Overnight: No Cigar

World Overnight
SPI Overnight (Dec) 6765.00 + 21.00 0.31%
S&P ASX 200 6753.00 – 19.50 – 0.29%
S&P500 3091.84 + 4.83 0.16%
Nasdaq Comp 8486.09 + 21.81 0.26%
DJIA 27691.49 0.00 0.00%
S&P500 VIX 12.68 – 0.01 – 0.08%
US 10-year yield 1.91 – 0.03 – 1.75%
USD Index 98.34 + 0.14 0.14%
FTSE100 7365.44 + 36.90 0.50%
DAX30 13283.51 + 85.14 0.65%

By Greg Peel

Decapitated Poultry

The futures said up 8 and the ASX200 opened up 5 in the first six minutes, then promptly fell -49 points to lunchtime, completely wiping out Monday’s largely mysterious gains. Once the headless chooks had stopped flapping around, the index rallied back to close down -19 – probably about where it should have been all along with Wall Street doing nothing for three sessions.

Don’t ask me to explain the redundant volatility in between.

What yesterday does suggest is we’re not apparently on a mindless momentum run up to a new high, as we were in July.

The bulk of -19 points was provided by healthcare (-0.9%) and the banks (-0.5%). CSL ((CSL)) was arguably due some profit-taking (-1.5%) after a stellar run, despite UBS’ new $295 target. Most of the banks’ fall can be attributed to Westpac ((WBC)) going ex-div, net of Commonwealth Bank’s ((CBA)) 1.0% gain.

After the bloodbath that was bank earnings result season, CBA showed at its quarterly update why it trades at a perennial premium to its peers.

The slow but inevitable death of FTA TV was again apparent yesterday as Nine Entertainment ((NEC)) issued a profit warning at its AGM that was worth -5.7%. Still Number One? Seven West Media ((SWM)) fell -8.3% in sympathy ahead of its AGM today. As Disney launches its streaming service in the US, the Americans are already anticipating the death of cable, let alone FTA.

Utilities (-0.4%) and telcos (-0.2%) gave back some of their inexplicable gains on Monday, when the local ten-year yield rose 10 points, although industrials (+0.1%) held fast and staples (+0.6%) remain popular with Christmas approaching.

Materials (-0.3%) continue to track a falling iron ore price while Whitehaven Coal ((WHC)) fell -5.0% as a large shareholder sells down its stake.

NAB’s business confidence survey showed slight improvement – the conditions index rose to 3.0 from 1.7 last month and the confidence index swung to 1.7 from -0.3 — but again there is little evidence of a stimulatory boost from RBA rate cuts.

Can we settle down now? Wall Street has again trod water, but our futures are up 21 this morning.

Maybe not.

Not A Typo

Honest to God, the Dow closed on Monday night at 27,691.49 and closed last night at 27,691.49. That’s taking “unch” to a new level.

It required a balancing act from the Mouse House nonetheless. Disney rose 1.4% to counter weakness elsewhere in the Dow after the company’s streaming service was so swamped at its launch – 6am local time – many punters could not get access.

The balancing act for the S&P was for the most part Facebook, which rallied 2.3% after announcing the pending launch of a payment system to rival the likes of PayPal and friends.

Otherwise Wall Street was focused on the afternoon’s speech to the Economic Club of New York by one President Trump. In the speech, Our Lord God and Saviour took credit for economic growth, low unemployment and a stock market at record highs, before once again sticking the boot in to the Fed.

But what Wall Street wanted to hear was news on the trade deal. The stock market had rallied to late morning in anticipation of some good news.

A deal is “close”.

The stock market fell back to square. A deal has been “close” for two years.

Speaking on CNBC thereafter, senior economic advisor and former CNBC presenter Larry Kudlow was quizzed on what “close” actually means. Days? Weeks? Months?

It means “close”.

So Wall Street remains in limbo, going nowhere until something substantial is revealed. There is still a trickle of earnings reports providing some ups and downs but maintaining a net positive tone. The Fed is on hold, so nothing to get excited about there. As Thanksgiving approaches, it will soon all be about shopping, unless there is some trade breakthrough.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1456.90 + 0.70 0.05%
Silver (oz) 16.77 – 0.07 – 0.42%
Copper (lb) 2.65 – 0.01 – 0.32%
Aluminium (lb) 0.81 – 0.00 – 0.48%
Lead (lb) 0.94 – 0.01 – 1.28%
Nickel (lb) 7.05 – 0.05 – 0.72%
Zinc (lb) 1.14 – 0.01 – 1.04%
West Texas Crude 56.77 – 0.11 – 0.19%
Brent Crude 62.02 – 0.18 – 0.29%
Iron Ore (t) futures 81.00 + 2.55 3.25%

That 21 point gain in the futures might have something to do with the bounce back in the iron ore price, although base metals are succumbing to weakness as trade negotiations linger on and the US dollar is back in rally mode.

The Aussie has matched the US dollar in falling -0.2% to US$0.6842.

Today

The SPI Overnight closed up 21 points or 0.3%.

The RBNZ makes a rate decision this morning.

Westpac releases its consumer confidence survey.

The US sees CPI numbers.

AusNet Services ((AST)) releases its earnings report today while Sydney Airport ((SYD)) hosts an investor day.

There is a long list of AGMs today, including those of Charter Hall ((CHC)), Coles ((COL)), Computershare ((CPU)) and Treasury Wine Estates ((TWE)), as well as Seven West Media.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AMC AMCOR Upgrade to Outperform from Neutral Credit Suisse
APT AFTERPAY TOUCH Upgrade to Buy from Neutral Citi
CSL CSL Upgrade to Buy from Neutral UBS
CSR CSR Downgrade to Neutral from Outperform Macquarie
DHG DOMAIN HOLDINGS Upgrade to Outperform from Neutral Macquarie
Upgrade to Accumulate from Hold Ord Minnett
DOW DOWNER EDI Downgrade to Neutral from Buy UBS
FLT FLIGHT CENTRE Downgrade to Neutral from Buy Citi
QBE QBE INSURANCE Downgrade to Neutral from Buy Citi
REA REA GROUP Downgrade to Underperform from Neutral Credit Suisse
Z1P ZIP CO Upgrade to Buy from Sell UBS
Greg Peel

About Greg Peel

Greg Peel joined Macquarie Bank in 1986 and acquired trading experience in equities, currency, fixed income and commodities derivatives, ultimately being appointed director of equity derivatives trading. He later published In With The Smart Money (a plain English guide to the mysterious world of financial markets and derivatives) and acted as a consultant to boutique investment funds. In 2004 Greg joined FNArena as a contributing writer. He is now a director and principal of the company. Greg compliments the journalistic background of the FNArena team with lengthy experience as a financial markets proprietary trader.

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