{"id":82121,"date":"2019-08-22T09:05:52","date_gmt":"2019-08-21T23:05:52","guid":{"rendered":"https:\/\/www.fnarena.com\/?p=82121"},"modified":"2019-08-22T10:16:57","modified_gmt":"2019-08-22T00:16:57","slug":"the-overnight-report-inversion-aversion","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2019\/08\/22\/the-overnight-report-inversion-aversion\/","title":{"rendered":"The Overnight Report: Inversion Aversion"},"content":{"rendered":"\n\n\n\n\n\n\n\n\n\n\n\n\n
World Overnight<\/strong><\/span><\/td>\n<\/tr>\n
SPI Overnight (Sep)<\/strong><\/span><\/td>\n6466.00<\/strong><\/span><\/td>\n+ 27.00<\/strong><\/span><\/td>\n0.42%<\/strong><\/span><\/td>\n<\/tr>\n
S&P ASX 200<\/strong><\/span><\/td>\n6483.30<\/strong><\/span><\/td>\n– 61.70<\/strong><\/span><\/td>\n– 0.94%<\/strong><\/span><\/td>\n<\/tr>\n
S&P500<\/strong><\/span><\/td>\n2924.43<\/strong><\/span><\/td>\n+ 23.92<\/strong><\/span><\/td>\n0.82%<\/strong><\/span><\/td>\n<\/tr>\n
Nasdaq Comp<\/strong><\/span><\/td>\n8020.21<\/strong><\/span><\/td>\n+ 71.65<\/strong><\/span><\/td>\n0.90%<\/strong><\/span><\/td>\n<\/tr>\n
DJIA<\/strong><\/span><\/td>\n26202.73<\/strong><\/span><\/td>\n+ 240.29<\/strong><\/span><\/td>\n0.93%<\/strong><\/span><\/td>\n<\/tr>\n
S&P500 VIX<\/strong><\/span><\/td>\n15.80<\/strong><\/span><\/td>\n– 1.70<\/strong><\/span><\/td>\n– 9.71%<\/strong><\/span><\/td>\n<\/tr>\n
US 10-year yield<\/strong><\/span><\/td>\n1.58<\/strong><\/span><\/td>\n+ 0.02<\/strong><\/span><\/td>\n1.02%<\/strong><\/span><\/td>\n<\/tr>\n
USD Index<\/strong><\/span><\/td>\n98.28<\/strong><\/span><\/td>\n+ 0.13<\/strong><\/span><\/td>\n0.13%<\/strong><\/span><\/td>\n<\/tr>\n
FTSE100<\/strong><\/span><\/td>\n7203.97<\/strong><\/span><\/td>\n+ 78.97<\/strong><\/span><\/td>\n1.11%<\/strong><\/span><\/td>\n<\/tr>\n
DAX30<\/strong><\/span><\/td>\n11802.85<\/strong><\/span><\/td>\n+ 151.67<\/strong><\/span><\/td>\n1.30%<\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

By Greg Peel<\/p>\n

And Tomorrow We Fall<\/u><\/p>\n

After two days of strong rallies for the ASX200, yesterday turned decidedly nasty after what was no more than a breather on Wall Street. While the macro still dominates, and has the market still feeling skittish, the micro of earnings season is providing a significant influence as well.<\/p>\n

I noted yesterday that beats to misses had been running at 20% to 33% up to Monday but that Tuesday’s results looked like bringing the ratio back in somewhat, given so many positive share price responses. Well it did, to some extent, with Tuesday’s result bringing us back to 22% to 30%, but a lot of Tuesday’s individual share price rallies, post-result, were in fact on “in line” results. The market was simply in a buoyant mood.<\/p>\n

Yesterday that mood changed, very quickly. Late morning the index was down -80 points.<\/p>\n

On their results, a2 Milk ((A2M)) fell -13.2%, Iluka Resources ((ILU)) -10.6%, Nearmap ((NEA)) -9.6%, Brambles ((BXB)) -9.4% and Emeco ((EHL)) -9.1%. It’s not every day you see a -9.1% place you only fifth on the ASX200 losers’ board.<\/p>\n

But they weren’t all losers.<\/p>\n

McMillan Shakespeare ((MMS)) jumped 17.8%, Wisetech Global ((WTC)) 11.0%, Carsales ((CAR)) 10.9% and Bapcor ((BAP)) 7.1%. Coming in fifth was Smartgroup Corp ((SIQ)) on 5.5%, which reported on Friday and has done nothing but rise ever since.<\/p>\n

Note that Smartgroup and McMillan Shakespeare are in the same game.<\/p>\n

Also note that a 5.5% gain gave you fifth among index winners and -9.1% among index losers, which may provide a simple summation of why the index closed down -0.9%.<\/p>\n

Not helping the index in general was an ongoing plunge in iron ore futures as the day progressed. Spot was down -6% overnight.<\/p>\n

The big drags on the index sector-wise were thus materials, down -2.0%, consumer discretionary (a2 Milk), down -1.8%, and industrials (Brambles), down -1.6%.<\/p>\n

Bucking the trend were IT (Wisetech), up 0.6%, along with healthcare (+0.3%) and utilities (flat) playing defensive.<\/p>\n

Yesterday was the second biggest day on the earnings calendar by number of stocks, and today is the biggest, by a margin. But today we go into the open in a positive frame of mind once more, with Wall Street up and our futures showing up 27.<\/p>\n

The macro continues to overshadow but today will be a biggie at the micro level. Anything could happen and probably will.<\/p>\n

Recession Obsession<\/u><\/p>\n

In the US, Target is a more expansive retailer than it is downunder, comparable to Wal-Mart, and not pronounced in the French. It’s not often you see a company the size of Target US jump 20% on its earnings report.<\/p>\n

Hardwarehouse Lowe’s we’re also familiar with, proving unwelcome downunder, but still is a force in the US. It jumped 10%, having already rallied in sympathy the day before when rival Home Depot rose 5% on its report.<\/p>\n

With unemployment at 3.7%, wages on the rise and consumers clearly pumped up, as such earnings results attest, how on earth<\/em> can anyone be talking “recession” for the US economy?<\/p>\n

The Dow was up over 300 points when the minutes of the July Fed meeting were released early afternoon. The minutes merely confirmed the statement at the time that suggested the July rate cut was a “recalibration” rather than the start of an easing cycle. On that note, the Dow pulled back around -100 points.<\/p>\n

Stocks pulled back because the minutes caused the US two-year yield to rise 7 basis points to 1.58% but the ten-year only 2 basis points to, you guessed it, 1.58%. The 2-10 curve is once again flat, and a mere one point will signal inversion.<\/p>\n

It is inversion aversion that is fuelling recession obsession, because the last seven inversions sent the US economy into negative growth. Much has been made of the last inversion – 2007.<\/p>\n

But this time it’s different. The reason not everyone is prepared to believe it’s different is because every time someone says this time it’s different it never is.<\/p>\n

Yet let’s consider that last night the German government auctioned 30-year, zero-coupon bonds and they settled at -0.11%. Yes, you can pay the German government to look after your money for the next thirty years.<\/p>\n

The German ten-year is at -0.67%, and Japan’s at -0.24%.<\/p>\n

At 1.58%, and given a solid-looking economy, tariffs notwithstanding, what is not to like about a US ten-year by comparison? Mandated risk-free investment has to be made somewhere. If there is a risk the US goes into recession – and it has to one day, just not tomorrow – it will be because the rest of the world goes into recession and the downdraught is too strong to resist.<\/p>\n

Tariffs, of course, don’t help, and it should be noted that one of the reasons cited by the Fed for the July rate cut was trade uncertainty. That meeting ended on July 31. It was on August 1 Trump announced the next round of tariffs.<\/p>\n

We recall that it was a brief inversion of the US yield curve that caused the initial August swoon on Wall Street. Last night inversion fear only brought stock indices back a little, not a lot.<\/p>\n

