Overnight: Less Is More

By Greg Peel

Shuffling About

It was a lacklustre day on the ASX yesterday with the ASX200 not doing much before closing modestly higher. Investors spent their time shuffling about in sectors, with movements split down the middle.

Last week’s rush into the resource sectors has come to an end for now despite the iron ore price continuing to surge. Last night iron ore hit its highest price since 2013. The materials sector was flat yesterday despite strength in gold miners – three of which finished in the top five index winners, suggesting more profit-taking in the bulks.

Whitehaven Coal ((WHC)) fell -6.2%.

Energy (-1.3%) was the worst performer as oil prices settle back again.

Monday’s stellar earnings result from Metcash ((MTS)) continues to reverberate through consumer staples (+1.1%), while discretionary (-0.3%) was impacted by a -6.6% fall for G8 Education ((GEM)) after the extent of its staff underpayment remediation obligation was revealed.

Selling in some of the high-flying tech names was overcome by a new takeover bid for Link Administration ((LNK)), which sent the stock up 13.7% and the tech sector up 0.9%.

After several sessions of selling, healthcare rebounded (+0.8%), after CSL ((CSL)) announced positive data for a new flu vaccine for the elderly. It rose 0.9%.

I remember the flu.

In economic news, the rebound that began in business confidence in October after Melbourne reopened kicked on last month to regain pre-pandemic levels. NAB’s survey business conditions index rose to +8.8 from +2.0 in October and +0.1% in September, while confidence rose to +12.4% from +3.2 and -3.2.

Happy days are here again. Both indicators are now well above their long-run averages.

The results did not do much to jolt the stock market into any sort of excitement, and perhaps this will remain the theme as we head towards Christmas. Markets are now in a limbo zone between knowledge that there is a vaccine(s) and its actual distribution.

And we’re now in the Silly Season.

One swing factor yet to come may be US fiscal stimulus, but that appears to be going nowhere again.

Look at me!

Trump held his “Vaccine Summit” last night, touted as an event to educate the public about vaccine development, regulatory approval, and distribution processes and to congratulate the many players helping to develop vaccine candidates.

Vaccine makers declined to attend.

The event has been widely seen as a publicity stunt – a means for Trump to slap himself on the back for such a speedy vaccine program. Asked why the team Biden has assembled to take the vaccination baton next year was not invited, Trump replied that it is yet unclear whose administration it will be.

Republican Senate leader Mitch McConnell said last night there’s no time to waste on fiscal stimulus. To that end, he has rejected the bipartisan US$908bn package put forward and proposed a pared-back package instead. I think we can see where this is going. Democrat leaders in the House and Senate have meanwhile endorsed the bipartisan package, implying they have come down from their US$2.2trn line in the sand.

The sticking points are state and local funding, which the Republicans reject (Trump will not support Democrat states), and business liability protection (from virus-related lawsuits), which the Democrats reject. McConnell has offered to leave both out for now.

Biden has endorsed the US$908bn, but only as a “down payment” until he’s in the White House.

On Saturday the government runs out of money, unless a budget bill plus stimulus package can be passed.

Wall Street was mildly positive last night amidst all of the above, with the Nasdaq only just edging out the Dow. It’s another new high for the Nasdaq of course.

Tesla last night announced a US$500m capital raising and why the hell not? The stock is up 650% this year, and up another 1.3% last night despite the raising. The funds will be used to pay down debt and build a war chest.

Commodities

Another tick up in the US dollar has not deterred gold, but has again kept a lid on most commodities.

Not iron ore, which continues on its merry way, now surpassing a level last seen in March 2013.

The stronger greenback has the Aussie down -0.2% to US$0.7407, despite business exuberance.

Today

The SPI Overnight closed up 33 points or 0.5%.

Following on from yesterday’s business confidence survey, we’ll see Westpac’s consumer confidence survey out today.

China will release inflation data.

Perpetual ((PPT)) hosts an investor day and Washington H. Soul Pattinson ((SOL)) holds its AGM.

Ninety year-old Maggie Keenan became the pin-up girl for saving the world last night as the Brit became the first to be Pfizer-vaccinated (outside trials).

Meanwhile, Boris is in Brussels for make-or-break, this-is-it, last minute Brexit talks, not that we haven’t heard that before. A “no deal” Brexit may nevertheless be one left-of-field event that could spark a bit of volatility.

The Australian share market over the past thirty days…