The Overnight Report: Just A Flesh Wound

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            [5] => ((TLC))
            [6] => ((NAB))
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            [8] => NWS
            [9] => REA
            [10] => COL
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This story features WESTPAC BANKING CORPORATION, and other companies.
For more info SHARE ANALYSIS: WBC
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

A Quieter One

Yesterday morning the local market signalled it was not as excited about the US midterms as Wall Street. The futures suggested up 24 and the ASX200 closed up 25 in a session of low volatility.

With less of a macro-drive, there were some micro factors to consider yesterday.

After its poorly received earnings result on Monday, Westpac ((WBC)) clawed back 2.0% after a bit of a rethink. Financials rose 1.0%.

Having surged on Monday, materials sat it out yesterday (-0.3%) on a mix of a stronger iron ore price and weaker everything else, and a guidance downgrade from James Hardie ((JHX)) which sent the stock down -13.7%.

The once can-do-no-wrong building supplier did wrong in warning of a “significant change to the outlook of housing market activity for the second half of our fiscal year in most of the geographies where we participate”. Housing starts slowed significantly in the US in the September quarter, and Australian building activity continued to be constrained by bad weather and labour shortages.

Materials also copped a -9.7% drop for Sims ((SGM)), after the scrapper bemoaned volume declines, increasing competition and margin pressure at its AGM.

The worst performing sector was energy (-2.3%), on slightly lower oil prices but more so coal prices, sending the usual suspects down -5-7% (they’re in either top five list most days now), and on a -5.3% fall for Santos ((STO)).

Santos cut its 2023 production target and announced a structural split into a legacy LNG and domestic gas business, and Santos Energy Solutions, which will focus on low-carbon processing of gas and liquids, decarbonisation, and clean fuel production.

Bandwagon. On. Jump. You know the drill.

On the other side of the ledger, the usual lithium miners were joined by a2 Milk ((A2M)), up 4.0% after it announced a buyback, and The Lottery Corp ((TLC)), up 4.0% on a revenue upgrade at its AGM.

Consumer staples rose 1.3% and discretionary 0.8%, despite Westpac’s consumer confidence index for November falling -6.9% to 78.0, compared to the GFC low-point of 79.0 and the 2020 lockdown low-point of 75.6.

"Christmas spending plans are very subdued this year," Westpac observed.

By contrast, NAB’s business survey showed business confidence rose 4 points in October – to zero – while business conditions slipped only -1 point to a still-high 22. The report suggested business conditions are still very strong, capacity utilisation is barely off its peak and cost and price growth remains elevated.

The bad news is this only implies the RBA has more work to do.

The good news is with Wall Street up yet again overnight, our futures are up 42 points this morning, so we don’t really care.

Crypto Crunch

According to Chas and John, all the latest major polls have the Republicans winning back an average of around 40 seats in the House and one in the Senate. One’s enough, but that’s a coin-toss. Biden won’t be getting any legislation through for the next two years. Even aid to Ukraine is now being questioned by Republicans.

Wall Street loves a good stalemate, as nothing untoward can upset the apple cart. Might as well go on holiday for two years, except that the usual debt ceiling/government shutdown brouhaha is pending. And once the midterm polls close, the 2024 presidential campaign begins.

God help us.

Wall Street was again in midterm fever last night as the Dow shot up another 500 points from the open. But by early afternoon it was back to square. Who thought crypto could be that influential?

One of the world’s biggest crypto exchanges, Binance, will merge with the non-US operations of the other world’s biggest exchange, FTX, to combat the recent “liquidity crunch” in crypto-land, brought about largely by millennials becoming bored with bitcoin this year.

On the news, bitcoin fell -12%, listed crypto exchange Coinbase fell -11%, and listed equity/crypto broker Robinhood fell -19%.

While there is little connection to the real world, the suggestion is crypto is a good bellwether for investor risk sentiment more broadly.

Once the initial scare subsided, Wall Street picked itself back up again and the Dow closed up over 300.

In typical American fashion, polls close at different times in different states, and then there are three time zones. I believe the last poll will close at 10am this morning Sydney time. It should not take long to declare victory in the House, but the Senate could take days, and there may yet need to be another run-off in Georgia.

Hard to know what Wall Street will do now ahead of Friday night’s CPI.

Commodities

Meanwhile, the US dollar has dropped another -0.5%. US bond yields were also down -8-9 points last night.

That was again good for gold, and seemingly for base metal prices, but not for oil.

Oil traders point to a new spike in Chinese covid cases, but by rights that should upset metals as well, so take your pick.

The Aussie is up a straightforward 0.4% at US$0.6509. Only the other day it had a 62 in front of it.

Today

The SPI Overnight closed up 42 points or 0.6%.

China reports October inflation numbers today.

National Bank ((NAB)), Orica ((ORI)), News Corp ((NWS)) and REA Group ((REA)) report earnings.

Coles ((COL)) and Newcrest Mining ((NCM)) are among those holding AGMs.

CSR ((CSR)), KMD Brands ((KMD)) and ResMed ((RMD)) go ex.

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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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