The Overnight Report: Back To Support

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            [0] => ((BHP))
            [1] => ((OZL))
            [2] => ((SFR))
            [3] => ((ORG))
            [4] => ((CXO))
            [5] => ((DEG))
            [6] => ((NHC))
            [7] => ((KMD))
            [8] => ((TUA))
        )

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            [0] => BHP
            [1] => OZL
            [2] => SFR
            [3] => ORG
            [4] => CXO
            [5] => DEG
            [6] => NHC
            [7] => KMD
            [8] => TUA
        )

)

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

By Greg Peel

Strange Days

Funny old market yesterday. The ASX200 chopped around doing not much from the open to be up 10 points and then suddenly at 12pm it fell to be down -25. At 12.30pm it bounced and returned to the flatline. With ten minutes to go it was up 10, and then closed down -19.

I can’t identify any 12pm trigger, so perhaps it was just a sell order.

Anyway, all sectors closed in the red yesterday except for materials and real estate. For materials, big falls in base metal prices overnight were countered by both a rebound for gold miners and some company-specific news to put the sector just slightly in the green.

Rumour has it BHP Group ((BHP)) is preparing to improve its bid for OZ Minerals ((OZL)). The target rose 3.5% and copper peer Sandfire Resources ((SFR)) rose 3.4% on valuation implications.

Real estate had been thumped all last week on higher bond yields so a 0.8% rally is no great surprise.

Utilities fell -1.4% to be the worst performer after Origin Energy ((ORG)) announced it is selling its exploration interest in the Betaloo Basin in the NT and indeed will sell all of its upstream exploration permits, as bringing them to production is just too expensive. The move is expected to cost the company -$70-90m. Origin fell -0.9%.

The news appeared to reverberate in the energy sector, as it fell -1.1% without any impact from overnight oil prices.

Otherwise technology (-1.3%) and healthcare (-1.1%) were the other poor performers. The banks were flat for once.

The market is poised ahead of today’s release of the minutes of the September RBA meeting and Wednesday night’s Fed rate decision.

Locally, we’ve received mixed messages from Philip Lowe, who after the meeting sounded like that 50-pointer might be the last of the 50-pointers but has since sounded more hawkish in his rhetoric, particularly to the parliamentary committee. The market is assuming another 50 points in October, and the US CPI did little to change that, but what thereafter?

As for the Fed, it’s a not dissimilar story.

A late rally on Wall Street has our futures up 25 points this morning, or largely back to where we were.

Poised

With the S&P500 having closed below 3900 support on Friday night Wall Street opened lower last night, with the Dow down -260 points. An up and down session then ensued, and the indices were all flat heading into the last hour.

The buyers then suddenly stepped in, and the S&P closed at 3899.89.

This would be the perfect jump-off point for whatever the Fed is set to deliver but for the fact there is another session to get through tonight.

The late rally was attributed to bond yields coming off their highs. The ten-year had flirted with 3.50% before settling at 3.49%, up 4 points, and the two-year had closed in on 4.00% before closing at 3.95%, up 9.

There is talk these levels represent the peak of market expectations for the Fed “neutral” rate, ie where it will stop, implying the bad news is now priced in. But others can still see 4.5%.

Another “bullish” sign is the fact the VIX volatility index is sitting quite happily in a bit of a no-man’s land in the mid-20s. Were Wall Street complacent it would be under 20 but if it were very nervous about Fed policy and market direction it would be over 30.

Either Wall Street is just not fussed or, more likely, anyone who wanted some downside protection already has it.

Moderna was the worst performer in the S&P500 last night – you may have heard of it. The stock fell -7.1% after President Biden declared the pandemic over in a 60 Minutes interview.

Never mind that the WHO said that on Friday, but the implication is the US government will soon stop buying vaccines on the public’s behalf, leaving punters to heretofore pay for shots themselves.

Moderna is supposedly in discussions with China about selling its mRNA vaccines, given the local varieties Sinopharm and Sinovac don’t seem to be helping much with a zero-covid policy, but there’s been no news lately.

It would be simple to expect tonight’s session to be a quiet one on Wall Street ahead of the Fed but these days that’s not often the case. If anything, the trend has been to rally into the decision.

Given the falls from the prior high, any move to just square up ahead of the Fed and take a neutral stance would imply buying.

Commodities

A bit of a bounce in some metals prices.

The oils have gone quiet but are tracking higher again.

The Aussie is up 0.2% to US$0.6734.

Today

The SPI Overnight closed up 25 points or 0.4%.

The RBA minutes are out today, as noted.

Japan releases its August CPI.

Earnings results are due today from Core Lithium ((CXO)), De Grey Mining ((DEG)), New Hope Corp ((NHC)), KMD Brands ((KMD)), formerly Kathmandu, and Tuas ((TUA)). 

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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