Overnight: Absolute Authority

By Greg Peel

Working So Far

Australia added 5,900 jobs in March. Yes – added. The unemployment rate did tick up, but only to 5.2% from 5.1%. This news spun the ASX200 around yesterday from an opening plunge of -120 points.

But we can throw this report in the bin. The ABS jobs monthly survey is conducted in the first two weeks of the month. In March, we were all living a normal life up until late in the month when the lockdowns began. Roy Morgan conducts its own, broader unemployment survey (not seasonally adjusted), and it had unemployment at 7.3% early in March, rising to 16.8% late in March.

So hold on for the April data, which the ABS acknowledges will be the first to tell the true story.

The ASX200 managed to hang on to the morning recovery nonetheless, trading roughly sideways through the afternoon. The consumer staples sector was the only standout in rising 2.1%. Healthcare and telcos managed to just fall across the line into the green. All other sectors closed down.

It was fairly uniform, with falls ranging from -1.1% for utilities to -2.1% for consumer discretionary. We are beginning to see the volatility subside, but that’s not to say it won’t fire up again.

Among individual stocks, sign-of-the-times moves were evident, with Mayne Pharma ((MYX)) rising 11.6% to top the index leaders’ board, after the company submitted a new drug application to the FDA. Outside of the index, Starpharma ((SPL)) jumped 18.3% after revealing it has a drug that has been shown to have significant antiviral activity against the coronavirus that causes Covid-19.

Star Entertainment ((SCG)) rose 9.4% after securing a new debt facility.

On the downside, travel companies Corporate Travel Management ((CTD)) and Flight Centre ((FLT)) were back to being whipping boys, falling -16% and -13%, the latter having just raised new capital, while Webjet ((WEB)) fell -6.5%.

Transurban ((TCL)) revealed average daily traffic fell -4.8% in the March quarter. See jobs number above.

Whitehaven Coal ((WHC)) fell -10% on its quarterly production report, which included a statement from the company that it did not intend to make a final investment decision regarding three development projects which are expected to underpin growth over the next decade.

Otherwise, in the scheme of things, a rather quiet day. The futures are up a full 8 points this morning. Might be a day to go to lunch.

Oh wait.

Technically Speaking

It looked like a quiet session on Wall Street last night too, with the Dow closing up a mere 33 points, but in fact the Dow fell -300 from the open, rallied back to the flat line, and fell -300 again before an afternoon claw-back.

Last weekend, when President Trump rolled out for the media his squeamish video highlighting just what a fabulous job he was doing, he indicated he would reopen the country on May 1. When asked how he could do this, given the decision lay with each state legislature, he said “When somebody is president of the United States, your authority is total.” He later added he would issue reports backing up his claim, which legal experts said isn’t supported by the Constitution.

This morning our time, after the close of US markets, Trump had a video hook-up with all the state governors and told them how and when to reopen was their decision. “You are going to call your own shots,” he said, with total authority.

The ups and downs of Wall Street had a lot to do with back and forth news flow and speculation over just what might be decided regarding reopening the US economy. During the session, seven US states extended their lockdowns to May 15. One of those is New York – the focal point of curve flattening, which has become a bellwether for reopening potential.

Wall Street rallied to the close nonetheless, but once again a dichotomy was obvious. The Dow closed up 0.1%, the S&P500 0.6% and the Nasdaq 1.7%.

Boeing dragged down the Dow yet again, after announcing on Wednesday night that more airlines were cancelling orders – this time not due to 737 Max issues, but due to grounded fleets.

Morgan Stanley was the last of the big US banks to report earnings last night, and the song remained the same – big mark-to-market loss, and a sizeable provision taken for potential bad debts. Bank shares have fallen steadily all week, both on earnings reports and the latest drop in US bond rates.

On the other hand, tech companies continue to surge ahead to new highs. One chip-maker posted a surprisingly positive earnings report last night, so all chip makers had a run.

Stay-at-home stocks continued to make new all-time highs, last night joined by the owner of several staple food brands, General Mills.

And the parade of respected US investors and fund managers on US business television continued, to a man and woman insisting the market will take another leg down, the only point of dispute being whether or not it will be a lower low than the -35% drop to March 23. One billionaire fund manager has told his clients be ready for a drop of -50% from the February high.

Another 5.3 million Americans filed for unemployment benefits last week, bringing the total to over 20 million.

Commodities

Not much to see here, other than to note WTI crude has now fallen below US$20/bbl.

The Aussie went on a wild ride following the jobs numbers, but has settled up 0.4% at US$0.6351.

Today

The SPI Overnight closed up 8 points.

Hang on to your hats, China releases its March quarter GDP result today, along with month of March data.

Rio Tinto ((RIO)) reports quarterly production.

The Australian share market over the past thirty days…