Stocks in the US pulled back a little from their all time highs after retail sales data printed a little weaker than expected. That put questions about the strength of the US economy front of mind and reduced expectations a little for a Fed hike in 2016.
That in turn hurt the US dollar. But the Australian dollar was weighed down a little by technical selling and the weaker than expected Chinese data.
All in all the SPI traders are looking for a small 11 point dip when the local stock market opens. But it’s a big week of reports so there will be plenty of stock specific news and movements.
Here’s the scoreboard (7.95am):
- Dow: 18576 -37 (-0.20%)
- S&P 500: 2184 -2 (-0.08%)
- SPI 200 Futures (September): 5,474, -11 (-0.2%)
- AUDUSD: 0.7655 -0.0040 (-0.52%)
The top stories
1. 100 companies on the ASX are reporting this week – here’s a snapshot. APP Securities Matt Felsman says “oOver 100 companies are coming to market next week with profit reports from the June half, highlights include potential index movers BHP and CSL, Newcrest, Woodside and Santos”.
So earning season has been pretty good, Felsman says, and after 2 weeks of reporting, of the 38 companies we’ve heard from, “44% beat estimates, 23% missed and a fairly even balance of 11 upgrades and 15 downgrades from brokers”.
But in real terms we are only just now getting into the meat of report season. BHP, Newcrest, Atlas Iron and JB Hi-FI are probably the standout today. But it be a big week for the ASX.
2. This is wild – could funds step into the breach and stop a housing crash? Besides the Olympics this has to be my favourite story for the weekend. The AFR reported that “Institutional and private equity is mobilising to fill a potential gap in the housing market if the buyers of Australia’s record number of off-the-plan apartments become unable to settle their purchases”.
Mark Harrison, managing director of property investor and financier Wingate says offshore funds are about to launch a product to fill the void. Maybe apartment prices won’t crash.
If true, this story and Westpac’s excellently well supported and even better-priced $5 billion bond issue into the US late last week shows not everyone offshore looking for doom and gloom in the Australian economy as plenty suggest.
3. One of the world’s most prominent central bankers just explained why savers matter less than the rest of the community when rates are being set. Andrew Haldane is the Bank of England’s chief economist and one of the most influential thinkers in the central bank universe.
In an article in The Sunday Times he has neatly summed up why the Bank of England cut rates recently. You get a sense of the thinking in the headline – “I sympathise with savers but jobs must come first”. And there you have have it. Jobs. It’s as simple and as difficult as that.
4. US data is pushing back the rate rise – but the Aussie dollar still fell Friday. The Aussie dollar is sitting at 0.7650 this morning. That’s not weak per se but it is weaker than the US data might have suggested, given the changed Fed expectations which CommSec’s Craig James says means traders “now see a 43% chance of a rate hike in December, down from 52% on Thursday”.
What’s hurt the Aussie it seems is the weaker than expected and a little disappointing Chinese data on Friday. Traders will be watching support at 0.7620 to see if the outlook has changed for the Aussie relative to the recent reasonably bullish consensus.
5. It’s begun – a tiny German bank has now put a negative rate on savings. Tim Wallace from the Telegraph in the UK reports that “Gmund am Tegernsee’s co-operative savings bank has decided to pass on the European Central Bank’s negative deposit rate to retail customers”.
For the moment it’s only clients with more than 100,000 Euro who will be charged a negative rate of 0.4% by Raiffeisenbank Gmund am Tegernsee. It’s the widening point of the thin end of the wedge with board member Josef Paul saying: “With our business clients there’s been a negative rate for quite some time, so why should it be any different for private individuals with big balances?”
6. Here’s how Elon Musk and Blockchain can revolutionise consumer energy consumption. I strongly believe Tesla’s Powerwall batteries are going to revolutionise energy production and consumption when the price is low enough that we can all get them in our homes and the solar cells on our roofs.
I figure we’ll create our own energy, consume it, and the excess might mean that base load power can eventually be gain from city roof tops. This will take years though right?
Maybe not. Perth company Power Ledger released a note last week saying that it was commencing trials which will use the blockchain technology behind Bitcoin to allow “producers and consumers to trade their energy directly”.
Base load solar power can revolutionise the world and its energy markets.
Key data for the past 24 hours (with thanks to BNZ markets)
NZ: BNZ manufacturing PMI, Jul: 55.8 vs. 57.7 prev.
NZ: Retail sales ex inflation (q/q%), Q2: 2.3 vs. 1.0 exp.
CH: Industrial production (y/y%), Jul: 6.0 vs. 6.2 exp.
CH: Retail sales (y/y%), Jul:10.2 vs. 10.5 exp.
CH: Fixed assets ytd (y/y%), Jul: 8.1 vs. 8.9 exp.
CH: New yuan loans (CNYBn), Jul: 464 vs. 850 exp.
EZ: Industrial production (m/m%), Jun: 0.6 vs. 0.5 exp.
US: Retail sales adv. (m/m%), Jul: 0.0 vs. 0.4 exp.
US: Core PPI, Jul: -0.3 vs. 0.2 exp.
US: Univ. of Mich cons. sent., Aug P: 90.4 vs. 91.5 exp.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
Blackmores Breaks Out
If you’ve waited for Blackmores share price to stabilise before buying in, it may be time to jump. On Friday, Blackmores broke through resistance, and could be in for a sharp rally.
There was no company specific news to prompt the move. China retail sales and industrial production data was released, but both disappointed, albeit modestly. When faced with a significant move without an obvious trigger, experienced brokers generally reach for “more buyers than sellers”.
So be it.
Whatever the reason, the price action is clear. The three-candle “morning star” formed two weeks ago initially pointed to upside potential. The breach of resistance on Friday suggests the moves may be accelerating. The targets are $187.50, $193.50, $204.80 and the all-time high at $220.90.
Michael McCarthy is chief market strategist at CMC Markets. You can follow Michael on Twitter @MMccarthy_CMC