The Overnight Report: Delicate Position

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(
    [0] => Array
        (
            [0] => ((CXO))
            [1] => ((AKE))
            [2] => ((PLS))
            [3] => ((LTR))
            [4] => ((LYC))
            [5] => ((AGL))
            [6] => ((ALL))
            [7] => ((GNC))
            [8] => ((NUF))
            [9] => ((MPL))
        )

    [1] => Array
        (
            [0] => CXO
            [1] => AKE
            [2] => PLS
            [3] => LTR
            [4] => LYC
            [5] => AGL
            [6] => ALL
            [7] => GNC
            [8] => NUF
            [9] => MPL
        )

)

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

It is as yet unclear whether the two missiles that landed on the Polish side of the Ukraine border near Lviv last night, as Russia fired up to 100 missiles into western Ukraine, were indeed Russian. There is a possibility they could be Ukrainian air defence missiles. Either way, Russia has already called the news a “deliberate provocation”.

So they must be Russian. NATO will soon meet.

Material Turnaround

Monday’s trade on the ASX was all about resource sectors surging to counter falls in every other sector. Yesterday most sectors rose to counter falls in the resource sectors.

On Monday materials rose 3.4% and yesterday fell -1.0%. Reports of cathode producers reducing production targets sent lithium miners tumbling. Core Lithium ((CXO)) fell -15.8%, Allkem ((AKE)), -12.4%, Pilbara Minerals ((PLS)) -8.7% and Liontown Resources ((LTR)) -7.7%. Lynas Rare Earths ((LYC)) fell -8.2% for good measure.

Energy rose 0.9% on Monday on higher oil prices and fell -0.9% yesterday on lower oil prices.

The minutes of the November RBA meeting, released yesterday, noted:

“In considering the size of the increase, members also discussed the value of the Board acting in a consistent manner. Having moved by 25 basis points in the previous month, they considered whether the flow of information since then warranted a 50 basis point move at the November meeting. The Board agreed that acting consistently would support confidence in the monetary policy framework among financial market participants and the community more broadly.”

In other words they could have gone 50 but decided on 25 so as not to upset anyone. A concurrent internal review has focused on the fateful “no rate rise until 2024” call. The RBA is treading on eggshells.

Otherwise, nothing has changed. We’ll have to see how the RBA may respond to lower US inflation numbers next month, as well as this week’s local wage price index and jobs numbers. Australian bond yields barely moved on the minutes.

Which doesn’t explain why real estate fell back -1.3% yesterday. Utilities fell -0.4% after investors sold Cannon-Brookes’ plans for AGL Energy ((AGL)).

All other sectors closed in the green, led by technology (1.7%).

There was a wobble mid-session after China released October numbers.

Retail sales fell -0.5% year on year when 1.0% growth was forecast. Industrial production rose 5.0% compared to a 5.2% forecast. Fixed asset investment rose 5.8% year to date compared to 5.9%.

The news had the ASX200 dropping -20 points rapidly late morning but the index quickly swung around as Chinese and other Asian markets responded positively to the numbers, expecting increased government stimulus.

Net it all out and the index closed flat.

Inflation Versus War

Before last night’s open the US October producer price index numbers were released. The headline PPI rose 0.2% in the month to 8.0% year on year, down from 8.4% in September. The core PPI rose 0.2% to 5.4%, down from 5.6%.

The Dow was up 450 points from the open. The S&P500 again breached 4000. But just when it looked like the S&P could finally break through on its third attempt, the missile news hit, so to speak.

The Dow fell to be down -200.

In theory a hit on Polish soil could bring all of NATO into the war. But that’s not what anyone, including NATO, wants. While Russia is playing its usual pathetic games in response, it was no doubt a slight overshoot and not intentional.

Not enough to start World War III.

But it will strengthen NATO’s resolve to provide support to Ukraine, and to shift more anti-missile capacity to the Russia-NATO borders.

Weighing up the risks, and further signs that inflation may have peaked, Wall Street recovered to a more modest gain.

The US ten-year yield fell -7 points to 3.80% on the PPI numbers, boosting the Nasdaq.

Last night’s earnings reports showed the US consumer is not yet backing off due to recession fears. Dow stocks Walmart and Home Depot reported beats on September quarter numbers and rose 6.5% and 1.6% respectively.

In Australian terms, Walmart is Woolworths plus K-Mart in one while Home Depot is Bunnings.

Commodities

There has as yet been no news on any decision from the LME regarding a ban of Russian metals trading. Maybe now there will be.

Nickel closed up 8% having jumped to limit-up 15% on unconfirmed news of a blast at a nickel plant in Indonesia. Nickel trading has been thin since March after traders abandoned the LME following the short-squeeze debacle which led to cancelled trades.

Lower US inflation implies more demand for oil.

The US dollar index has fallen back -0.3% and the Aussie has shot up 0.9% to US$0.6776, perhaps concerned over the reasons why the RBA only went 25 and not 50.

Today

The SPI Overnight closed down -12 points.

Australia’s September quarter wage price index is out today.

The UK releases October inflation numbers.

The US will see industrial production and retail sales data.

Aristocrat Leisure ((ALL)), GrainCorp ((GNC)) and Nufarm ((NUF)) all report earnings.

Medibank Private ((MPL)) is among many companies holding their AGMs today.

Tomatoes available at the door.

The Australian share market over the past thirty days…

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