The Overnight Report: Summer Winding Down

This story features HARVEY NORMAN HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: HVN

The company is included in ASX200, ASX300 and ALL-ORDS

World Overnight
SPI Overnight (Jun)	7444.00	– 33.00	– 0.44%
S&P ASX 200	7534.90	+ 30.40	0.41%
S&P500	4522.68	– 6.11	– 0.13%
Nasdaq Comp	15259.24	– 6.65	– 0.04%
DJIA	35360.73	– 39.11	– 0.11%
S&P500 VIX	16.48	+ 0.29	1.79%
US 10-year yield	1.30	+ 0.02	1.48%
USD Index	92.67	– 0.03	– 0.03%
FTSE100	7119.70	– 28.31	– 0.40%
DAX30	15835.09	– 52.22	– 0.33%

By Greg Peel

Lovely Display

A funny thing happened on the ASX yesterday. The ASX200 did not shoot up, pull back and then rally, rather it opened quietly and tracked a relatively steady path to be up 50 points with 20 minutes to go. Then in came some profit-takers.

While a close of up 0.4% did actually match the S&P500 overnight, and it was the final day of individual stock influence from earnings reports, the session smacked largely of end-of-month window dressing. Hence the late sell-off, and noting the fact the futures are down -33 points this morning for no obvious reason.

So we reset for September, historically the weakest month of the year, ahead of October, historically the most volatile.

With our earnings season now out of the way, and the long US earnings season all but over, we head into a bit of a dead period in September, at least until the Fed meeting in three weeks. Otherwise, vaccination rates will be clearly in the spotlight and on that count we (finally) seem to be doing quite well.

Sector wise, we saw technology up 1.9% yesterday, following the Nasdaq, industrials up 1.2%, property up 1.2%, staples up 1.1%, and, with more index clout, healthcare up 0.9%. Telcos managed 0.8% and discretionary 0.4%, weighed down by a post-result drop for Harvey Norman ((HVN)).

Energy fell -1.4% and utilities -1.2%, the former exacerbated by Worley ((WOR)) going ex-div, while the banks and materials took the day off.

Notably, on the last day of earnings season, not one top five index winner on the day reported earnings. Clinuvel Pharmaceutical ((CUV)), which is not covered by FNArena database brokers, jumped 10.7%, followed by three tech stocks and a lithium miner, all of which had reported prior.

Mesoblast ((MSB)), also not covered, was the result train crash of the day in falling -15.9%, but thereafter Worley managed to come in at second place on the losers’ board just by going ex. Harvey Norman fell -3.2% for fourth spot.

In economic news, Australia posted its ninth consecutive current account surplus in the June quarter, thanks to selling rocks at high prices. The last run anything like it was seven consecutive quarters over 1972-75 (during another commodities boom, and into a recession).

With all the lead-in numbers in, economists are forecasting a June quarter GDP result today of 0.5% quarter on quarter growth and a sly 9.2% annual growth, cycling last year’s big lockdown plunge. Sounds good, but is of little relevance. The delta-impeded September quarter is what matters now.

Yawn

Wall Street can often be volatile on the last day of any month as the profit-takers fight it out with the window-dressers, but not last night. Last night the market just stopped.

When what little dust there was settled, the Dow closed up 1.2% for the month, the S&P 2.9% and the Nasdaq 4.0%. The S&P marked its strongest eight month gain since 1997.

With Jackson Hole now out of the way and the Fed meeting not for three weeks, and the earnings season as good as over, Wall Street may make the most of the last few days of the summer break, which unofficially ends with the Labor Day long weekend this weekend.

There will nevertheless be the August jobs numbers to deal with on Friday night.

Not providing much impetus was the Conference Board’s monthly consumer confidence index, which has slid to a six-month low of 113.8 from 125.1 in July. Economists had forecast 123.1 so it’s a significant miss, driven, according to the survey, by delta and inflation fears.

This survey corroborates Michigan Uni’s separate survey numbers, which fell in each of its fortnightly surveys in August to also miss expectations.

