The Overnight Report: Goodbye August

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            [0] => ((WDS))
            [1] => ((ZIP))
            [2] => ((WOW))
            [3] => ((BGA))
            [4] => ((WES))
            [5] => ((TAH))
            [6] => ((CUV))
            [7] => ((MSB))
            [8] => ((IMU))
            [9] => ((AGL))
            [10] => ((WHC))
            [11] => ((BHP))
        )

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            [0] => WDS
            [1] => ZIP
            [2] => WOW
            [3] => BGA
            [4] => WES
            [5] => TAH
            [6] => CUV
            [7] => MSB
            [8] => IMU
            [9] => AGL
            [10] => WHC
            [11] => BHP
        )

)

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

Good Effort

The ASX200 opened down -60 points yesterday, in line with the futures, but closed down only -11, despite a clear shift to bearishness on Wall Street.

For that we can thank the banks, which, after two days of drubbing post Jackson Hole, rose 1.1%. The move appeared a classic shift out of resources, with energy falling -2.9% and materials -1.4%.

Woodside Energy ((WDS)) fell -4.5%. Not only were oil prices down -5% overnight, in the wake of the company’s earnings report, three of seven FNArena database brokers downgraded the stock, warning the announced super-dividend will be the last before the company ramps up its capital expenditure in FY23.

Metals prices were lower overnight, and were lower again last night following yesterday’s release of China’s PMIs for August. China’s manufacturing PMI improved to 49.4 from 49.0 in July, but remained in contraction, despite lockdowns ending in Shanghai.

Technology was another outperformer yesterday in rising 1.7%, with volatile Zip Co ((ZIP)) up 11.6%.

Movements in other sectors were more modest, up and down. There was a clear impact from stocks going ex-dividend on the day. Staples were down -0.7% because Woolworths ((WOW)) went ex, along with Bega Cheese ((BGA)). Discretionary did well (+0.2%) considering Wesfarmers ((WES)) and Tabcorp ((TAH)) went ex.

Stocks reporting on the day included Clinuvel Pharmaceuticals ((CUV)), which rose 16.2%, Mesoblast ((MSB)), up 8.9% and Imugene ((IMU)), up 8.3%. The healthcare sector closed flat. These biotechs are not in the index.

Economic news on the day was surprisingly poor.

Construction work done in the June quarter fell -3.8% when economists had expected a rebound from the -0.3% fall in March, given rebuilding required post-floods. It was the biggest quarterly fall since the pandemic began.

Said ANZ Bank economists:

“The weakness was widespread across states and sectors. This raises concerns that construction activity will not be as strong as we had expected this year, despite the extensive pipelines of work yet to be done, particularly across the residential and infrastructure sectors. Demand is still there, capacity utilisation in the industry is running well above average, but supply constraints don’t explain the extent of the weakness in Q2.”

Maybe building companies going bankrupt does.

We may have seen some extent of window-dressing yesterday for the last day of August, although as noted, the banks alone saved the day.

With Wall Street down again overnight, our futures are down -69 points this morning.

No Joy

If there was any end-of-month activity on Wall Street last night it was in the other direction. The major indices flip-flopped all session but late selling ensured a weak close. For once, the Dow underperformed the S&P500 and the Nasdaq outperformed.

The Nasdaq was boosted by the news Snap was laying off -20% of its workforce, and rationalising its business model. Investors assume the same moves will come from the likes of Facebook and Netflix. All three stocks were strong last night.

While Wall Street would have not been heartened by the Chinese PMI, it was European inflation that caught the attention. The eurozone headline CPI jumped to a record 9.1% in July – matching the US. There is talk the ECB, which has been slow to move, may go a full 100 point hike in response.

Meanwhile, Goldman Sachs is now forecasting UK inflation to hit 25%.

Otherwise, the ADP private sector jobs report for the US showed only 132,000 jobs added – below forecast. This is good news because it's bad news. But average private sector wages are up 7.6%, and that is not what the Fed wants to see.

In the month of August, the Dow fell -3.9%, the S&P500 -4.2% and the Nasdaq -4.6%. The S&P had rallied back 16% until it hit its 200-day moving average. The Nasdaq nonetheless remains 10% above its June low.

Many believe that June low will be retested. If there is a month to do that in, it’s September – historically the worst month of the year. Tomorrow night we’ll see the non-farm payrolls report for August, which Wall Street will want to hope is really bad, and in a couple of weeks August CPI, which Wall Street will hope is a meaningful drop, ahead of the next Fed meeting.

It has been noted nonetheless that August is typically a good month, and hence maybe typical September weakness has been brought forward, but that would be clutching. Sentiment remains downbeat, and outside the two abovementioned data releases, what could turn sentiment positive?

Commodities

See: Chinese PMI.

The Aussie is down -0.2% with the US dollar down -0.1%, impacted by the weak construction data which imply a downgrade to June quarter GDP forecasts.

Today

The SPI Overnight closed down -69 points or -1.0%.

Cover your eyes, today we’ll see August house prices.

June quarter private sector capex numbers are due – another major GDP component.

Manufacturing PMI numbers will be reported around the globe.

It is a (very) big day for ex-dividends today. While the longest list so far includes many a smaller name, it does include AGL Energy ((AGL)), and Whitehaven Coal ((WHC)), but also BHP Group ((BHP)) — $2.48.

Note that the futures don’t pay dividends, so ex-divs are not reflected in futures moves.

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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