The Overnight Report: Sentiment Shifts

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    [0] => Array
        (
            [0] => ((WDS))
            [1] => ((STO))
            [2] => ((OBL))
            [3] => ((LOV))
            [4] => ((A2M))
            [5] => ((MYX))
            [6] => ((BVS))
            [7] => ((MYS))
            [8] => ((HVN))
            [9] => ((OZL))
            [10] => ((WES))
            [11] => ((WOW))
        )

    [1] => Array
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            [0] => WDS
            [1] => STO
            [2] => OBL
            [3] => LOV
            [4] => A2M
            [5] => MYX
            [6] => BVS
            [7] => MYS
            [8] => HVN
            [9] => OZL
            [10] => WES
            [11] => WOW
        )

)

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

By Greg Peel

Nice Try

The futures had suggested a slight rebound from Monday’s sell-off but sentiment was boosted yesterday morning on the release of Woodside Energy’s ((WDS)) earnings result, which showed a 400% jump in profit and a tripling of its dividend.

The result was worth only a 1.5% gain for the stock but it’s a big stock. As is rival Santos ((STO)), which also rose 1.5% in sympathy.

The energy sector gained 1.4%, underpinned by a jump in oil prices overnight. But oil prices tanked last night, so today will be a different picture.

Woodside seemingly gave the ASX200 the courage to take a run back up to the 7000 level, which it did, hitting 7020 with about half an hour to go. But late selling pared that back, leading the index to a close of 6998 – a pivot point.

Alas, Wall Street has not played ball overnight, and our futures are down -58 points this morning.

Technology led the bounce-back yesterday (+1.8%) despite more weakness in the Nasdaq overnight. Outside of energy and tech, other sectors all rebounded modestly, by less than 1%, after Monday’s tumbles. Materials nevertheless closed flat.

Earnings report winner on the day was Omni Bridgeway ((OBL)), which jumped 11.4%.

Lovisa Holdings ((LOV)) kicked on 8.6% following its result on Monday as did a2 Milk ((A2M)), up 6.1%. Mayne Pharma ((MYX)) went the other way after reporting on Friday and fell -9.7%.

Reporting yesterday were Bravura Solutions ((BVS)), down -8.1%, and MyState ((MYS)), down -6.2%.

Yesterday’s economic news was of building approvals falling -17.2% month on month in July, as rate hikes and cost inflation hit home. Approvals for apartments fell -43.5%, to their lowest level since 2012.

Today is the last day of August, and hence the last day of result season (except for a couple of outliers still to come). Today’s list of reporting stocks is the shortest in a couple of weeks but the last day always features one Harvey Norman ((HVN)).

Note that today’s list of stocks going ex-div is the most extensive so far, and includes some big names, so we’ll be handicapped from the start.

Technical Breach

News came through early on Wall Street that Taiwan had fired a warning shot at a Chinese drone circling a Taiwanese island, causing some nervousness.

The Conference Board’s consumer confidence index for August came out at 103.2, up from 95.7 in July, when economists had forecast 97.4. Not only was this the first increase in four months, anything over 100 signals optimism.

Steadily falling US gasoline prices are cited as the cause.

Right now Wall Street doesn’t want a confident consumer, because the Fed doesn’t want a confident consumer, as it is a headwind to bringing down inflation. So good news is bad.

A too-strong labour market is also a headwind. Also rising for the first time in four months were US job openings – up to 11.2m from 11.0m in July, when economists had forecast a fall to 10.2m.

More job openings than the number of those looking for work implies higher wages, which are also inflationary. It was this data update that really spooked Wall Street last night. (Note that at the same time, Snap announced it would lay off -20% of its workforce.)

A -5.5% fall in the WTI crude price did not help stock indices either, even though this is good news on the inflation front.

The Dow was down -450 points at its low but more ominously, the S&P500 fell through the 4000 mark. This is technically significant in itself, but also happens to be where the 50-day moving average is currently sitting.

An attempt was made to recover lost ground in the last hour, but this failed in the last half hour and the S&P500 closed at 3986. Any talk of technical support has now evaporated. The S&P has also now given back more than -50% of the rally off the June low, which was in itself a 50% retracement of the 2022 fall to that point.

Since the rally began the bears have insisted the S&P will ultimately have to retest the low. But as the market became more complacent there were many who suggested a pullback was likely, but not as far as a retest. Now sentiment has swung bearish again, and the June low is back in sight.

That was 3636 – another -8.7% down from last night’s close.

Tonight we’ll see the ADP private sector jobs number, followed by the manufacturing PMI on Thursday and non-farm payrolls on Friday. With technical support now lost, each data point becomes ever more critical for sentiment.

Commodities

Having been closed on Monday night, the LME reopened last night to start pricing in expected ongoing rate hikes across all major economies.

The jump in oil prices on Monday night was attributed to renewed fighting in Libya, but also civil unrest in Iraq. But state-owned Iraqi oil company SOMO assured last night the unrest is having no impact on production, and that it can still redirect more oil to Europe if required.

At the same time, Russia’s fastest-growing oil producer, Gazprom Neft, said it plans to double oil production at its Zhagrin field in Western Siberia to more than 110,000 barrels per day.

The Aussie is down -0.6% at US$0.6860, initially falling on the building approvals number.

Today

The SPI Overnight closed down -58 points or -0.8%. Goodbye 7000.

Local data releases today include July private sector credit, and June quarter construction work done.

China releases August PMIs.

Private sector jobs in the US.

A raft of mostly smaller names report earnings today, outside of Harvey Norman.

A long list of today’s ex-divs includes OZ Minerals ((OZL)), Wesfarmers ((WES)) and Woolworths ((WOW)).

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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