Last week, the Australian index jumped 2 per cent, while the US trading week ended with the S&P500 and the Nasdaq Composite indices at fresh record highs after a strong US gross domestic product reading.
“The galactic US GDP print of 3.2 per cent annualised growth should be taken with a pinch of salt. Stockpiled inventories accounted for nearly half the number,” said Mr Halley.
On Monday, banks were weak, with NAB shares down 0.9 per cent at $25.44 and Commonwealth Bank down 0.5 per cent at $75.11.
Property firms were also under pressure. GPT Group shares fell 2.8 per cent to $5.83. GPT released a March-quarter update confirming it was on track to meet 2019 guidance of 4 per cent growth for both Funds From Operations per security and Distributions per security.
In the local market, childcare stocks and dentistry companies shone following the Opposition Labor Party’s election spending promises for a generous taxpayer-funded childcare package and $2.4 billion for older people on the age pension or commonwealth seniors card holders up to $1000 of dental care every two years.
Shares in G8 Education, which runs 500 childcare centres around Australia, jumped 3.4 per cent to $3.07. Think Childcare, a mid-sized group, climbed 3.9 per cent to $1.75.
Of the larger ASX-listed dentistry stocks, Pacific Smiles gained 5.9 per cent to $1.25 while 1300 Smiles rose 0.8 per cent to $6.35.
Deal making helped as well. Pioneer Credit jumped 28 per cent to $2.52 in afternoon trading when the halt on its shares was lifted. It confirmed bidders are lining up to buy the Perth-based debt collector, with one suitor proposing an offer “at a material” premium to its hammered share price.
Shares in Freelancer surged 21.4 per cent to 85¢ after it provided a first-quarter market update. Gross payment volumes are up 26 per cent to $204.3 million, a record high. It has a positive operating cash flow of $2 million for the three months ended in March.
Viva Energy shares ended the day down 3.4 per cent at $2.28 after warning of a $35 million hit to its earnings thanks to sharply rising global oil prices. Viva recorded an improvement in its refining margins for the 2019 March quarter but volatile oil prices – which have jumped nearly 50 per cent since December – stripped out its petrol station earnings.
Stockwatch: Seven Group
Ord Minnett analysts are sticking to their accumulate recommendation on Seven Group following first-quarter results from US construction and mining equipment services group Caterpillar. Seven Group’s WesTrac business is a major dealer in Caterpillar equipment, the analysts said, while noting that Caterpillar’s resource sales into Asia Pacific rose 52 per cent in the first quarter of 2019. “We see the 52 per cent growth number, coupled with favourable commentary around mining capital expenditure, as likely to be a positive at the margins for WesTrac,” they said. Seven Group is likely to lift its guidance in the next month after a rebound in the oil price, the analysts said.
The Australian dollar traded at US70.54¢. The currency drew support from a decline in the US dollar and a strong lift in Chinese industrial profit data late last week. “However, with the Australian economic data focusing on the weak housing market this week, we expect the Australian dollar to remain heavy around US70¢,” said Commonwealth Bank analysts. “The soft Australian first-quarter CPI data published last week will be a noose around the neck of the Australian dollar in the near term.”
Brent crude dipped 46¢ to $US71.61 a barrel. The US President took the wind out of the sails of the oil market on Friday, tweeting: “Spoke to Saudi Arabia and others about increasing oil flow. All are in agreement.” According to Commonwealth Bank analysts, the comments suggest that global oil supply was set to rise to counter the rise in oil prices. “It is worth noting that President Trump’s tweets tend to have a short-term impact on oil prices before other drivers become more dominant,” they added.
US interest rates
ANZ’s economics team is looking ahead to this week’s Federal Reserve meeting. “This week’s [Future Open Market Committee} meeting will garner plenty of market attention. A consistent improvement in the US data pulse has led many commentators to reduce the odds of future rate cuts in the US,” the economists said. “That said, a benign inflation backdrop has allowed many to maintain their arguments for future rate cuts.” Market pricing suggests the Fed is not expected to change its stance on rates, they said.
It’s a big week for Chinese companies, with more than 60 companies in China and Hong Kong worth about $US2.6 trillion ($3.7 trillion) reporting on Monday alone, according to Bloomberg. China Telecom is set to be one of the first to report with dozens more results due after the market close. In the banking sector, Standard Chartered and HSBC Holdings are expected to report later in the week. Mainland markets will be shut from Wednesday for a three-day break.
William McInnes covers markets from Sydney including editing the Markets Live blog.