The Overnight Report: Run Away

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            [7] => BHP
            [8] => AMC
            [9] => BRG
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            [11] => XRO
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This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies.
For more info SHARE ANALYSIS: NAB
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

Wall Street fell back last night for a number of reasons. Dow down -646.

By Greg Peel

Hello Old Friend

The ASX200 made it back to 7000 yesterday, after rising 40 points as the futures had suggested. That’s roughly the level at which the covid crash began in 2020, and where we recovered to in February 2021, and where we were in August.

It was just a brief visit – the futures are down -61 this morning.

Materials led the charge (+2.5%), again, with the top five index winners all miners, again, in this case all gold.

The Aussie ten-year yield fell -17 points to 3.86% yesterday, so real estate was up 1.4%. But the drop didn’t much seem to help anywhere else, accept maybe the banks.

The banks rose 0.2% despite National Bank ((NAB)) falling -0.9% on what appeared a reasonable earnings result.

Worst performing sector was communication services (-1.4%). REA Group ((REA)) posted a rare miss on its quarterly and fell -4.3%, while major shareholder News Corp ((NWS)) also had its own issues in the quarter and fell -11.1% to be the worst index performer.

Having starred recently, the coal miners have been under pressure of late. Whitehaven Coal ((WHC)) has had to downgrade production guidance due to persistent rain and it fell -8.5% yesterday, taking New Hope Corp ((NHC)) down -6.4%.

CSR ((CSR)) fell -5.4%, but went ex.

Other sectors were fairly quiet.

The same may be true today, ahead of the US CPI.

Speaking of inflation, with a whole lotta nothing going on in China, the Chinese CPI was up only 2.1% in October. Ah, those were the days. The PPI was down -1.3% year on year – the first negative result since December 2020.

It has been noted changes in China’s PPI tend to precede similar changes in that of the US by about one or two months. It makes sense, given the extent of imported Chinese-made parts and equipment, but yesterday's fall is all about lockdowns.

Let me count the ways

I can give you five reasons why Wall Street turned tail last night.

Wall Street had run up hard into last night’s midterms, in expectation of a “red wave” that would ensure Biden could not introduce any more "socialist" measures. While this set the market up for a “sell the fact” last night, what has transpired is more of a red ripple.

The Republicans will take the House, but with a much smaller majority than the polls were suggesting. The Senate remains up for grabs until a run-off in Georgia on December 6.

The good news is Trump-backed election-deniers and general fruitcakes were largely shut out. Might be a different announcement forthcoming next week.

Secondly, the US Treasury held a ten-year bond auction and nobody came. Yields were heading down ahead of the auction but on “woeful” demand, turned back up again. The ten-year closed up 3 points to 4.15 and the US dollar jumped back 0.8%.

This might reflect the risk surrounding the third issue – tonight’s CPI. Yet another hot number could have Wall Street heading right back down again. Best to square up on this week’s rally and play it safe.

Fourthly, on Tuesday night it was reported leading crypto exchange Binance would buy out the non-US business of leading crypto exchange FTX to overcome a liquidity crunch in the crypto market. Last night Binance changed its mind.

“Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” a Binance spokesperson said. Binance has reportedly found a gap, likely in billions and possibly more than US$6bn, between the liabilities and assets of FTX.

Commentators have suggested FTX is facing a “Lehman moment”. Long Term Capital Management collapsed in the nineties owing US$6bn. Bitcoin is down another -12%, Coinbase -9.5%, and Robinhood -13.8%, while Block ((SQ2)) has now been caught up, and fell -8.5%.

It won’t mean the death of blockchain, but observers suggest it could set crypto back five years.

Finally, Disney (Dow) reported a miss on earnings last night and fell -13%. We recall that early in the season, rival Netflix had gone the other way. Apparently the big miss is more to do with a miss at the Happiest Places on Earth.

I could also add that Tesla has been on a slide and was down another -7% last night, to be now down -44% from its high. Elon has had to sell stock to fund his disastrous Twitter takeover.

The WTI crude price fell -3.8% last night on a combination of the usual higher than expected weekly US crude inventories, and on fading hope of any end to zero-covid in China. The S&P500 energy sector fell over -4%.

I think that about covers it.

One other bit of news – Zuckerberg has listened to critics and decided to trim down Meta, announcing the layoff of some 11,000 staff, or 13% of the current workforce. Meta shares rose 6% and signs that the tech sector may finally lead US unemployment higher further increased.

What can all these newly unemployed computer geeks do for a living otherwise?

“You want fries with that?”

Commodities

Mixed.

Having briefly stuck its head over 65, the Aussie is down -1.2% at US$0.6428.

Today

The SPI Overnight closed down -61 points or -0.9%.

US CPI tonight.

There is a large number of AGMs being held today, including those of BHP Group ((BHP)), Amcor ((AMC)), Breville Group ((BRG)) and Nine Entertainment ((NEC)), just to name a few.

Xero ((XRO)) reports earnings.

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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