Overnight: Grand Reopenings

By Greg Peel

Damn the Torpedos I

In yesterday’s economic news:

NAB’s survey of Australian business conditions and confidence, conducted in late March when the market was in freefall, showed a -21 point drop in current conditions from a prior zero. The 2009 GFC bottom was -17, but the 1990s recession saw -40.

Confidence fell -63 points to -66. The previous all-time low was -30 in 2008.

Chinese exports fell by -6.6% year on year in March, having been down -17.2% in February, when economists had forecast a -14.0% decline. Imports fell only -0.9%, having been down -4.0% in February, when economists had forecast a -9.5% decline.

Luxury retailer Hermes reopened its online store in China yesterday and booked its highest daily sales ever.

Yesterday the ASX200 gained another 100 points, to be up 24.7% from the March 23 bottom. What we might read into the market’s take-out from the above data is March confidence numbers are not so surprising, and will likely improve in April, while China is showing that an economy can bounce back quickly once restrictions are lifted.

Assuming they haven’t been lifted too soon.

Throw in FOMO, and US stock futures rising during our session, and it was another session in which every sector finished in the green bar one, being REITs (-1.8%), as the whole rent moratorium and assistance imbroglio continues to confuse.

It was also another session in which some of the ongoing one-day share price moves continued to boggle the mind.

IT was the standout sector with a 5.9% gain, as Afterpay ((APT)) revealed sales were up 105% from a year ago, margins are stable and hardship claims did increase in March but are now trending back down. The stock jumped 29.1% to top the index, while other BNPL rivals rose in sympathy.

Materials rose 3.4% on another leg up in the USD gold price, with the gold miners again having a solid session despite the AUD gold price remaining muted as the Aussie continues to add around a percent a day.

But thereafter, what was a mostly risk-on theme recently in the snap-back returned to being more defensive yesterday, with staples (2.26%), industrials (2.7%) and utilities (2.2%) the next best performers. The switch we were seeing in past sessions out of staples and into discretionary appeared to end yesterday, with discretionary up only 1.4%.

This is despite Southern Cross Media ((SXL)) surging another 21.7% post raising, possibly as the NRL is insisting it will start up again in May, and Corporate Travel Management ((CTD)) and Flight Centre ((FLT)), the latter also post-raising, rising 21.7% and 15.6% respectively.

Charging back into travel? Webjet ((WEB)), also post raising, was the worst performer on the index yesterday, down -9.9%, there followed by three REITs.

Speaking of raisings, G8 Education’s ((GEM)) has been put away, InvoCare ((IVC)) and QBE Insurance ((QBE)) joined the rush yesterday, and Healius ((HLS)) has deferred its dividend.

Taking advantage of a market rebound that may not last?

Wall Street has spun around and run up again, but our futures are up only 10 points this morning, implying we were front-running yesterday.

Damn the Torpedos II

President Trump told an eye-rolling press gallery on Monday night just what a fantastic job he alone had done, and had a carefully selected video of testimonials to prove it. Even Dr Fauci spoke up in praise of the president. If you looked closely you could just see the little red dot moving about his forehead.

Whether or not anyone outside of Trump’s rusted on supporters actually believe him is by the by. Ten US states, from California to New York, representing 38% of total US GDP, are currently working on plans, independently of the White House, to reopen their economies. All bar one have Democrat governors.

This despite the US death toll still topping the world and rising, and the aforementioned Dr Fauci warning the country still doesn’t have the critical testing or tracking facilities needed to get Americans safely back to work.

What Wall Street is focused on is an apparent peaking of the curve, a clear peak and downtrend of the curves in Europe, and China going back to work.

To the latter point, Apple (Dow) last night revealed an uptick in its iPhone sales in China in March following a big drop-off in February. That was worth 5%.

Meanwhile, the stay-at-home stocks continue to power ahead. Last night Amazon hit a new all-time high. Video-streamers Netflix and Roku surged further on increased user numbers. Healthcare staple Johnson & Johnson (Dow) announced a 6% dividend increase.

If Wall Street is becoming excited about lockdowns being lifted soon, why do the stay-at-home stocks continue to rally?

On the other side of the ledger, JPMorgan (Dow) and Wells Fargo reported earnings last night. The March results themselves were not important. The focus was on sizeable provisions for bad debts taken by both banks, and a warning from both banks that these March quarter provisions will probably be just the beginning. JPMorgan fell -2.7% and Wells Fargo -4%.

The financials sector just managed to close in the green nonetheless, leaving the only sector in the red as energy, again, with WTI crude falling another -7% after industry analysts have one by one said the OPEC-Plus production cuts are not nearly enough. Rather, an oil price under US$20/bbl will lead to lower production as smaller US producers go to the wall.

Commodities

China’s trade numbers appear to have provided hope for copper and nickel, as does a lower US dollar.

Gold continues to rise on the Fed’s QE infinity.

Another notable factor in the oil market is the Brent/WTI spread continues to widen, likely a matter of who will run out of storage capacity first.

Another day, another 1% gain for the Aussie, to US$0.6443, which is likely a punt on which economy will actually be able to reopen first.

Today

The SPI Overnight closed up 10 points.

Yesterday we saw business confidence, today it’s the consumer’s turn.

The US sees March numbers for industrial production and retail sales tonight.

The Australian share market over the past thirty days…