Commodities<\/u><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Spot Metals,Minerals & Energy Futures<\/strong><\/span><\/td>\n<\/tr>\n
Gold (oz)<\/strong><\/span><\/td>\n1502.20<\/strong><\/span><\/td>\n– 4.60<\/strong><\/span><\/td>\n– 0.31%<\/strong><\/span><\/td>\n<\/tr>\n
Silver (oz)<\/strong><\/span><\/td>\n17.08<\/strong><\/span><\/td>\n– 0.05<\/strong><\/span><\/td>\n– 0.29%<\/strong><\/span><\/td>\n<\/tr>\n
Copper (lb)<\/strong><\/span><\/td>\n2.59<\/strong><\/span><\/td>\n+ 0.01<\/strong><\/span><\/td>\n0.26%<\/strong><\/span><\/td>\n<\/tr>\n
Aluminium (lb)<\/strong><\/span><\/td>\n0.79<\/strong><\/span><\/td>\n+ 0.00<\/strong><\/span><\/td>\n0.01%<\/strong><\/span><\/td>\n<\/tr>\n
Lead (lb)<\/strong><\/span><\/td>\n0.94<\/strong><\/span><\/td>\n+ 0.01<\/strong><\/span><\/td>\n0.92%<\/strong><\/span><\/td>\n<\/tr>\n
Nickel (lb)<\/strong><\/span><\/td>\n7.16<\/strong><\/span><\/td>\n– 0.04<\/strong><\/span><\/td>\n– 0.61%<\/strong><\/span><\/td>\n<\/tr>\n
Zinc (lb)<\/strong><\/span><\/td>\n1.02<\/strong><\/span><\/td>\n+ 0.01<\/strong><\/span><\/td>\n1.24%<\/strong><\/span><\/td>\n<\/tr>\n
West Texas Crude <\/strong><\/span><\/td>\n55.85<\/strong><\/span><\/td>\n– 0.49<\/strong><\/span><\/td>\n– 0.87%<\/strong><\/span><\/td>\n<\/tr>\n
Brent Crude<\/strong><\/span><\/td>\n60.44<\/strong><\/span><\/td>\n+ 0.37<\/strong><\/span><\/td>\n0.62%<\/strong><\/span><\/td>\n<\/tr>\n
Iron Ore (t) futures<\/strong><\/span><\/td>\n83.00<\/strong><\/span><\/td>\n– 5.45<\/strong><\/span><\/td>\n– 6.16%<\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

All that stands out is iron ore.<\/p>\n

The Aussie continues to slumber at US$0.6781.<\/p>\n

Today<\/u><\/p>\n

The SPI Overnight closed up 27 points or 0.4%.<\/p>\n

Today\/night brings August manufacturing PMI estimates from across the globe. If we’re talking global recession, these numbers are critical indicators.<\/p>\n

Way too many reporting companies today to pick highlights.<\/p>\n

Note that Domain Group ((DHG)), JB Hi-Fi ((JBH)), Newcrest Mining ((NCM)) and QBE Insurance ((QBE)) all go ex today.<\/p>\n

