Hope you all enjoyed the long weekend. Now it's back to work.
The Australian share market has finished marginally in negative territory after sitting in the red throughout the last day of a shortened trading week.
The benchmark S&P/ASX200 index finished down 4.7 points, or 0.08 per cent, at 6,050.0 points on Thursday, as rising commodities lifted the mining companies and offset broad weakness across the market ahead of Friday's shutdown for the Australia Day public holiday.
CMC Markets chief market strategist Michael McCarthy said investors rotated back towards the growth-oriented sectors of the market following on from Wednesday's second consecutive session of gains.
"The good support for utilities, trusts and financials has been reversed and they're at the bottom of the pile today; materials and energy led the market higher this morning, while the rest of the market has tried to moderate its losses," Mr McCarthy said.
The benchmark S&P/ASX200 index, despite the looming long weekend, had strong market turnover - well above $6 billion ahead of the close - that took the index down as much as 0.4 per cent in early trade before regaining most of the lost ground by the close.
Assisted by a tumbling US dollar, strength in iron ore and copper and a resurgent gold price lifted key materials stocks with BHP Billiton up 0.6 per cent to $30.85, Rio Tinto up 0.8 per cent at $78.81, and Fortescue Metals gaining 1.6 per cent to $5.10.
Shares in the mining services company Mineral Resources gained 3.6 per cent to $19.43 after its Chinese state-owned rival in bidding for oil and gas outfit AWE did not increase its offer of $0.73 per share, leaving MinRes as the frontrunner.
Gold miner Newcrest added 2.2 per cent at $23.36 as gold prices rose.
Fellow producer Northern Star also added two per cent to $6.26 despite a dip in December quarter sales, as the company expressed confidence of achieving bullish full-year production guidance.
Mr McCarthy said pressure in the energy sector was most obvious among the coal players, with Yancoal down 2.9 per cent and New Hope losing 2.4 per cent, however, Whitehaven gained 3.3 per cent.
Santos gave up its early gains, closing 0.8 per cent lower at $5.20, while Woodside Petroleum gained 0.4 per cent to $34.04.
All four big banks reversed Wednesday's positions, with National Australia Bank and the ANZ leading the losses, 0.6 per cent and 0.5 per cent lower, Westpac shedding 0.3 per cent and Wednesday's loser, the Commonwealth Bank, breaking even at $78.65.
Medibank Private shares rose two cents, or 0.6 per cent, to $3.31 after news the insurer and its rival NIB announced plans to increase private health insurance premiums by less than the 3.95 per cent average flagged through by the federal government.
NIB shares gained 0.3 per cent to $6.79.
On currency markets, concerns over US protectionism and comments from US Treasury Secretary Steven Mnuchin welcoming a weaker greenback drove the US dollar to a three year low against a basket of major currencies, with the Australian dollar rising to 81.05 US cents at 1700 AEDT, up from 80.17 on Wednesday.
ON THE ASX:
* The benchmark S&P/ASX200 index closed down 4.7 points, or 0.08 per cent, at 6,050.0 points
* The broader All Ordinaries index finished down 4.1 points, or 0.07 per cent, at 6,164.7 points
* The SPI200 futures contract was down two points, or 0.03 per cent, at 5,999 points
* National turnover was 3.7 billion securities traded worth $6.4 billion
CURRENCY SNAPSHOT AT 1700 AEDT:
* 81.05 US cents, from 80.17 US cents on Wednesday
* 88.29 Japanese yen, from 88.13 yen
* 65.11 euro cents, from 65.03 euro cents
* 56.69 British pence, from 57.13 pence
* 109.85 NZ cents, from 108.83 NZ cents
GOLD:
The spot price of gold in Sydney at 1700 AEDT was $US1,364.67 per fine ounce, from $US1,341.99 per fine ounce on Wednesday.
BOND SNAPSHOT AT 1630 AEDT:
* CGS 4.50 per cent April 2020, 2.069pct, from 2.0796pct on Wednesday
* CGS 4.75pct April 2027, 2.8022pct, from 2.7827pct
Sydney Futures Exchange prices:
* March 2018 10-year bond futures contract at 97.145 (implying a yield of 2.855pct), from 97.17 (2.83pct) on Wednesday
* March 2018 3-year bond futures contract unchanged at 97.74 (2.26pct).
