The Overnight Report: Oh Blessed Relief

Array
(
    [0] => Array
        (
            [0] => ((ORG))
            [1] => ((AGL))
            [2] => ((STO))
            [3] => ((PPT))
            [4] => ((PDL))
            [5] => ((XRO))
            [6] => ((SQ2))
            [7] => ((NAB))
            [8] => ((AX1))
        )

    [1] => Array
        (
            [0] => ORG
            [1] => AGL
            [2] => STO
            [3] => PPT
            [4] => PDL
            [5] => XRO
            [6] => SQ2
            [7] => NAB
            [8] => AX1
        )

)

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

By Greg Peel

Ready, Set…

After one of the more extraordinary sessions on Wall Street overnight – stocks up 5.5%, bond yields down -30 points, dollar down -2% and SPI futures up 190 — it seems pointless to talk about yesterday’s -35 point fall in the ASX200.

But there were some things going on.

Foremost, of course, was the bid for Origin Energy ((ORG)) of $9.00 per share from Canadian asset manager Brookfield and US gas company MidOcean Energy. And bugger me if they don’t want to split the company into two – old fossils and rays of sunshine.

Brookfield had previously had a swing at AGL Energy ((AGL)) with Cannon-Brookes, but only he hung around after the offer was rejected. Brookfield/MidOcean’s earlier offer was knocked back by Origin until they upped the ante, and Origin accepted.

The news comes a couple of days after Santos ((STO)) announced it would restructure into two entities. Still a wallflower though, and yesterday fell -1.6% on lower oil prices, as did the other one. The energy sector was the worst performer, down -2.1%, while utilities rather took the medal with a 13.2% gain on a $34.8% jump for Origin to $7.34 – still -$1.66 short of the bid price.

Sticking with takeovers, the bid for Perpetual ((PPT)) has been sweetened as well, so it rose 14.8% yesterday. Perpetual’s prey Pendal Group ((PDL)) fell -10.9% after Perpetual requested a delay in those proceedings while it assesses the new bid.

Also falling -10.9% was Xero ((XRO)), after reporting earnings. Throw in Block’s ((SQ2)) -5.7% fall on crypto fallout and it was a tough day for technology (-1.9%).

Block was up 15% last night.

The banks were a drag (-0.9%), with National Bank ((NAB)) falling another -2.1% on analyst assessments of Wednesday’s result, and the other three fell in sympathy.

This despite the Aussie ten-year falling by another -15 points, to 3.71%, ahead of last night’s CPI.

There’s going to be some smiles among bond holders today. Tina? RIP.

Anyway, strap in, although I expect the ASX200 will simply step-jump from the open and that will be that.

Happy Days Are Here Again

The US headline CPI rose 0.4% in October to an annual rate of 7.7%, down from 8.2% in September, when forecasts were for 0.6% and 7.9%.

The core CPI rose 0.3% to 6.3% when 0.5% and 6.5% were expected.

Wall Street did actually see a stronger session than last night back in the April 2020 covid rebound, but gee it was a biggie.

All S&P500 sectors closed in the green, led by technology’s 7% leap. All the Big Tech names were suddenly back in fashion.

The US ten-year and two-year yields both fell -30 basis points to 3.82% and 4.33%.

The US dollar index plunged -2.2%, and -3% against the yen specifically. We recall only a couple weeks ago the BoJ was forced to intervene in the currency.

Standout gains were posted for beaten-down home builders, as mortgage rates plunged.

Even bitcoin caught a bid, despite serious questions now being asked of FTX management, and expectations the company will indeed go down.

So, is this it? The S&P500 has smashed through resistance at 3900. Next stop 4100 to break the downtrend.

Wall Street is now, yet again, expecting the Fed to pause. What’s that definition of insanity? The weaker inflation print may make the Fed more comfortable in only hiking by 50 points next month, but Wall Street was always expecting only 50 points anyway.

More than one Fed official has insisted the FOMC would need to see more substantial evidence of a turnaround in inflation than just one good month before any change in policy trajectory could be considered.

Earlier this year, Wall Street was excited when the CPI dipped one month, but it rose again the following month.

Yet, many a commentator has pointed to real-time measures of inflation, rather than backward-looking as is the case with the CPI, to believe inflation is indeed now on its way down. House prices are one example.

Anyway, it seems for now it’s a case of enjoy it while it lasts.

Australia has its own localised inflation issues, it must be noted, from flood-impacted food prices to a weak Aussie dollar (not quite as weak this morning).

Commodities

A predictable move for gold, but other commodities are torn between a weaker greenback and further Chinese lockdowns.

The Aussie is up a full 3% at US$0.6628.

Today

The SPI Overnight closed up 190 points or 2.7%.

The US has a part-holiday tonight for Memorial Day. Banks and the bond markets are closed but stock markets are open.

Michigan Uni will release its consumer sentiment index.

After a big week of AGMs, Accent Group ((AX1)) looks lonely today.

There are a lot more to come next week.

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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