The Monday Report – 20 November 2023

This story features ACCENT GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: AX1

The company is included in ASX300 and ALL-ORDS

World Overnight
SPI Overnight	7104.00	+ 28.00	0.40%
S&P ASX 200	7049.40	– 9.00	– 0.13%
S&P500	4514.02	+ 5.78	0.13%
Nasdaq Comp	14125.48	+ 11.81	0.08%
DJIA	34947.28	+ 1.81	0.01%
S&P500 VIX	13.80	– 0.52	– 3.63%
US 10-year yield	4.44	– 0.00	– 0.09%
USD Index	103.92	– 0.48	– 0.46%
FTSE100	7504.25	+ 93.28	1.26%
DAX30	15919.16	+ 132.55	0.84%

By Greg Peel

Friday on their Mind

Wall Street took a breather on Thursday night following another strong run and the ASX200 did the same on Friday, chopping around in a tight range before finishing only slightly lower.

There seemed little appetite to continue buying ahead of the weekend after the index put on 1% over the week, despite another -8 point fall in both the Aussie two and ten-year yields.

Rate-sensitive sectors were both bought and sold, with industrials, technology and healthcare closing mildly higher while real estate, communication services and the banks all mildly fell.

Consumer sectors were on the nose, with staples falling -0.7% and discretionary -1.0% ahead of a week in which Australian retailers give thanks and consumers make the most of it ahead of Christmas.

There were some notable falls among ASX200 and 300 stocks for the likes of Accent Group ((AX1)), Car Group ((CAR)), formerly Carsales, Cettire ((CTT)) and Lovisa Holdings ((LOV)).

Energy was the worst performer (-1.6%) on a -4% fall in oil prices, which spun into a 4% gain on Friday night. Utilities lost -1.0%.

Materials rose 0.4% thanks to iron ore and gold.

Presumably, there was an element of not wanting to take risk home for the weekend in a world in which anything might happen in two days. Wall Street again closed flat on Friday night but our futures were up 28 points on Saturday morning, with the swing in oil prices about the only catalyst.

Yet Tuesday brings the minutes of the November RBA meeting (another hike in December?), and Tuesday night brings the minutes of the Fed meeting (are we done?).

Tuesday night also brings one of the most critical earnings reports of the US season, being that of Nvidia.

Three-Peat

Wall Street just fell over the line on Friday night but marked a third straight week of gains, which have taken the S&P500 from 4100 to over 4500.

The Dow rose 1.9% for the week, the S&P 2.2% and the Nasdaq 2.4%.

The uniformity of those gains underscores a rally (9.6% for the S&P) off the low that has been most notable in its breadth, as opposed to past rallies led almost solely by the Magnificent Seven mega-techs.

While the Mag7 has still performed well, the S&P500 Equal-Weight index, or as some like to call it, the S&P493, has also rallied solidly after having been in the doldrums for most of the year. Ditto the Russel 2000 small cap index, which last week alone gained over 5%.

There was a slight scare in the last hour of trade on Friday night with the shock announcement the board of OpenAI, which created ChatGPT, had sacked its CEO for apparently not providing the sort of feedback consistent with the requirements of a board charged with fiduciary responsibilities.

There is no truth to the rumour the new CEO will be AI-generated.

The news hit Microsoft shares, given the company has around a 10% stake in OpenAI and has recently been hitting consistent new highs on the back of ChatGPT demand. Microsoft, which is in all three indices, fell over -2% but that was largely recovered by the bell.

It was likely pointed out that in the scheme of things, OpenAI’s US90bn valuation (up from US$29bn in 2021, but it’s not listed) is really a drop in the bucket for the trillion-plus dollar-valued Microsoft.

The week saw Fed speakers trying to play down a notion the FOMC is clearly now done with raising rates, and that the next move will be a cut, which has become the general market belief.

On Friday night the San Francisco Fed President said the central bank should wait on interest rate policy given the high uncertainty surrounding the outlook for the US economy. The Boston Fed President said “I wouldn’t take additional firming off the table,” despite the soft inflation data released over the week.

Bond yields did not move on Friday night. The two-year remains under 5% when the Fed funds rate is 5.25-5.50%.

Meanwhile, US retailers reported earnings over the week and despite speaking of caution regarding spending in the holiday quarter, have net beat on earnings and seen some solid gains.

The standout on Friday night was apparel retailer Gap, which jumped 30%.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1981.10	– 0.40	– 0.02%
Silver (oz)	23.72	– 0.03	– 0.13%
Copper (lb)	3.69	– 0.01	– 0.36%
Aluminium (lb)	0.99	– 0.01	– 0.57%
Nickel (lb)	7.57	– 0.03	– 0.41%
Zinc (lb)	1.16	+ 0.01	0.50%
West Texas Crude	75.89	+ 2.96	4.06%
Brent Crude	80.61	+ 3.11	4.01%
Iron Ore (t)	128.95	– 0.47	– 0.36%

The 4% jump in oil prices, following Thursday night’s -4% fall, was attributed simply to shorters taking profits after a fourth consecutive week of lower prices. Both crudes fell -1% for the week.

The bottom line is demand from China has been weaker than expected, while US production has been stronger than expected.

China is writ large across metal prices.

Despite no move in US bond yields, the US dollar fell -0.5% on Friday night so the Aussie’s up 0.8% at US$0.6516.

The SPI Overnight closed up 28 points or 0.4% on Saturday morning.

The Week Ahead

It’s Thanksgiving week in the US. Once Wall Street gets past the release of the November Fed meeting minutes on Tuesday and durable goods orders on Wednesday morning, Wednesday afternoon sees an exodus.

Wall Street is closed on Thursday and closes early on Black Friday – a session which is typically a waste of time as no one’s there.

Japan is also closed on Thursday.

The RBA minutes are out on Tuesday in an otherwise data-free week locally.

The AGM season rolls on nonetheless. The numbers are now dwindling, but there’s another big Thursday ahead.

TechnologyOne ((TNE)), Webjet ((WEB)) and Virgin Money UK ((VUK)) report earnings over the week.

The Australian share market over the past thirty days…

Index	17 Nov 2023	Week To Date	Month To Date (Nov)	Quarter To Date (Oct-Dec)	Year To Date (2023)
S&P ASX 200 (ex-div)	7049.40	1.04%	3.96%	0.01%	0.15%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A2M	a2 Milk Co	Upgrade to Buy from Neutral	Citi
ALL	Aristocrat Leisure	Upgrade to Accumulate from Hold	Ord Minnett
ALQ	ALS Ltd	Upgrade to Lighten from Sell	Ord Minnett
NHF	nib Holdings	Upgrade to Hold from Lighten	Ord Minnett
NUF	Nufarm	Upgrade to Buy from Neutral	Citi
PNR	Pantoro	Upgrade to Hold from Sell	Bell Potter
SEK	Seek	Upgrade to Buy from Neutral	UBS
SVR	Solvar	Upgrade to Buy from Hold	Bell Potter
TPG	TPG Telecom	Downgrade to Underweight from Equal-weight	Morgan Stanley
WDS	Woodside Energy	Downgrade to Sell from Neutral	Citi

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

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