|SPI Overnight (Dec)||6702.00||+ 14.00||0.21%|
|S&P ASX 200||6710.20||– 38.70||– 0.57%|
|Nasdaq Comp||8077.38||+ 83.76||1.05%|
|S&P500 VIX||15.96||– 1.09||– 6.39%|
|US 10-year yield||1.73||+ 0.10||5.93%|
|USD Index||99.01||+ 0.66||0.67%|
|FTSE100||7289.99||– 1.44||– 0.02%|
|DAX30||12234.18||– 72.97||– 0.59%|
By Greg Peel
Buyers Lined Up
I suggested yesterday a -72 drop in the ASX200 implied by the overnight futures looked a bit excessive. Yesterday the index traded down -52 points in the first hour, but then the buyers amassed.
Coming up to 3pm, the index was only down -22. A late sell-off took us to down -39.
The end result appeared a market-wide sell-off, in line with Wall Street. Although the likes of Trump and Morrison would not have engendered confidence by slagging off China at the UN, at a time the world is hoping for at least some sort of breakthrough on trade, Wall Street largely fell on the news of impeachment proceedings which are now official.
Three points to make about impeachment: (a) it takes years; (b) it requires a 2/3 majority vote in the (currently Republican held) Senate; (c) it does not actually get rid of the president. Nixon chose to resign. Clinton served out his term (because the Senate failed to convict him by the necessary 2/3 of votes).
This reality might have been on the minds of buyers yesterday and indeed a similar response played out on Wall Street last night, so, well traded.
Only two sectors closed in the green yesterday. One was utilities (+0.6%), which seems fair given this is the most defensive sector in the market but telcos fell -1.6% and staples -0.6% so there was no overriding defensive theme.
The other was IT, which by rights should have followed down the Nasdaq but instead rose 1.0%. It was all about a 13.3% pop for flag bearer Afterpay Touch ((APT)), ahead of the release of the findings of a report delivered to AUSTRAC regarding the buy now, pay later company’s compliance with various anti-money laundering and terrorism financing laws.
In a case of excellent timing, Goldman Sachs released a research update in the morning upgrading the stock to a Conviction Buy with a mouth watering price target of $42.90. Bell Potter has since followed up with a revised price target of $41.61.
Energy (-1.6%) was the other major loser on the fall in the oil price, while it was not a good day for materials (-1.2%), as the iron ore price slipped, nor discretionary (-1.0%). Other sector moves were less dramatic.
The S&P500 lost -0.8% on Tuesday night and our futures suggested a -72 point fall for the ASX200. The S&P is back up 0.6% overnight and our futures are showing up 14.
This time I’m calling it a little on the light side, particularly with the Aussie down -0.7% on last night’s US dollar rebound.
Feeding the Chooks
The Ukrainian president was conveniently in New York for the UN summit and when asked last night as to whether Trump applied any pressure, he replied “I wasn’t pushed”. Whether or not there was an unseen gun to his back we’ll never know.
Either way Wall Street mostly decided last night it will shrug off the whole impeachment thing in the near term for the reasons outlined above. We recall that the Russia probe thing that began pretty much immediately after Trump was elected initially led to bouts of market volatility, until everyone got a bit bored with it. It ultimately took about 18 months to arrive at an indecisive finding.
And Wall Street kept hitting new highs.
On that subject, Wall Street rallied after both the Nixon and Clinton impeachments.
So we can all, for now, turn back to trade. On that note, Trump said last night an end to the trade war may happen “sooner than you think” and China wants to “make a deal very badly”.
Funny how every time Trump gets into a spot of bother, a trade deal suddenly seems imminent. A deal has been imminent for a very long time now. An infamous former Queensland premier called it “feeding the chooks” when he fed a lot of rubbish to the media.
The other factor spurring Wall Street into a rebound last night were new home sales data for August. Sales of newly built homes jumped 7.1% seasonally adjusted, up 18% year on year.
Who needs a rate cut?
Apart from the fact this data set is notoriously volatile, one year ago the Fed had been hiking and QT-ing and ensuring more hikes to come, sending bond yields and thus mortgage rates soaring. Not only did Wall Street ultimately tank in December, potential new home buyers crawled under a rock.
With rates now heading back down again, they’ve crawled back out again, and the comparable numbers from here will look pretty impressive.
So put it all together and we’re again back in a waiting mode, shy of all-time highs, looking ahead to the senior level trade negotiations set for early October. The rest is just noise.
Notably, the US ten-year bond yield flew back up 9 basis points last night to 1.73% and gold gave back its recent gains, dropping -US$27/oz.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1503.60||– 27.90||– 1.82%|
|Silver (oz)||17.88||– 0.70||– 3.77%|
|Copper (lb)||2.60||– 0.00||– 0.06%|
|Aluminium (lb)||0.78||– 0.00||– 0.47%|
|Lead (lb)||0.95||+ 0.02||1.72%|
|Nickel (lb)||7.93||– 0.00||– 0.02%|
|Zinc (lb)||1.04||– 0.00||– 0.13%|
|West Texas Crude||56.66||– 0.14||– 0.25%|
|Brent Crude||62.59||+ 0.19||0.30%|
|Iron Ore (t) futures||89.60||0.00||0.00%|
Other than the move in gold, commodity markets had a quiet night. Iron ore really was unchanged.
It was not quiet on the currency front nonetheless, with the greenback shooting up 0.7% and the Aussie matching that with a fall to US$0.6750.
The SPI Overnight closed up 14 points or 0.2%.
The US will again revise its June quarter GDP result tonight but it’s getting a bit old hat.
Locally it’s stock option expiry day today, but this tends to result in a lot less volatility than last week’s derivatives expiry.
Suncorp ((SUN)) holds its AGM.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|A2M||A2 MILK||Downgrade to Sell from Neutral||Citi|
|CLV||CLOVER CORP||Downgrade to Neutral from Buy||UBS|
|FMG||FORTESCUE||Downgrade to Underweight from Equal-weight||Morgan Stanley|
|IFL||IOOF HOLDINGS||Upgrade to Outperform from Neutral||Macquarie|
|ILU||ILUKA RESOURCES||Upgrade to Outperform from Neutral||Macquarie|
|NCM||NEWCREST MINING||Downgrade to Underperform from Neutral||Macquarie|
|NHC||NEW HOPE CORP||Downgrade to Underperform from Neutral||Macquarie|
|ORE||OROCOBRE||Downgrade to Underperform from Neutral||Macquarie|
|PMV||PREMIER INVESTMENTS||Upgrade to Outperform from Neutral||Macquarie|
|Downgrade to Sell from Neutral||Citi|
|RRL||REGIS RESOURCES||Upgrade to Equal-weight from Underweight||Morgan Stanley|
|S32||SOUTH32||Downgrade to Underperform from Neutral||Macquarie|
|SFR||SANDFIRE||Downgrade to Neutral from Outperform||Macquarie|
|WHC||WHITEHAVEN COAL||Downgrade to Neutral from Outperform||Macquarie|