The Australian share market over the past thirty days…<\/strong><\/p>\n

<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS<\/span><\/td>\n<\/tr>\n
ABP<\/td>\nABACUS PROPERTY GROUP<\/td>\nDowngrade to Neutral from Outperform<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
ALU<\/td>\nALTIUM<\/td>\nUpgrade to Neutral from Underperform<\/td>\nMacquarie<\/td>\n<\/tr>\n
AQG<\/td>\nALACER GOLD<\/td>\nDowngrade to Underperform from Outperform<\/td>\nMacquarie<\/td>\n<\/tr>\n
BKL<\/td>\nBLACKMORES<\/td>\nDowngrade to Underperform from Neutral<\/td>\nMacquarie<\/td>\n<\/tr>\n
BLX<\/td>\nBEACON LIGHTING<\/td>\nUpgrade to Add from Hold<\/td>\nMorgans<\/td>\n<\/tr>\n
BPT<\/td>\nBEACH ENERGY<\/td>\nUpgrade to Buy from Neutral<\/td>\nCiti<\/td>\n<\/tr>\n
BSL<\/td>\nBLUESCOPE STEEL<\/td>\nUpgrade to Neutral from Underperform<\/td>\nMacquarie<\/td>\n<\/tr>\n
CCP<\/td>\nCREDIT CORP<\/td>\nDowngrade to Hold from Add<\/td>\nMorgans<\/td>\n<\/tr>\n
COH<\/td>\nCOCHLEAR<\/td>\nUpgrade to Neutral from Underperform<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
CQR<\/td>\nCHARTER HALL RETAIL<\/td>\nUpgrade to Hold from Lighten<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
DHG<\/td>\nDOMAIN HOLDINGS<\/td>\nUpgrade to Neutral from Sell<\/td>\nUBS<\/td>\n<\/tr>\n
GBT<\/td>\nGBST HOLDINGS<\/td>\nDowngrade to Hold from Add<\/td>\nMorgans<\/td>\n<\/tr>\n
GWA<\/td>\nGWA GROUP<\/td>\nDowngrade to Sell from Neutral<\/td>\nCiti<\/td>\n<\/tr>\n
IPH<\/td>\nIPH<\/td>\nDowngrade to Hold from Add<\/td>\nMorgans<\/td>\n<\/tr>\n
IVC<\/td>\nINVOCARE<\/td>\nDowngrade to Sell from Neutral<\/td>\nUBS<\/td>\n<\/tr>\n
MND<\/td>\nMONADELPHOUS GROUP<\/td>\nDowngrade to Sell from Neutral<\/td>\nCiti<\/td>\n<\/tr>\n
NCM<\/td>\nNEWCREST MINING<\/td>\nUpgrade to Hold from Reduce<\/td>\nMorgans<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nDowngrade to Sell from Neutral<\/td>\nCiti<\/td>\n<\/tr>\n
NHF<\/td>\nNIB HOLDINGS<\/td>\nUpgrade to Hold from Sell<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nDowngrade to Sell from Neutral<\/td>\nUBS<\/td>\n<\/tr>\n
NWL<\/td>\nNETWEALTH GROUP<\/td>\nUpgrade to Buy from Accumulate<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nUpgrade to Neutral from Sell<\/td>\nUBS<\/td>\n<\/tr>\n
ORA<\/td>\nORORA<\/td>\nDowngrade to Neutral from Buy<\/td>\nUBS<\/td>\n<\/tr>\n
PTM<\/td>\nPLATINUM<\/td>\nDowngrade to Sell from Hold<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
SEK<\/td>\nSEEK<\/td>\nUpgrade to Add from Hold<\/td>\nMorgans<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nUpgrade to Neutral from Sell<\/td>\nUBS<\/td>\n<\/tr>\n
SGR<\/td>\nSTAR ENTERTAINMENT<\/td>\nDowngrade to Neutral from Outperform<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
SHL<\/td>\nSONIC HEALTHCARE<\/td>\nUpgrade to Neutral from Underperform<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
SIQ<\/td>\nSMARTGROUP<\/td>\nUpgrade to Outperform from Neutral<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
<\/td>\n<\/td>\nUpgrade to Add from Hold<\/td>\nMorgans<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

For more detail go to FNArena's Australian Broker Call Report<\/a>, which is updated each morning, Mon-Fri.<\/p>\n

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<\/a>. (Subscribers can access prices on the website.)<\/em><\/p>\n

(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)<\/strong><\/em><\/p>\n

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FNArena is proud about its track record and past achievements: Ten Years On<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

A retail-led rally on Wall Street was clipped by the Fed minutes as the US yield curve again flattened. Dow up 240.<\/p>\n","protected":false},"author":8,"featured_media":82128,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[84],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/82121"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=82121"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/82121\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media\/82128"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=82121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=82121"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=82121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}