The question for Wall Street now is can the market book yet another month of gains? In the seasonally weakest month of the year? There has not been one -5% pullback all year.

The bears suggest a pullback simply must be due, but then they’ve been saying that for months. The bulls point to the fact that while the market PE is still elevated, significant earnings growth (E) revealed in the result season means PE is not nearly as stretched as it was prior, despite persistent all-time highs (P).

And the PE should be above average anyway given Fed support.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1814.10	+ 3.90	0.22%
Silver (oz)	23.88	– 0.12	– 0.50%
Copper (lb)	4.29	+ 0.03	0.81%
Aluminium (lb)	1.22	+ 0.01	0.76%
Lead (lb)	1.09	– 0.01	– 0.86%
Nickel (lb)	8.87	+ 0.31	3.62%
Zinc (lb)	1.36	+ 0.00	0.35%
West Texas Crude	68.50	– 0.71	– 1.03%
Brent Crude	72.99	– 0.29	– 0.40%
Iron Ore (t)	152.60	– 5.15	– 3.26%

The surge in the nickel price last night was a result of the latest inventory data, particularly in Shanghai, which is not sufficient to meet current demand. Demand strength reflects the fact nickel consumers are putting in orders well ahead of actual need, in order not to be caught out by shipping delays.

The steady rise upward of late for aluminium is a case of demand meeting constrained supply from the world’s biggest producer of the stuff – China — as Beijing clamps down on heavily energy intensive, and water intensive, smelting for environmental reasons.

Iron ore has taken another bit of a tumble but for now seems to be trying to consolidate in the US$150-160/t region.

The Aussie is up 0.3% to US$0.7316, despite the greenback being little moved, likely on yesterday’s current account numbers.

Today

The SPI Overnight closed down -33 points or -0.4%.

GDP numbers today, along with August house prices.

Globally we’ll see August manufacturing PMIs today.

August private sector jobs numbers are out in the US.

Quite a few stocks going ex-dividend today, with Wesfarmers ((WES)) the biggest.

Metcash ((MTS)) holds its AGM.

Summaries of analyst responses to the prior day’s results are available on the FNArena Corporate Results Monitor.

(https://www.fnarena.com/index.php/reporting_season/)

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A2M	a2 Milk Co	Upgrade to Buy from Neutral	Citi
ABC	AdBri	Upgrade to Add from Hold	Morgans
ALG	Ardent Leisure	Upgrade to Buy from Sell	Ord Minnett
ALU	Altium	Downgrade to Neutral from Outperform	Credit Suisse
ASG	Autosports Group	Upgrade to Outperform from Neutral	Macquarie
BKL	Blackmores	Upgrade to Outperform from Neutral	Credit Suisse
COE	Cooper Energy	Downgrade to Underweight from Equal-weight	Morgan Stanley
FCL	Fineos Corp	Upgrade to Accumulate from Hold	Ord Minnett
FLT	Flight Centre Travel	Downgrade to Lighten from Hold	Ord Minnett
ILU	Iluka Resources	Upgrade to Neutral from Underperform	Credit Suisse
LNK	Link Administration	Upgrade to Accumulate from Hold	Ord Minnett
		Downgrade to Neutral from Buy	Citi
LOV	Lovisa	Downgrade to Neutral from Outperform	Macquarie
MCR	Mincor Resources	Downgrade to Neutral from Outperform	Macquarie
MYX	Mayne Pharma	Upgrade to Buy from Neutral	Citi
NXT	NextDC	Downgrade to Accumulate from Buy	Ord Minnett
PAR	Paradigm Biopharmaceuticals	Upgrade to Hold from Reduce	Morgans
PLS	Pilbara Minerals	Downgrade to Hold from Buy	Ord Minnett
QUB	Qube Holdings	Upgrade to Outperform from Neutral	Credit Suisse
		Upgrade to Hold from Reduce	Morgans
WES	Wesfarmers	Downgrade to Neutral from Outperform	Macquarie
WGN	Wagners Holding Co	Downgrade to Neutral from Outperform	Macquarie

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

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