The Overnight Report: A Pause After Eight Days

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

By Chris Weston, Head of Research, Pepperstone

Good morning.

After 8 days of gains, the S&P500 couldn’t quite push higher for a 9th consecutive higher close, although after such a run a fall of -0.2% is hardly that emphatic. In all, it was a bit of a messy session that will spill over into a weaker open for Asia equity.

Again, there was no real news to drive the cross-asset flows, so positioning and liquidity dynamics will likely get the blame. On net, the risk bulls will feel today’s moves have grazed but the wounds will not cut too deep given many have traded this move well and would be sitting on some good profits in equity indices. For those trading intraday, we can say that the price action certainly in the S&P500- was a low-energy chop fest, where cash volumes were -25% lower than the 30-day average.

Small caps underperformed with the Russell -1.2%, while 66% of S&P500 companies closed lower, with energy getting a solid working over by the sellers. Nvidia caught some flow, where the -2.1% lower close has weighed on the S&P500 and NAS100, and the attention on this name will clearly ramp up from here as we look ahead to its all-important quarterly earnings release next Wednesday.

We may have seen choppy trade in US equity, but the same can’t be said in the US Treasury market, with good buying across the curve. Notably, we saw the yield on the US 2-year lower by -8bp to 3.98%, and in US interest rate swaps, traders have added -6bp of implied cuts to the December FOMC meeting.

Bond traders pointing to a lower core Canadian CPI print (at 2.4%) as a trigger behind the bond buying, backed by anticipation for the BLS annual revisions to the Establishment nonfarm payrolls survey (due 10 am local tomorrow) – where the view is US payroll growth will be revised lower by -600k to 1m jobs for the year ending March 2024. You’re only as good as the data you can model and backtest, but with the Fed moving its focus towards the US labour market, we’ll see how the less compelling employment backdrop affects their thinking.

US yields have subsequently tightened and come in vs its G10 peers, and the reduced yield premium in the US Treasury market has been a clear factor driving the USD lower vs the JPY, CHF and EUR.

Gold has found support from the weaker USD and holds the former trend support for a new closing high. The broad market is long and strong, perhaps a touch too long, but shorts have been frustrating and costly. There is always the risk we see USD shorts lighten up into Jay Powell’s testimony on Friday, but picking the low in the USD and top in gold has been costly, where the weight of capital flow has been one-way, and it still suggests that trend not for fighting just yet.

Crude also screens at big levels with the June and August lows in play around US$73/oz. One could argue the fall in crude has impacted the US Treasury market and been a factor that has seen buyers in the 10-year Treasury, but for those trading the crude market how price reacts to these big prior support levels is key. The sellers have work to do but the set-up on the higher timeframes needs monitoring and the price action doesn’t portray an overly positive picture of demand.

On the calendar today:

-Japan July Trade Balance

-US July FOMC minutes

Earnings reports from:

-Articore ((ATG))
-AUB Group ((AUB))
-Bapcor ((BAP))
-Breville Group ((BRG))
-Brambles ((BXB))
-Cleanaway Waste Management ((CWY))
-Domino’s Pizza ((DMP))
-EBOS Group ((EBO))
-Fletcher Building ((FBU))
-Healius ((HLS))
-Hansen Technologies ((HSN))
-HMC Capital ((HMC))
-Insurance Australia Group ((IAG))
-PSC Insurance ((PSI))
-Peter Warren Automotive Holdings ((PWR))
-Pexa Group ((PXA))
-Qualitas ((QAL))
-Scentre Group ((SCG))
-SKY Network Television ((SKT))
-Superloop ((SLC))
-Santos ((STO))
-The Lottery Corp ((TLC))
-WiseTech Global ((WTC))
-Imdex ((IMD))
-Data#3 ((DTL))

and more

FNArena’s Corporate Results Monitor: https://fnarena.com/index.php/reporting_season/

Corporate news in Australia:

-Up to -600 jobs to go at Bank of Queensland ((BOQ))

-Foxtel ((NWS)) ((TLS)) and its biggest sports rights partners face millions in damages after being accused of breaching US privacy laws using Meta’s tracking tools, the AFR reports

-Yancoal Australia ((YAL)) is focusing on acquiring Anglo American’s Queensland coal mines by retaining its $420m interim profit instead of paying dividends

-South Africa’s Aveng will spin out its Australia and New Zealand business McConnell Dowell for ASX listing in 2025

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.

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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