Overnight: As You Were

By Greg Peel

Mirror, Mirror

They say what goes up must come down, but when it comes to locking in your monthly performance without actually changing your sentiment then what goes down must come up, specifically the next day.

Yesterday on the ASX we simply saw a reversal of Monday’s end-of-month profit-taking. Pretty much a mirror image.

The day’s economic news did little to interfere. In its last policy meeting before February, the RBA said absolutely nothing new. Phil probably phoned it in. But then no one expects much to change, possibly all the way through 2021.

The September quarter current account numbers showed a drop in surplus from the record set in the June quarter, but this was of little surprise as well. The trade numbers told the tale of the period July-September. Exports fell -3.2% and imports rose 6.5% — the biggest gain since 2009.

Exports of iron ore, coal and LNG were all lower while services exports, mostly tourism, fell -8.8%. Unable to travel, Australians spent their money on stuff. Stuff like household electronic goods, up 31%, and cars, up 48%, bearing in mind we were coming out of lockdown in that period (ex-Mexico).

If we were doing one thing while in lockdown that has remained a popular pastime, it’s gorging ourselves on fat, sugar and preservatives, delivered to the door.

Brokers salivated over Domino’s Pizza’s ((DMP)) trading update delivered on Monday, sending the stock up a chart-topping (see what I did there?) 12.4%. Four FNArena database brokers upgraded the stock, but that leaves only the two Buys alongside two Sells on valuation.

Coming in second was Collins Foods ((CKF)), owner of KFC in Australia and (parts of) Europe, which rallied 10.9% on its earnings result.

The consumer discretionary sector posted a 1.7% gain, beaten only by technology’s 1.9%, but as noted, everything that went down on Monday went up yesterday. Energy nonetheless sat it out with an OPEC-Plus meeting pending.

Sandfire Resources ((SFR)) took the bronze (+9.8%) after updating its production expectations for its copper mine in Botswana.

Moves to the downside were comparatively inconsequential, although we note Treasury Wine Estates ((TWE)) fell another -2.2%. Brokers are completely split on the future of the wine producer and distributor, with three subsequent downgrades meeting one upgrade to leave two Buys, three Holds and two Sells.

So we can basically write off the past two sessions as netting each other out, such that December begins today. Wall Street, again, posted a similar session to ours last night, but there was some possibly promising news.

Our futures are up 37 points this morning.

Oh how stimulating

The President-elect, his Treasury Secretary nominee, the incumbent Treasury Secretary and the Federal Reserve Chair all met last night and unanimously agreed a stimulus package is needed urgently.

Deck the halls!

The fact that everyone in America has agreed since July that a second stimulus package is needed urgently is by the by. It’s one thing to agree a package is needed, it’s another to agree on a package.

Democrat Congressional leaders have written to the Republican Senate majority leader to reopen stimulus negotiations as well. It’s unusual to propose significant legislation in a so-called lame duck period, but there does have to be a budget bill passed this month. McConnell has suggested stimulus could be included in that bill.

It’s also traditional for an outgoing administration not to be a hindrance to the incoming administration, but this is a Trump administration.

So we can only wait and see, but in the meantime Wall Street, too, spun around last night to reverse the profit-taking on Monday night. The S&P500 and Nasdaq posted new all-time highs. But as we can see, last night’s spread between major indices was not reflective of stimulus excitement.

The Dow rose 0.6%, the S&P 1.1% and the Nasdaq 1.3%. It should be the other way around.

The Trump administration has also called in vaccine manufacturers and distributors, industry leaders, state governors and the vice president to a Covid-19 Vaccine Summit to be held on December 8 – two days before the FDA considers Pfizer’s application. The summit is designed to discuss a distribution hierarchy.

There has been much push-back from the private sector, which sees the summit as purely political. Trump will probably ride in on a white horse.

Let’s face it, they can talk all they want but Pfizer so far only has 20 million doses ready to go. It is agreed health workers should be the first to be vaccinated but there’s 21 million of those in the US. And a double-dose is required, so really only 10 million people can go first.

Are they all going to be American?

US economic data overnight showed a slowing in the manufacturing PMI to 57.5 in November form 59.3 in October. It’s still a pretty fair clip, but worryingly the employment component of that index fell into contraction at 48.4 from 52.3.

The virus bites back.

Commodities

Speaking of biting back, the US dollar index dropped a solid -0.7% last night, revitalising gold. The dollar dropped for two reasons.

One was stimulus talk, which also had the US ten-year yield leaping 9 basis points to 0.93% last night, although we might argue the selling of bonds may well be reflective of portfolio reallocation for the new month.

The other was talk the UK and EU are close to agreeing on a trade deal – no guarantees, but close – which relieves uncertainty over a “No Deal Brexit”. The pound subsequently shot up against the greenback.

Industrial commodities weren’t much impacted, as they had a solid run the day before on Chinese data.

OPEC-Plus has postponed its meeting until Thursday night.

Fortunately the Aussie has not fully mirrored the greenback’s fall in rising 0.2% to US$0.7363.

Today

The SPI Overnight closed up 37 points or 0.5%.

GDP day today.

The RBA governor will testify before a parliamentary committee.

The US will see private sector jobs numbers and the Fed Beige Book.

Nothing of note on the corporate calendar today.

The Australian share market over the past thirty days…