The Overnight Report: No Fear

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World Overnight
SPI Overnight	7580.00	+ 38.00	0.50%
S&P ASX 200	7578.40	+ 23.00	0.30%
S&P500	4927.93	+ 36.96	0.76%
Nasdaq Comp	15628.05	+ 172.68	1.12%
DJIA	38333.45	+ 224.02	0.59%
S&P500 VIX	13.60	+ 0.34	2.56%
US 10-year yield	4.09	– 0.07	– 1.66%
USD Index	103.61	+ 0.18	0.17%
FTSE100	7632.74	– 2.35	– 0.03%
DAX30	16941.71	– 19.68	– 0.12%

By Greg Peel

Modest Strength

Wall Street stalled on Friday night but local investors came back from the holiday in buying mode, sending the ASX200 up 23 points at a fairly steady pace yesterday. Moves were largely concentrated to only a few sectors nonetheless.

The banks were the primary driver in rising 0.7%. Bond yields slipped a little, and real estate was fired up as well (+1.1%) but not all rate-sensitive sectors responded. Industrials and utilities both rose 0.5%.

Technology went the other way, falling -1.2%, following the Nasdaq’s break of its six-day winning streak.

Otherwise, it appears hopes are high for a positive (low) print for the December CPI, due tomorrow.

Materials fell -0.4% as BHP Group ((BHP)) dropped -1.4% after the Brazilian state prosecutor pushed BHP and Vale to pay up the near US$10bn in damages sought following the Samarco dam disaster (nine years ago). The decision remains subject to appeal.

Energy was the winner on the day (+1.8%), following the “serious escalation” of the Middle East conflict with the death of US soldiers. Oil prices jumped over the two sessions prior to yesterday, but actually fell back last night.

Apparently the ultimate demise of Evergrande was the trigger, suggesting the parlous state of the Chinese property market will translate in weaker oil demand in the Chinese economy.

The news of Evergande’s liquidation nevertheless seemed to have little impact elsewhere, including on the Hong Kong stock market, which rose 0.8%. No one was shocked.

Among individual index stocks, Gold Road Resources ((GOR)) had a bad day after releasing its quarterly report, falling -18.4%. Gold Road has been popular with gold sector analysts.

Outside the index, environmental technology company Calix ((CXL)) plunged -22% after announcing its “green” cement operation in Germany is being forced to move location.

It’s a big week ahead, with our Christmas retail sales numbers out today and CPI tomorrow, along with the Fed meeting tomorrow night, as well as a wealth of US Mega Cap earnings results that have the power to move world markets. But are traders cautious?

Wall Street has closed with a spurt and the S&P500 was up 0.8% overnight. Our futures are up 38 points (+0.5%) this morning.

Not so Much

Wall Street was already looking healthy last night ahead of the Fed and this week’s earnings results when heading into the last hour, the US Treasury announced its borrowing estimates for this and the next quarter (amount of bonds it has to sell).

For the March quarter, the Treasury now estimates US$760bn, which is -US$55bn lower than the prior estimate made in October. For the June quarter, Treasury will need a mere US$202bn – the lowest amount since the same quarter in 2022.

Markets were thrilled with the news. The US ten-year yield was already lower on the day but dropped as much as -10 points before settling at 4.09%, down -7 points. Stock indices, particularly the Nasdaq, spiked higher.

Back last year when the US ten-year peaked over 5%, part of the problem was the sheer extent of borrowing the Treasury would require, having been held up by the Republican circus in Congress which threatened shutdown after shutdown. With China lacking capacity and Japan preferring to buy local, the question was just where the buyers would come from.

But they came. In droves in fact, sending US bond rates tumbling. Not every Treasury auction has been deemed a winner but expectations of Fed rate cuts were enough to encourage sufficient demand. And now the supply is not as much as feared.

US shutdown risk is not over by the way. There’ll be another confrontation in February.

Meanwhile, the Dow and S&P500 again hit new all-time highs while the Nasdaq hit a new one-year high.

For all the hype around the Mag7, the bulk of which reports this week, it is noteworthy the gains in late 2023 and into 2024 have for the most part only taken share prices back to where they were at their peaks in 2021, when covid ravaged the planet.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	2032.00	+ 13.20	0.65%
Silver (oz)	23.16	+ 0.38	1.67%
Copper (lb)	3.85	+ 0.01	0.16%
Aluminium (lb)	1.02	– 0.00	– 0.30%
Nickel (lb)	7.41	– 0.06	– 0.82%
Zinc (lb)	1.15	– 0.01	– 0.96%
West Texas Crude	77.00	– 1.01	– 1.29%
Brent Crude	82.55	– 1.00	– 1.20%
Iron Ore (t)	135.19	0.00	0.00%

Iron ore futures were closed yesterday.

Gold has received a boost from lower US yields.

The oils are defying what might come next in the Middle East.

The US dollar is a tad higher, despite yields, but the Aussie has suddenly jumped 0.5% to US$0.6612.

Today

The SPI Overnight closed up 38 points or 0.5%.

December retail sales data are out today.

The eurozone reports December quarter GDP tonight.

The US will see consumer confidence and job openings.

Google and Microsoft report tonight.

There’s a longish list of local companies, mining and non-mining, reporting quarterlies today as January comes to a close.

Eagers Automotive ((APE)) holds an EGM.

The Australian share market over the past thirty days…

Index	29 Jan 2024	Week To Date	Month To Date (Jan)	Quarter To Date (Jan-Mar)	Year To Date (2024)
S&P ASX 200 (ex-div)	7578.40	0.30%	-0.16%	-0.16%	-0.16%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BOE	Boss Energy	Downgrade to Hold from Buy	Bell Potter
DMP	Domino's Pizza Enterprises	Downgrade to Hold from Add	Morgans
EDV	Endeavour Group	Upgrade to Equal-weight from Underweight	Morgan Stanley
IEL	IDP Education	Downgrade to Hold from Add	Morgans
LTR	Liontown Resources	Upgrade to Buy from Neutral	UBS
MFG	Magellan Financial	Downgrade to Underperform from Neutral	Macquarie
NAN	Nanosonics	Upgrade to Hold from Lighten	Ord Minnett
NST	Northern Star Resources	Upgrade to Accumulate from Hold	Ord Minnett
PDN	Paladin Energy	Upgrade to Buy from Hold	Bell Potter
		Upgrade to Buy from Neutral	Citi
PSI	PSC Insurance	Upgrade to Buy from Neutral	UBS
RRL	Regis Resources	Downgrade to Sell from Neutral	UBS

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

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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