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)
The Australian sharemarket is expected to open with gains on Monday after a three-day Australia Day weekend following strong gains in North America and Europe on Friday.
The S&P/ASX200 futures is pointing to a 0.5 per cent gain on Monday.
US markets were up again on Friday and the three major indices, the Dow Jones, S&P 500 and Nasdaq were all up more than two per cent for the week, driven by strong profit results from pharmaceutical and technology companies including Intel.
"The big picture environment is positive," CommSec chief economist Craig James told AAP.
"European and US companies are making money and the profit reporting season has been good, economic data hasn't been so bad either and the US economy grew 2.6 per cent at an annual pace in the December quarter,"
However Australian shares could be weighed down by the fact that commodity prices were not as positive last week, with iron ore and gold down, and a strong Australian dollar above 81 US cents hurting exporters, he said.
Volatility is also higher, with the US greenback falling to a three-year low in a confusing scenario last week in which President Donald Trump supported a strong currency, contradicting Treasury Secretary Steven Mnuchin endorsing a weak dollar.
Australian inflation data for the December quarter will be released on Wednesday, with underlying inflation tipped to be below target and subdued at 0.5 per cent.
The CommSec State of the States report comparing the eight territory and state economies is out Monday.
The S&P/ASX200 was up 0.7 per cent over last week but closed on Thursday 0.8 per cent lower at 6,050 points.
The latest round of strong earnings reports, including from Intel and AbbVie, along with continued weakness in the dollar lifted each of the major Wall Street indexes to closing records on Friday.
The three main indexes notched their best four-week run since 2016.
Intel’s (INTC.O) shares surged as high as $50.15, their highest level since October 2000, and closed up 10.55 percent at $50.08 after results indicated that the chipmaker’s shift to higher-margin data-center business was working.
AbbVie’s (ABBV.N) shares jumped 13.77 percent after the drugmaker significantly boosted its 2018 earnings forecast with help from U.S. tax reform and said it hopes to accelerate dividend growth and share buybacks.
“We continue to see these positive steps in the right direction and definitely earnings are clearly justifying a lot of the recent move that we’ve had,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
Fourth-quarter earnings growth for the S&P 500 is now estimated at 13.2 percent, according to Thomson Reuters data, up from 12 percent at the start of the year. Of the 133 companies in the index that have reported through Friday, 79.7 percent have topped expectations.
The earnings enabled investors to shrug off a reading on economic growth that came in below expectations.
Gross domestic product increased at a 2.6 percent annual rate in the fourth quarter, the Commerce Department said in its advance GDP report, below the 3-percent forecast, as the strongest pace of consumer spending in three years resulted in a surge in imports.
“You have manufacturing and the consumer doing well at the same time and the globe is doing better, so that’s a path for future GDP gains, which has always provided a fertile backdrop for earnings gains,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management in Milwaukee.
Weakness in the dollar, which is supportive for large multinational companies, continued. The greenback was down 0.34 percent against a basket of major currencies.
The dollar was on track for its worst week since May after comments from senior U.S. officials this week backing a weak currency.
The Dow Jones Industrial Average .DJI rose 223.92 points, or 0.85 percent, to 26,616.71, the S&P 500 .SPX gained 33.62 points, or 1.18 percent, to 2,872.87 and the Nasdaq Composite .IXIC added 94.61 points, or 1.28 percent, to 7,505.77.
For the week, the Dow rose 2.08 percent, the S&P 500 gained 2.22 percent and the Nasdaq advanced 2.31 percent.
Buoyed by AbbVie, the S&P healthcare index .SPXHC gained 2.17 percent, scored its best day since November 2016 and was the best performer among the 11 major S&P sectors.
Also lifting the index were gains in Pfizer (PFE.N), up 4.78 percent after a European regulator recommended granting marketing approval to a diabetes drug developed by the company and Merck (MRK.N), up 1.21 percent.
Starbucks (SBUX.O) dropped 4.23 percent after it warned 2018 global cafe sales growth would be at the low end of its forecast.
