The Overnight Report: Snap Back?

Array
(
    [0] => Array
        (
            [0] => ((ZIP))
            [1] => ((LNK))
            [2] => ((KLS))
            [3] => ((ANZ))
            [4] => ((SUN))
            [5] => ((SEK))
            [6] => ((REA))
            [7] => ((TLS))
            [8] => ((WDS))
            [9] => ((STO))
            [10] => ((MGR))
            [11] => ((CRN))
            [12] => ((UWL))
            [13] => ((WAF))
        )

    [1] => Array
        (
            [0] => ZIP
            [1] => LNK
            [2] => KLS
            [3] => ANZ
            [4] => SUN
            [5] => SEK
            [6] => REA
            [7] => TLS
            [8] => WDS
            [9] => STO
            [10] => MGR
            [11] => CRN
            [12] => UWL
            [13] => WAF
        )

)

This story features ZIP CO LIMITED, and other companies.
For more info SHARE ANALYSIS: ZIP
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Late Bloomer

It looked like the ASX200 was going to yawn its way to a flat close yesterday right up until the last hour, when it suddenly took off and closed up 35 points. The futures had suggested down -33.

By day’s end it was as much to do with individual stock news prompting some sizeable share price moves as it was with any wider macro theme.

Technology was always set for another strong day, in line with Nasdaq, but a 16.5% jump for Zip Co ((ZIP)) post the company’s update was included in the 3.2% sector gain. The jump comes on top of a 13% gain on Wednesday but the stock was down by as much as -97% prior.

More influential in the tech sector was a 12.6% gain for Link Administration ((LNK)) after announcing Dye & Durham are back for another sniff.

Sticking with M&A, Kelsian Group ((KLS)), once known as SeaLink but now more a London bus company, rose 14.7% after revealing it’s been in takeover talks with UK-based bus and train operator GoAhead.

ANZ Bank ((ANZ)) came back on the boards and rose 2.2% after successfully raising the capital required to acquire the banking division of Suncorp Group ((SUN)). Clearly, the market assumes the ACCC will not have an issue. The banks rose 1.0%.

Just as the tech sector has been rebounding, so too have the online pioneers Seek ((SEK)) and REA Group ((REA)), which both posted solid sessions and had communications services up 2.1%, with some help from Telstra ((TLS)).

The consumer sectors and healthcare also had positive sessions.

On the other side of the ledger, underwhelming quarterly reports from Woodside Energy ((WDS)) and Santos ((STO)) had energy down -2.8%, and that won’t improve today with oil prices down again overnight. Utilities also fell -0.6%.

The once boring real estate sector has become the most volatile of late, falling -0.8% yesterday after rising 2.2% on Wednesday. Mirvac Group ((MGR)) fell -2.3%.

The Bank of Japan met yesterday and left its cash rate at -0.10%. Didn’t they get the memo? You’d think in a country that imports pretty much all its raw materials (and food and energy) and exports Toyota Hiluxes and some other things, inflation might be a bit higher than the 2.3% peak projected this year.

Japan has been stagnant since the early 1990s.

Last night’s session on Wall Street looked very much like Wednesday night’s, but there have been some developments post the close.

Earnings Trend

The Dow dropped -300 points early in last night’s session on news Biden had the plague. But when told it was only mild and he was doing just great, Wall Street reset to normal service.

I noted yesterday that Tesla had reported in the aftermarket and posted a beat, but the share price was only mildly higher in response. Well, whatever Musk said in the subsequent conference call obviously worked as Telsa closed up 10%, driving up the Nasdaq yet again, and the S&P500.

The Nasdaq is now up over 5% for the week, and appears to be undeterred by weak macro data.

US unemployment may be historically low but weekly new jobless claims are back on the rise again, last night hitting a level last seen in November. The Philadelphia Fed activity index can be volatile, but last night surprised with a read of -12.3 (zero-neutral) when economists had forecast +1.6%.

Yeah, well, we know the economy is slowing – that’s why the S&P500 fell over -20%. The focus right now is on earnings, and with 90 of the 500 S&P companies having reported to date, 78% have beaten forecasts.

The ECB hiked by a “surprise” 50 points last night – the first hike of any sort in eleven years – which took some pressure off the elevated US dollar.

But it hasn’t all been beer & skittles. Telco AT&T fell -7.6% after warning phone and internet customers are being slow to pay their bills. This weighed on peers such as Verizon (Dow), which fell -3%.

American Airlines fell -7.4% and United Airlines -10.2% on results impacted by reduced capacity due to staff shortages.

Cruise line Carnival lost -11.2% after it announced it had to go back to the market for more money.

And then after the bell, things took a nasty turn.

Following the March quarter, social media platform Snap guided to 20-25% revenue growth. The stock plunged in May when that was downgraded to the “lower end”, due to weakening digital advertising spend (which lent a lot to Apple changing its privacy rules). Peers Facebook and, to a lesser extent, Google, were caught in the downdraught.

Consensus had revenue growth at 18% before this morning when Snap reported, and posted flat revenue growth. The stock is currently down -26%, again.

Facebook (Meta) is down -5% and Google (Alphabet) is down -3%.

Communication Services, in which social media lays, was one of only two sectors to close in the red last night (energy) on falls in the telcos, and is not shaping up well for tonight.

Facebook, Google, Apple, Amazon and Microsoft all report earnings next week.

Commodities

Even though the ECB rate hike led to a weaker US dollar, the economic implications hit commodities last night.

Oil prices continued to fall as Vlad turned the Nord Stream 2 gas pipeline to Europe back on after maintenance, when it was feared he may not. Supply out of Libya also came back on line.

Note that the WTI price has rolled forward to the new front month contract, which is why it seems a bit low.

The ECB rate rise also had US bond yields retreating – the ten-year back below 3% — so it was good news for gold.

With the dollar index down -0.4%, the Aussie is up 0.7% at US$0.6937.

Today

The SPI Overnight closed up 12 points.

Flash estimates of July PMIs are due from across the globe today. Japan reports its June CPI in a case of nice timing.

Coronado Resources ((CRN)) provides a quarterly.

Uniti Group ((UWL)) goes ex but having been taken over, we bid farewell. As does the ASX200.

West African Resources ((WAF)) jumps in.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms