The Overnight Report: And On The Third Day

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            [0] => ((ABC))
            [1] => ((CXO))
            [2] => ((LTR))
            [3] => ((CGC))
            [4] => ((BXB))
            [5] => ((COH))
            [6] => ((EDV))
            [7] => ((TWE))
            [8] => ((RIO))
        )

    [1] => Array
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            [0] => ABC
            [1] => CXO
            [2] => LTR
            [3] => CGC
            [4] => BXB
            [5] => COH
            [6] => EDV
            [7] => TWE
            [8] => RIO
        )

)

This story features CORE LITHIUM LIMITED, and other companies.
For more info SHARE ANALYSIS: CXO
The company is included in ALL-ORDS

By Greg Peel

Here We Go Again

Anyone getting dizzy? After jumping 116 on Friday, then falling -94 yesterday, the ASX200 is set for another rally today with the futures up 61. In each case we’ve just followed Wall Street.

There was some stock-specific news to cope with yesterday, but otherwise everything that rallied on Friday fell and all sectors closed in the red.

Energy and utilities were the big winners on Friday, they fell -2.1% and -1.0% yesterday on lower oil prices.

Materials rose 1.5% on Friday but yesterday fell -2.1%, with two factors dominating.

The first was Xi Jinping’s reiteration of a tough zero-covid policy at the CCP hoedown over the weekend, and another lockdown has been implemented, in a district of phone-making hub Zhengzhou.

The second was a profit warning from Adbri ((ABC)), with full-year guidance reduced to $75-85m when consensus was $117m, blamed on inflation and the weak Aussie. Adbri fell -22.0% and the CEO has walked.

Lithium prices otherwise continue to surge, yesterday sending Core Lithium ((CXO)) up 5.2% to top the index and Liontown Resources ((LTR)) up 4.9%. One wonders how EV prices can ever come down.

Costa Group ((CGC)) has blamed the weather for poor quality and low-yield citrus. It fell -13.4% to help staples down -1.3%. If you think the situation is bad in Victoria and Tasmania at the moment, you should see what’s coming over the next five days for all the South-East.

Which brings us to financials, and thus insurance companies. That sector fell -1.2% yesterday.

Otherwise, as noted, it was just a matter of everything that went up on Friday went down yesterday, and will probably go back up today. Falls yesterday were not quite as great as gains on Friday on the whole, while a 61 point rally in the futures suggests today’s rebound will not quite match yesterday’s fall, if they prove accurate.

So we might be slowly consolidating, but yesterday we closed at the same level seen on October 4.

And if you’re worried about famous October crashes, note the 29^th this year is a Saturday.

On the Hunt

First Liz Truss dropped the tax cuts for the rich, then dropped the corporate tax cuts and sacked the Chancellor of the Exchequer, and last night the new Chancellor, Jeremy Hunt, scrapped almost all of the planned tax cuts in the much-maligned budget, and cut the extent of the household energy price guarantee from two years to April next year.

In other words, spring.

In response, the UK 30-year bond yield fell -48 points to 4.37%, taking the pressure off UK pension funds, and thus the Bank of England. The pound surged and the US dollar index fell -1%.

US bond yields did not respond in kind. The ten-year ticked up 1 point to 4.02% and the two-year fell -5 points to 4.45%.

But the stock market took off again.

Also supporting the mood was as earnings beat from Bank of America, which had that stock up 6% and floated all bank boats, including Morgan Stanley, which had fallen on its result on Friday night, and Goldman Sachs (Dow), which reports tonight.

Several big Dow names will report earnings this week but the real focus will be on Big Tech earnings next week. Last night all the Big Tech names, which had led the market down on Friday night, led the market up.

There is much discussion currently about inflation, to wit one respected funds manager said last night that the CPI and inflation are very different.

He is not alone in pointing out the large overweight in the CPI towards “owner-equivalent rent”, which is distorting the result, when really OOR is just a reflection of house prices. If one removes OOR and replaces it with the Case-Shiller house price index, the past three months have shown not just lower inflation, but actual deflation.

General market consensus is shifting to a belief the Fed will go hard in November with another 75, then probably a 50 in December, and then stop.

If earnings season proves to be not as bad as feared, and more so guidance, then support for a rally into year-end is growing stronger.

Of course, it depends on what happens in the rest of the world, from the UK to Ukraine, and even then no one believes it would be anything more than just another bear market rally, ahead of a Fed-induced recession next year.

Commodities

Not a lot of relief from a lower dollar. Even gold shrugged.

Chinese lockdowns prevail.

The Aussie is up 1.3% at US$0.6291.

Today

The SPI Overnight closed up 61 points or 0.9%.

China will offer a September quarter GDP result today, along with monthly industrial production, retail sales and fixed asset investment.

The US will also see industrial production.

Brambles ((BXB)), Cochlear ((COH)), Endeavour Group ((EDV)) and Treasury Wine Estates ((TWE)) are all among those companies holding AGMs today, while Rio Tinto ((RIO)) will provide a quarterly.

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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