The Overnight Report: Sentimental

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This story features ANZ GROUP HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: ANZ
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Risk On

It was an interesting start for the ASX200 yesterday. The index jumped 50 points in the first half hour as the futures had suggested but then it looked like a big sell order hit the market, sending the index back to be up only 10 points half an hour later.

But with the order cleared, it was all systems go, with the big cap banks and resource sectors leading the charge.

The banks were buoyed by their US counterparts, following big moves up post result for Citigroup and Bank of America, floating all boats in the US sector. ANZ Bank ((ANZ)) didn’t participate as it went into a trading halt on the announcement of its intention to acquire Suncorp’s ((SUN)) banking division, requiring a big capital raise at a sizeable discount.

Suncorp jumped 6.1% but the deal is pending Treasurer/ACCC approval which is not a given. ANZ Bank also took the opportunity to provide a trading update indicating growth in both margins and loans in the June quarter.

The financials sector closed up 1.4% on the day but arched rivals – the resource sectors – also posted strong gains off arguably oversold levels.

Some stability in the iron ore price (ultimately up 2%) had the big miners turning around, and investors also hit the base and exotic metals stocks despite ongoing price falls. Whitehaven Coal ((WHC)) rose 5.2% on its production report. The materials sector rose 2.4%. Good call – base metals bounced in London last night.

Energy gained 2.2% in anticipation of how oil prices would react last night to Biden’s failure to get anything out of the Saudis. Another good call – WTI jumped 5%.

All in all it was a “risk on” session, with technology the other big mover (+2.9%) and a reversal of last week’s defensive tilt. Staples fell -0.5%, healthcare -0.5% and utilities -0.2% to be the only losing sectors on the day.

Can it last?

Wall Street was on a run last night until Apple upset the apple cart, leading the S&P500 down -0.8%. We don’t have an Apple, so any read-through seems misplaced, but the futures are down -21 points this morning.

One Bad Apple

It was all going along swimmingly on Wall Street last night as the Dow reached a gain of 350 points. Then the wheels fell off. (Mixed metaphor? Sorry)

Apple announced it plans to slow hiring and spending growth in some divisions next year in anticipation of a potential economic downturn.

Apple is not the first big company to make such an announcement. Google did so recently, Amazon not so long ago, but given the biggest company is considered by the market of some sort of Rock of Gibraltar – ever reliable as more a seller of “things” rather than just ephemera – the impact was felt not only in market cap influence but in sentiment. Apple only fell -2%, but is one of only two Mega-Techs in all three major indices (Microsoft) and appears in a wealth of ETFs.

Nor is Apple the first company to warn of an economic slowdown. A couple of weeks ago Zuckerburg (Meta) warned of “the worst downturn in recent history”, and earlier Dimon (JPMorgan) warned of a “hurricane” approaching.

It dampens the mood as US earnings season ramps up.

IBM (Dow) reported after the bell this morning, beat on both earnings and revenues, and is currently down -4%. The issue there is likely a significant drag on earnings from the strong US dollar, as reported, and the warning it sounds for other multinationals.

Fortunately it means Australia has the opposite problem.

Before the bell Goldman Sachs (Dow) posted a solid result – enough to send it up another 2.5%, on top of the banks all taking off on Friday night on earnings from Citigroup and Wells Fargo.

Yet aside from the impact Apple had on the technology and communication services sectors, the worst performer was healthcare (-2.1%), which is a bit hard to connect. Otherwise, the wash-up was not dissimilar to our market yesterday. Healthcare, staples, utilities and real estate were all down, while energy outperformed and materials snuck into the green.

It was also notable that NYSE volumes closed roughly two to one to the buy-side, highlighting last night was really just about Big Tech.

Netflix reports tonight. We recall that last quarter the stock was absolutely carted when it announced a big miss on subscriber growth, confirming the pull-forward of earnings so many companies enjoyed during lockdowns, and most of which are now right back where they started.

We might also note the odds of the Fed going a full 100 points next week, based on futures markets, have now dropped to 33% from 80% last week. The odds of at least 75 remain at 100%.

Commodities

It had to come eventually, and a couple of sessions of weakness for the US dollar would have helped. Having been taken to the cleaners lately, metal prices had to have been oversold.

As noted, the oils shot up on Biden’s failure to secure anything out of the Saudis.

The Aussie is up 0.3% at US$0.6816.

Today

The SPI Overnight closed down -21 points or -0.3%.

The minutes of the July RBA meeting are out tonight. Note that yesterday New Zealand reported a 7.3% June quarter CPI yesterday. Our numbers are out next week.

Last night the US saw a shock fall in the housing market sentiment index. Tonight its housing starts.

Quarterly reports are due today from BHP Group ((BHP)), Deterra Royalties ((DRR)), Ampol ((ALD)) and Hub24 ((HUB)).

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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