The Overnight Report: Long Road To Wyoming

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            [0] => ((NHF))
            [1] => ((EML))
            [2] => ((ALD))
            [3] => ((ABC))
            [4] => ((RWC))
            [5] => ((ANN))
            [6] => ((BLD))
            [7] => ((BRG))
            [8] => ((SCG))
            [9] => ((ALQ))
        )

    [1] => Array
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            [0] => NHF
            [1] => EML
            [2] => ALD
            [3] => ABC
            [4] => RWC
            [5] => ANN
            [6] => BLD
            [7] => BRG
            [8] => SCG
            [9] => ALQ
        )

)

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

By Greg Peel

Follow the Leader

The macro took over from the micro on the ASX yesterday despite some big moves up and down on earnings reports. The local market followed the rollover on Wall Street, both generally and in sector terms.

While the rollover on Wall Street was to an extent technical, it was the US ten-year bond yield regaining the 3% level that specifically triggered the fall. Investors are no longer sure the Fed will begin easing off on its pace of rate hikes following a lower CPI print.

US banks were hard hit on Wall Street hence the bulk of the fall in the ASX200 yesterday, which was basically locked in from the open, was due to a -1.2% fall in the local financials sector.

The worst performing sector was consumer discretionary, down -1.9%, again mimicking Wall Street, while a big fall in the Nasdaq had technology down -1.5%.

Every sector closed in the red, with major falls reserved for cyclicals and growth and lesser falls for defensives. Healthcare only just closed lower.

The standout positive moves among companies reporting earnings on the day were booked by nib Holdings ((NHF)), up 7.0% to lead the index, and EML Payments ((EML)), up 6.1%. Ampol ((ALD)) also managed 2.3%.

On the flipside, Adbri ((ABC)) plunged -16.9% on result, within a materials sector that fell -0.9%. The company blamed higher raw material, freight and fuel costs and the weather – a common theme in result season to date.

Reliance Worldwide ((RWC)) fell -6.2% and industrials -0.9%.

The bad news, as we step up again in number of stocks on today’s reporting calendar, is the sell-off on Wall Street accelerated last night.

Yesterday the futures showed down -0.4% ahead of the open when the S&P500 had fallen -1.3%, and the ASX200 fell -1.0%. This morning the S&P closed down -2.1% and our futures are down -0.6% this morning.

No company on today’s list is big enough to counter a further large fall, which would bring support at 7000 into play.

Following On

The US ten-year yield rose another 5 points last night to 3.04%. The fact the 3% level did not offer any resistance was reason enough to sell stocks down further, kicking on from Friday night. Last night Wall Street posted its biggest daily loss since June.

The return to strength in bond yields reflects a switch in assumption from the Fed beginning to ease off its pace of tightening come September to the Fed sticking to its guns – implying another 75 points at the next meeting.

Aside from a lower CPI print for July, the market had taken Jerome Powell’s rhetoric at the July Fed meeting press conference to hint at a possible easing in the pace. But Fedspeak since has suggested 75 is still on the table, despite there being more inflation and jobs data to come before the September meeting.

The funny thing about bond yields is that they go up on expectations of Fed tightening but down, at the long end, on recession expectations. It was recession expectations that took the US ten-year back down to 2.5% from the last time it hit 3%, leading to an inverted yield curve from twos to tens.

This also drove an assumption the Fed would need to “pivot” its policy.

But now it’s back at 3%, what do we assume? Recession fears were sparked by a belief the Fed would prove to be too aggressive in light of lingering high inflation and fail to lead the US economy into a magical “soft landing” as it hopes.

We may learn more about Powell’s intentions when he speaks at the Jackson Hole conference on Friday night. But Friday is a long way away when Wall Street is already in reverse gear.

A fall on a Friday followed by an even bigger fall on the Monday is right out of the Wall Street text book. There often, but not always, follows what has been dubbed a Turnaround Tuesday. We can’t count on it though.

It is also not helping Wall Street that the US dollar is again rallying hard, up 0.8% last night following a 0.6% rise on Friday night.

Commodities

Not really much to see here.

We note WTI crude has stalled around the US$90/bbl level which can’t be a bad thing from the inflation perspective.

Despite another big surge in the greenback, the Aussie has held its ground at US$0.6877.

Today

The SPI Overnight closed down -43 points or -0.6%, which again seems underdone compared to the S&P500. Can 7000 hold?

While the next 24 hours will bring flash estimates of August PMIs from around the world, from the micro level there is another long list of local companies reporting today.

So it will up to the likes of Ansell ((ANN)), Boral ((BLD)), Breville Group ((BRG)) and Scentre Group ((SCG)) to do their best, among an extensive list of smaller names.

ALS Ltd ((ALQ)) holds its AGM.

FNArena’s Corporate Results Monitor provides both a calendar of upcoming result releases and a summary of all reports to date: https://www.fnarena.com/index.php/reporting_season/

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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