Weakness in the commodity complex overnight weighed on the ASX today with the index finishing in the red for the 3rd straight day. Copper the main target overnight and that provided the topic for our AM report this morning. Last night’s fall in Copper was blamed mainly on a stronger $US but that doesn’t sit particularly right with us at MM as the $US only rallied 0.15%, we feel optimism around the US tax cuts fuelling the global economy has got a little ahead of itself. The copper price is generally regarded as a leading indicator on the global economy and the recent 10% correction is at odds with most economists belief that growth is improving.
There is certainly some debate going on about whether or not Copper will be in surplus or deficit in 2018/19, with most predicting a slight surplus in 2018 followed by a slight deficit in 2019, which means any price increase for now will probably come from a change on the demand side, or in other words, a more bullish growth outlook for the global economy. Overall, we believe the risk / reward has returned for the bulls and while copper holds above the 275-280 region we can be buyers around $US290/lb. To that end, Oz Minerals (OZL) came back into the buy range below $8.00 today.
Nickel was also smacked overnight and it’s now down ~15% from its recent peak just a few short weeks ago – funnily enough just as the topic of Nickel and electric cars was getting most airtime. Today Western Areas (WSA) got sold hard, down -5.26% to $2.88 (-16% from its recent highs) – this is a stock to buy into weakness, but not yet, while Independence Group (IGO) which we own has also struggled, but not as much, trading down ~12% from its recent highs, but is still +42% above its May 17 lows. Clearly a volatile area of the market.
On the broader mkt today, selling came in fairly hard from the open before a tentative fightback into lunch time, however sellers then dominated the afternoon session. Telcos the best of a weak bunch adding +0.42%, Telstra up smalls while TPG re-confirmed guidance and ended +1.33% higher. On the flipside, Materials lost -1.66% with BHP mirroring its performance overseas by dropping ~2%. An overall range today of +/- 26 points, a high of 5964, a low of 5938 and a close of 5945, off -26pts or -0.44%.
We’re now only 46pts above our shorter term downside target for the mkt, before the usual December strength that typically happens from the middle of the month starts to play out.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
TOP MOVERS 1. TPG Telecom (TPM) – Reconfirmed FY18 Guidance for EBITDA $800-815m + mobile rollout on track + we also had Chair and major shareholder David Teoh show confusion about why the share price was so low – those comments prompted some buying today by the look with the stock closing up + 1.33% to $6.11
TPG Daily Chart
2. Corporate Travel (CTD) – Morgan’s reckon this is a BUY again after the weakness and they tend to have a reasonable impact on stock prices – the pullback here is deep and the obvious pattern below was the marginal new high before the stock rolled over. When that happens, we tend to see a test of the lower extremity of the range, which has now played out. CTD added +4.05% today closing at $20.30.
Corporate Daily Chart
FREE TRIAL - 14-days free stock market advice - all our reports including every ASX buy & sell recommendation - CLICK HERE TO REGISTER
Have a great night James & The Market Matters Team
Prices as at 06/12/17
James is a Portfolio Manager within Shaw and Partners heading up a team that manages direct equity and option portfolios. He is also the Primary Contributor to Market Matters, a daily investment report that offers real market insight.