The Overnight Report: Buy Anyway

This story features BRAINCHIP HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: BRN

The company is included in ASX300, ALL-ORDS and ALL-TECH

World Overnight
SPI Overnight	7283.00	+ 88.00	1.22%
S&P ASX 200	7186.50	+ 32.60	0.46%
S&P500	4505.10	+ 37.66	0.84%
Nasdaq Comp	13926.05	+ 112.47	0.81%
DJIA	34907.11	+ 331.58	0.96%
S&P500 VIX	12.82	– 0.66	– 4.90%
US 10-year yield	4.29	+ 0.04	0.92%
USD Index	105.34	+ 0.57	0.54%
FTSE100	7673.08	+ 147.09	1.95%
DAX30	15805.29	+ 151.26	0.97%

By Greg Peel

Something for Everyone

The ASX200 opened lower yesterday on the morning’s ex-divs but unlike prior sessions this week, did not go on with it. Rather, the index immediately headed north, as the buying that was put on hold on Wednesday ahead of the US CPI was unleashed.

The index rallied into the August jobs report late morning which caused a slight stumble, until the numbers became more clear and the rally recommenced.

Australia added 64,900 jobs in August, following a loss of -1,400 in July (revised), well ahead of 25,000 estimated. While estimates are never right, that’s a big difference, and enough for the market to assume the RBA may not yet be done.

Except that (a) the unemployment rate was steady at 3.7%, (b) 62,100 jobs added were part- time and only 2,800 full-time, which leads to (c) a -0.5% fall in hours worked. These numbers, it was decided, are not enough to fire the RBA up again.

Hence the index rallied on, only dipping at the bell on a market-on-close order.

Meanwhile, China added more incremental stimulus yesterday, with the PBoC cutting the bank reserve ratio requirement by -25 basis points. That had metals and oil prices increasing last night.

Despite a “hot” US PPI, and absorbing better than expected retail sales, Wall Street posted a strong market-wide session last night. The S&P closed up 0.8%. Put it all together and our futures closed up 88 points or 1.2% this morning.

We should get 7200 back “in a canter”.

Index strength yesterday was led by materials (+1.0%) and the banks (0.7%). We can put bank strength down to stubbornly low unemployment, but that should in theory also boost the consumer sectors. They were flat. Healthcare fell -0.6%.

Bond yields fell -2 points.

All other sectors closed modestly in the green.

Miners dominated the top spots yesterday, although Brainchip Holdings ((BRN)) topped the index with a 5.5% gain.

The ever-rising price of uranium was in the spotlight, sending index component Paladin Energy ((PDN)) up 3.9% and peers Boss Energy ((BOE)) and Deep Yellow ((DYL)) each up over 8%.

So we should be in for a cracking opening today. There may be pause for thought late morning when China releases its August industrial production, retail sales and fixed asset investment numbers, but I suggest a steak and a nice claret for lunch.

To assist a strong opening, Carsales ((CAR)) is the only biggie in a quiet day for ex-divs.

Hawkish Pause?

The US headline PPI rose a solid 0.7% in August, well ahead of 0.4% forecasts, but mirroring the 0.6% jump in the CPI. Both moves were the biggest in 14 months. The jump was put down almost solely to energy prices.

Yet the annual rate was only 1.6%. The core PPI rose only 0.2% when 0.3% was expected. The annual core rate ticked up to 3.0% from 2.9% in July.

US retail sales rose 0.6% in August when 0.1% was expected. Low expectations were due to the big bump in July thanks to Amazon’s Prime Day, but the “beat” was again blamed on energy prices.

The above “beats” suggest the Fed could be forced to raise next week. Except that no one believes so. The market is still factoring in a 97% chance of a pause, and only a 32% chance of a November hike.

Bond yields ticked up a few points on the data, but Wall Street fired up nevertheless, and despite the ECB hiking by 25 points overnight. Investors are “looking through” to next year, knowing that even if there is another rate rise, the Fed is close to being done.

Also sparking confidence was the first big tech IPO for 2023. British company Arm Holdings, which makes the actual chip hardware that the likes of Nvidia and Microsoft then turn into AI chips, jumped 25% on debut.

That took the stock to a PE of over 100x, for a company that is not a growth start-up, but has been around since 1990 and is really just a reliable plodder. But Wall Street has been starved of IPOs since 2021, so it seems like investors are just itching to get their hands on anything new.

Arm will no doubt encourage some other companies in the IPO wings — still in the will we, won’t we phase – and there is excitement building that IPOs may be baaack!

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1910.60	+ 2.70	0.14%
Silver (oz)	22.63	– 0.18	– 0.79%
Copper (lb)	3.81	+ 0.03	0.90%
Aluminium (lb)	0.99	+ 0.01	1.09%
Nickel (lb)	9.03	+ 0.21	2.41%
Zinc (lb)	1.15	+ 0.02	2.19%
West Texas Crude	90.16	+ 1.64	1.85%
Brent Crude	94.13	+ 1.94	2.10%
Iron Ore (t)	120.56	+ 0.03	0.02%

Not the first time I’ve said a little bit of Chinese stimulus goes a long way.

The Aussie is up 0.3% at US$0.6441, which seems a bit tepid under the circumstances, but the US dollar is up 0.5% so a pretty good effort.

Today

The SPI Overnight closed up 88 points or 1.2%.

China data today as noted.

The US will see industrial production and consumer sentiment tonight.

The September quarter ASX index promotions relegations will come into effect at today’s close.

As noted, Carsales is the only ex-div of note today.

The Australian share market over the past thirty days…

Index	14 Sep 2023	Week To Date	Month To Date (Sep)	Quarter To Date (Jul-Sep)	Year To Date (2023)
S&P ASX 200 (ex-div)	7186.50	0.42%	-1.63%	-0.23%	2.10%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BBN	Baby Bunting	Upgrade to Buy from Neutral	Citi
ERD	Eroad	Upgrade to Buy from Hold	Bell Potter
IPL	Incitec Pivot	Downgrade to Sell from Neutral	Citi
		Downgrade to Equal-weight from Overweight	Morgan Stanley
PTM	Platinum Asset Management	Upgrade to Neutral from Sell	UBS
SGM	Sims	Upgrade to Neutral from Sell	Citi
SHV	Select Harvests	Downgrade to Neutral from Buy	UBS

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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