Advancing issues outnumbered declining ones on the NYSE by a 1.20-to-1 ratio; on Nasdaq, a 1.54-to-1 ratio favored advancers.
The S&P 500 posted 125 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 178 new highs and 22 new lows.
Volume on U.S. exchanges was 6.58 billion shares, compared to the 6.81 billion average for the full session over the last 20 trading days.
Anybody hoping for a replay of the stock market advance that followed U.S. President Donald Trump’s first address to Congress may be disappointed. This time around, shares could suffer if Trump does not tread carefully on hot-button issues.
The S&P 500 jumped 1.4 percent the day after Trump’s speech last February, as an unexpectedly measured tone from the notoriously abrasive president boosted investor optimism that he would be able to deliver on pro-business campaign promises.
But with a new tax law under his belt, Trump is expected to use his late-night State of the Union speech on Tuesday to applaud that victory and broach topics including trade agreements, immigration reform and infrastructure spending.
That may not be enough to inspire investors further, after enthusiasm about corporate tax cuts helped push the S&P 500 up more than 19 percent in 2017 and close to 7 percent so far this year.
“Nothing is going to trump tax reform,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “Since I expect the president to do a victory lap, the typical market reaction would be a sell-the-news reaction in contrast to last year.”
The S&P 500 has had only 4 daily declines so far this year, and the chances of a Jan. 31 selloff are higher if the market does not take a breather before then, O‘Rourke said.
Investors could be rattled by tough talk from Trump on issues including U.S. immigration policy, which has already divided lawmakers in a Republican-controlled Congress and led to a three-day government shutdown.
“He’s got to tread carefully on the hot-button items,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York, citing immigration and trade talks.
He noted that a “pro-immigration agenda” could be the easiest way to expand the U.S. workforce to boost an economy with a tight labor market.
Congress agreed to extend funding to Feb. 8 and the White House is expected to unveil an immigration legislation framework a day before the speech.
Strategists also are wary about how Trump will approach international trade, including the North American Free Trade Agreement, due to his tendency for “America First” rhetoric.
“We know historically protectionism is bad for the economy. It’s bad for markets. You open a great deal of uncertainty if you hone in on that,” said JonesTrading’s O‘Rourke.
Officials from the United States, Canada and Mexico will wrap up the sixth of seven planned rounds of NAFTA talks in Montreal on Monday, with little sign of agreement on U.S. proposals to overhaul the $1.2 trillion pact.
Any trade comments would also come on the heels of Trump approving a steep tariff on solar panels and washing machines, moves those industries have warned could raise prices and endanger jobs.
To be sure, Trump could boost sentiment with details on a plan to rebuild U.S. infrastructure. On Wednesday he promised $1.7 trillion in investments over the next 10 years. But any related gains may be limited to sectors like industrials and materials.
And in general, big moves like the one seen last year are relatively rare.
The market moved more than 1 percent in either direction just 15 times the day after the annual U.S. presidential address since 1965, when it was first televised at night. By comparison, it had a 1 percent or more move 13 times in the session before the speech.
Retail investors may be more likely than professional fund managers to let policy comments influence their trading, said Blancato, who is not planning to make any asset allocation changes based on the speech.
Investors may also be less sensitive to the speech’s message this time around. Many now say they largely ignore politics after a tumultuous year with a divided Republican party, heated exchanges with nuclear-armed North Korea, a probe of possible collusion between Trump’s election campaign and Russia and the government shutdown.
Traders have instead focused on economic data and earnings, which continue to look strong. Analysts expect the S&P 500’s fourth-quarter earnings per share to rise by 12.7 percent from a year earlier, according to Thomson Reuters data.
“Short of something truly stupid like a trade war with China or a withdrawal from NAFTA, or something horrific like a nuclear conflict with North Korea, we don’t see a scenario where investors are likely to elevate politics to the same level of importance as the global recovery and improving earnings,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.
Source: Netwealth Morning Business Roundup
Especially for those overindulgers to give their livers a rest, breakfast this morning is a Fruit Platter and lots of Apple Herb Tea.
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Happy trading, play nicely and make informed decisions.
