Company Interview / the open: lacklustre lead & dividends in focus

The ASX is expected to make a modest move to the upside today, with no lead coming from US or Canadian markets which were closed for a long-weekend. 

 European markets fell slightly on little volume, with wins for the populist parties in German state elections adding to the trepidation. Eurozone final August manufacturing PMI was marked up slightly to 45.8 from the Flash 44.6. The UK's final August Manufacturing PMI was left unchanged at 52.2. 

Traders are betting on a September Federal Reserve rate cut with a 33% chance that it could be a 50-basis point reduction. Treasury markets were closed for the long-weekend which marks the end of the summer in North America.

Oil prices were little changed after falling in recent days. Brent crude held steady at $76.91 a barrel, down more than 5% from a week earlier. Iron ore fell further, which could put some pressure on the miners. Gold prices fell to their lowest in more than a week as the US dollar firmed.

Locally, we get the second quarter current accounts which are expected to show a deficit of $5.5bn on declining bulk commodity export prices. NAB economists say the release will also help firm up expectations for Q2 GDP. They have pencilled in a 0.1 per cent quarter-over-quarter gain.

 On the equities front - a raft of stocks trade ex-dividend including Coles, Wesfarmers and Woolworths.

Below is an unedited transcript:

0:00

So despite US equities of course giving us no lead. Are we all in all did see the global benchmark the world index if you will, push higher up into record territory. And that's supported by the European benchmarks heading higher with the euro index that we watch up about 0.3%. It's not much to go by, but I do really think that a lot of caution is in the air, Nadine, because we've got to remember that September is traditionally the worst month of the year for equity market returns. So that's what investors are facing with and will this Friday's report, the US jobs report being upset for markets? I think that's a bit of a concern over a lot of investors at the moment. Typically, um, you know, we do see souring towards the later part of September. But I think this jobs report, if it's stronger than expected, we could

0:59

see equities, um, potentially take a big haircut, particularly given that there's a 1 in 4 chance of a 50 basis point cut, um, in a couple of weeks by the fed. So there's a lot to digest. But, um, I guess markets will be wondering, will they be singing wake me Up When September Ends by Green Day? Yeah. All right. Well, um, we'll watch the volatility index closely for here locally as well. Just commodity prices. You know we can live or die by commodity prices as well. And we're starting to see a few cracks in that scenario.

1:39

Yeah a few cracks. And um, also a few green shoots uh, green shoots for some. So the wheat price is up almost a 5% in five days. Um, and we're also seeing, um, other green shoots in other key commodities as well in the soft space. So this means that we should keep our eyes and I guess our radar on those poultry producers such as Ingham's, we know that they've been heavily sold down. Of late because of their own issues, because of, uh, change of contracts, etc.. But also speaking of other softs, we're seeing cattle prices also up about 2% in the space of five days. So just makes me wonder, are we sometimes forgetting the staple players, remembering that investors typically like to be defensive around this time of year with seasonality and lots of caution creeping up? But I think it would be remiss if we

2:38

didn't, um, have a look at Elders Australian Agricultural Co, just with cattle prices, are potentially heading to higher levels. Indeed. That's what we've seen over the past five days. But moving along the other spectrum, looking at some other commodity prices, we've seen copper, aluminium,

2:57

um, and nickel, um, uh, I guess they're they're taking it they're taking a step back for now. Um, and I think that's part and parcel for the fact that we are seeing the US U.S. dollar continuing to hold above its lows that we saw hit back in August. So this is a bit of a concern. And last but definitely not least, the iron ore price. Nadine took a tumble, um, much like that, to take a tumble off my, uh, of the stand that I'm on right now.

3:29

It's crumbling as we speak. Um, the iron ore price down 2%, uh, overnight. And despite, um, China's manufacturing activity coming in, I guess in expansionary territory, there is concern that we haven't yet seen a stimulus there, uh, from China to support their property sector. So a bit more concern for those iron ore, uh, key players and investors, uh, today. Nadine. Yeah. Okay. So we will be watching those big miners, you know, see if they will experience the same pressure they did in the session yesterday So what are you expecting from the local market today, Jesse? Because as we mentioned, we don't have much of a lead in thin trade in Europe waiting for that jobs data later in the week. Also GDP here locally tomorrow. So pretty tepid start you think.

4:22

Yeah, pretty tepid start. But if you have a look at the futures they say it should be a green day. Um, to quote another Green Day reference. So the futures were up before we jumped on this. Today futures are up point about 0.2 of a per cent it's not much to go by, but I do think investors are probably going to be playing the defense game today, are looking at those defensive sectors such as staples. And they've got good reason to given that we're seeing those soft commodity prices move on up. Also, I think we'll get some reprieve in the oil sector today. Brent crude is up by about 0.8%. Yes. It's been sold off of late because we do know OPEC are increasing production. OPEC plus are increasing production. And there's a little bit of concern um around lack of demand from China and the US, but are nevertheless we will see some reprieve in the oil sectors today. So that's something to keep on your radar. I

5:22

keep an eye on potential more pressure, um, in the iron ore space. But really big picture. I take a step back, think about later this month, potentially maybe reassessing your portfolio. Uh, we do know, as we said at the open, September is the worst month for equities. A lot of sophisticated investors rebalance their portfolios toward the end of the month because, of course, end of quarter. But it would be remiss to point out a lot of, uh, institutional investors might be buying the dip later this month and then potentially selling maybe if they're trading, selling in November, remembering that November is the best month of the year for share market returns. Last but not least, we do have the December uh, rally, uh, Santa rally to look forward to. So there's lots to keep on your radar, but, um, plenty to, um, plenty to trade and, uh, investing opportunities.