ahead of today’s release.

On the wrong side of the ledger were IDP Education ((IEL)), down -10.4%, Webjet ((WEB)), the standout star of February’s reporting season, down -8.3%, Bingo Industries ((BIN)), down -7.4% and South32 ((S32)), down -4.4%.

Other big names to report positively were Origin Energy ((ORG)) and Santos ((STO)), along with Coca-Cola Amatil ((CCL)). Star outside the index was Catapult ((CAT)), up 19.8%, and ERM Power ((EPW)), up 42% after a bid from Shell.

I could go on, and on. Suffice to say we’ve seen the initial reaction so now it’s time to see what the analysts thought as the reports flood in this morning.

On reports delivered and assessed up to Wednesday, the FNArena Results Monitor is showing only 19% beats to 31% misses, which continues to track as the worst season on record (August ’13). Yesterday looks on balance to have provided a brighter picture, but we’ll know once yesterday’s avalanche is evaluated.

Eyes on the Hole

Let’s go around the grounds…

Australia’s flash estimate of August manufacturing PMI, 49.5, Japan, 49.6. The eurozone 47.0 with Germany specifically on 43.6. And the US, 49.9 – the first dip into contraction in a decade.

Looks very much like a slowing global economy. At least in manufacturing. Slightly more worrying from a US standpoint was the services PMI estimate, which indicated a fall to 50.9 from 53.0 in July. Services are not a tariff story.

How did Wall Street respond? The Dow rallied 180 points form the open until the PMI numbers came out, then fell -280 points. While US bond yields actually rallied, once again the 2-10 curve inverted.

But only just. It’s clear there are computers programmed to start selling as soon as the curve inverts, but more and more humans are appreciating that an inverted curve is not a definitive indicator of recession, and indeed can more safely be blamed on negative rates around the globe.

Once again last night the US consumer was shown to be in fine fettle, with another round of big share price pops for reporting retailers who have previously been beaten down on tariff concerns. Not all were winners, as again the disparity between those who have adapted to the twenty-first century and those who haven’t was evident.

And so the humans shrugged off recession talk, and indices rallied back. After all the argie-bargie it ended as a bit of a nothing day, and volumes were typically summer-light. A note from an analyst suggesting recertification for the 737 Max may only be six weeks away had Boeing shares up strongly, to the tune of 100 Dow points. So the net result was a soft session.

There is little incentive to take a big position ahead of tonight, when Fed chair Jerome Powell speaks at the Jackson Hole symposium.

Commodities

Weak global manufacturing data are not a good sign for base metals. Iron ore didn’t seem to mind though.

Oil prices similarly dipped, as did the Aussie, down -0.3% at US$0.6758.

Today

The SPI Overnight closed down -15 points.

Jackson Hole will be the big focus tonight.

While the local earnings season may have peaked yesterday in terms of number of reporting stocks, we still have a long way to go. All the way through next week in fact.

Note that Lendlease ((LLC)) and Super Retail ((SUL)) are among those stocks going ex today.

The Australian share market over the past thirty days…