The Overnight Report: Tacit Confidence

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By Greg Peel

Whiplash

The Australian market fell out of bed on Friday following a sell-off on Wall Street driven by slower than expected US growth and a higher than expected inflation component within the GDP data.

Yesterday, the Australian market regained two-thirds a that loss following a rally on Wall Street driven by a flat PCE result.

It’s hard to keep up.

Everything that was trashed on Friday rebounded yesterday. Technology led the way (+1.7%), buoyed by positive earnings result responses for Google and Microsoft, and real estate matched (+1.7%) despite the Aussie ten-year only giving back -3 points to Friday’s 10 point gain.

Solid bounces were also recorded in communication services (+1.3%), discretionary (+1.1%), healthcare (+1.2%) and industrials (+1.2%). Basically anything slightly rate-sensitive.

The banks were a little more timid (+0.6%) while solid gains in copper and lithium prices overnight, driven by Chinese restocking ahead of the May Day five-day holiday at week’s end, only drove materials up 0.5% given investors are still worried about BHP Group’s ((BHP)) M&A ambitions.

Energy (flat) sat it out, although beleaguered Strike Energy ((STX)) was the best index performer on the day (+10.0%).

Star Entertainment ((SGR)) made a rare appearance on the top five winners’ list in rallying 6.4% after laying off -1000 jobs.

For all the to-ing and fro-ing, the ASX200 is roughly back where it was a week ago, and is little changed since mid-April.

Today, we’ll see March retail sales data which may provide food for thought.

Baby you can drive my car

In a quieter session on Wall Street, last night the story of the day was Tesla, which jumped 15% on news surrounding Elon Musk’s visit to China. Tesla on Sunday said local Chinese authorities removed restrictions on its cars after passing the country’s data security requirements.

The move raised expectations that Tesla’s driver-assistance software known misleadingly as Full Self-Driving would soon be available for world’s largest EV market. FSD is not what it seems – you still have to drive the thing, but it offers various automated aspects such as lane changing.

Apple was another Mega Tech to have a good session, rising 2.5% after a well-respected analyst upgraded the stock to Buy for the first time in six years, suggesting slowing iPhone sales in China are cyclical not structural.

The rest of the Mega Techs saw slight pullbacks following Friday night’s burst of enthusiasm.

With 46% of S&P500 stocks now having reported earnings, 80% have beaten forecasts.

Yet the S&P500 is still down -3.5% from its high heading into the last day of April. And you know what they say about May.

There was a slight bout of caution late in the session last night when the US Treasury announced what its next round of borrowing requirements will be – higher than the last – but bond yields were unmoved and Wall Street quickly regained momentum into the close.

Attention now turns to this week’s Fed meeting, which the market worried recent inflation data will lead Jerome Powell to swing back to being a bit hawkish again.

Before that, Amazon reports earnings tonight.

Commodities

There’s a rumour going round that Beijing is going to introduce further property market-related stimulus ahead of the May Day holiday, which has sparked buying in metals.

US Secretary of State Blinken is back in the Middle East to make a renewed diplomatic push to secure a cease-fire in Gaza and head off an Israeli offensive against Rafah. The deal offered to Hamas is said to be the most persuasive to date.

That guy must by now have enough frequent flyer points to travel the world for the rest of eternity.

Oil prices fell on the news.

The Aussie is up yet again, by 0.5% to US$0.6565.

Today

The SPI Overnight closed up 12 points.

Today we’ll see retail sales and private sector credit.

China reveals April PMIs.

The US will see monthly consumer confidence.

Ampol ((ALD)) and Coles Group ((COL)) will provide quarterly updates today while IGO Ltd ((IGO)), Liontown Resources ((LTR)), Origin Energy ((ORG)) and Sandfire Resources ((SFR)) release production reports.

The Australian share market over the past thirty days…

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

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