6 things Australian traders will be talking about this morning

Photo by David McNew/Getty Images

The Dow, Nasdaq and S&P all did something they haven’t done since 1999 overnight in closing at new all-time highs on the same day.

That’s help lift the SPI 200 futures 33 points, taking back almost all of the 35 points of losses in yesterday’s session.

Key to the moves overnight was a solid surge of more than 4% in the price of crude. But iron ore is back below $60 a tonne, gold slipped a little, and financial stocks lagged in the US. So it might still be heavy going for the ASX today.

On forex markets, the Aussie is back under 77 cents and looking like it needs a rest and a test lower as the US dollar gained across the board. USDJPY is at 101.91, euro is at 1.1137 and the pound is down at 1.2958.

Here’s the scoreboard (7.95am):

  • Dow: 18613 +117 (+0.64%)
  • S&P 500: 2186 +10 (+0.47%)
  • SPI 200 Futures (September): 5,498, 33 (+0.6%)
  • AUDUSD: 0.7695 -0.0008 (-0.1%)

The top stories

1. Glenn Stevens’ last speech as governor was even more awesome than first thought – he buried a huge swipe at the IMF. Footnotes? Who would have thunk Glenn Stevens would have used the last footnote in his last speech to give a very strong message about where Europe and the IMF have gone wrong?

Paul Colgan thought he might read all the way to the bottom and noticed the hand grenade Stevens left behind. You can read his piece here.

2. If the Ausgrid asset is so valuable NSW should sell it to itself. On the way home from Sydney last night I heard NSW Treasurer Gladys Berejiklian say something to the effect that the Ausgrid assets were excellent and she wouldn’t have any trouble selling them. So while the hand wringing and finger pointing about Scott Morrison’s decision to block the sale was going on, an idea struck me.

If the assets are excellent, if their sale is going generate cash to then spend on Mike Baird’s roads and infrastructure plans, and if Scott Morrison is worried about national security, then surely there is an alternative where we can keep these excellent assets in State hands but still fund the much-needed infrastructure?

So here’s my plan – NSW should securitise the cashflows from the Ausgrid assets issue bonds and then use the proceeds of the bond sales to fund the infrastructure. That way NSW gets to keep these excellent assets, ScoMo doesn’t have to worry about national security because the state will still control them, and NSW can use the $300-$400 million to service between $7.5-$10 billion in bonds at the current NSW T-corp 2030 bond rate.

3. It’s not just Scott Morrison blocking Chinese energy plays. Everyone seems to be dancing around whether or not the decision to block the Ausgrid sale to either of Mike Baird’s preferred Chinese bidders was all about China.

But Tao Jingzhou, a managing partner at Dechert LLP in Beijing has no such qualms. In an article which also looked at the recent decision by the British government to block a Chinese state-owned company’s investment in a nuclear power plant, Jingzhou told Bloomberg that: “As China’s diplomatic policies become more and more assertive, there’s a trend that these countries are gradually enhancing their vetting on Chinese investment…This is an attitude change.”

That view was echoed by Peter Jennings, executive director of the Australian Strategic Policy Institute, who told Bloomberg: “The more assertive a country makes its foreign policy, the harder it will be for partners like Australia to accept its foreign investment…It is a difficult message for China to receive, but a necessary one.”

4. New South Wales just paid $220 million to buy back a coal exploration licence BHP paid $100 million for a few years back. This is a win for the Liverpool Plains region with news yesterday that the NSW government has agreed to pay BHP Billiton $220 million to buy back its coal exploration licence in the region Reuters reports.

MIke Baird said in a press release that “after careful consideration, the NSW Government has determined that coal mining under these highly fertile black soil plains… poses too great a risk for the future of this food-bowl and the underground water sources that support it”.

In another win for NSW, the Opera House is getting a makeover.

5. Australian banks got hammered again yesterday as investors wonder about economic headwinds and the sustainability of dividends. Australian banks are such an important part of many retail investors’ portfolio. Buying them is as close as you can get to full representation across the Australian economy – in a way the index sometimes isn’t – and they also have been paying cracking dividends for an eternity. In a world of low rates on TDs and other investments, that’s important.

But global funds management behemoth SSGA is questioning the sustainability of dividends in Australian stocks. It has massive implications for the banks, but also the way investors approach the local stock market.

6. The Fed is going to increase rates in 2016. San Francisco Fed President John Williams said in an interview with the Washington Post published overnight the Fed will hike at least once this year, Reuters reports. Williams said: “As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years.”

And the Wall Street Journal survey tends to agree with him. But not during the election campaign with only a handful of respondents thinking September or November. But 71% of the 62 economists polled by the journal are thinking December is the meeting when the Fed will move again.

Also worth noting is Rachel Butt’s article saying that wage growth in the US is accelerating, and that could change the Fed’s plans.

I’m Greg McKenna and you can catch me on Twitter or at AxiTrader where I am the Chief Market Strategist.

Key data for the past 24 hours (with thanks to BNZ markets)
NZ: RBNZ official cash rate, %, 11-Aug: 2.0 vs. 2.0 exp.
NZ: Food prices m/m, %, Jul: -0.2 vs. 0.4 exp.
UK: RICS house price balance, %, Jul: 5 vs. 6 exp.
AU: Consumer infl. expectations, Aug: 3.5 vs. 3.7 prev.
CA: New house price index, m/m, %, Jun: 0.1 vs.0.3 exp.

And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day

ANZ Inflection

It’s decision time for ANZ investors. A 20% lift in share price in six weeks presents them with a first world problem – take profits, or hang on for the ride?

The update delivered this week suggests the recent rise, and outperformance against its peers, is justified. It held its Net Interest Margin steady, while CBA’s declined by 2 basis points. The market will wait to hear from Westpac and NAB before making final judgement, but the early signs are positive.

The charts are pointing to a binary situation. The share price is displaying trend reversal characteristics, similar to an “evening star”, but this reversal is taking place just above key support. In my view ANZ is good value at current prices, but what do fundamentals have to do with bank share prices?

Investors may prefer to let the price decide. Above $26 ANZ’s technical outlook is positive, but ay fall below that level could herald a large fall to come.

Michael McCarthy, chief market strategist, CMC Markets.

You can follow Michael on Twitter @MMccarthy_CMC

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