The Overnight Report: Off The Rails

This story features AGL ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: AGL

World Overnight
SPI Overnight	7180.00	+ 32.00	0.45%
S&P ASX 200	7139.30	– 12.50	– 0.17%
S&P500	3949.94	– 15.40	– 0.39%
Nasdaq Comp	11024.51	– 121.55	– 1.09%
DJIA	33700.28	– 45.41	– 0.13%
S&P500 VIX	22.36	– 0.76	– 3.29%
US 10-year yield	3.83	+ 0.01	0.18%
USD Index	107.84	+ 0.91	0.85%
FTSE100	7376.85	– 8.67	– 0.12%
DAX30	14379.93	– 51.93	– 0.36%

By Greg Peel

Death in China

On a comeback close for Wall Street on Friday night, the ASX200 jumped over 20 points from the open yesterday, but thereafter no one was interested. The index sank quietly all day to a lacklustre close.

News over the weekend was that Chinese covid cases had increased sevenfold in just two weeks and that three deaths had been reported – the first in six months. The manufacturing city of Guangzhou has been locked down and Shijiazhuang is under stay-at-home orders.

Going well, this zero-covid policy.

The materials sector subsequently closed down -1.5% and energy -0.9% to provide the greatest drag.

Utilities bucked the trend (+1.8%) to be the best performing sector by percentage. AGL Energy ((AGL)) led the index yesterday with a 4.2% gain. There was no particular news, but one assumes the bid for Origin Energy ((ORG)), leaving AGL at the altar, and the new-look AGL board, all add up to a possible bid for AGL from elsewhere.

Technology was down -1.5%, led by a -4.3% fall in Block ((SQ2)) after the government revealed it is considering applying credit card company regulations to BNPL.

Like that was never coming.

The banks provided the main counter to resources (+0.5%), with some help from staples (+0.9%) and healthcare (+0.5%).

There is little point in me needlessly waffling on any further. It was a quiet day, and this week will likely bring more of the same with Wall Street not much interested.

That said, I note the S&P500 has closed down -0.4% and metal prices tanked overnight on China woes, yet our futures are up 32 points this morning.

Seems ambitious. And you’ll need to find some willing players.

Not Much Difference

Wall Street wasn’t exactly lit with excitement last night either.

Fresh restrictions in China also weighed but in a nod to the seventies and wage-price spirals, one of the two largest US railway unions rejected a White House-brokered labour agreement, raising the possibility of a potential strike by early December, which would suggest further supply-chain issues that would continue to drive inflation.

The good news for Christmas shoppers is that retailers will already be well and truly stocked and ready to go, with this week’s Thanksgiving sales the kick-off, so there should be no impact on supply were there to be a rail strike.

The bad news is that if a deal is not reached, a strike could cost the US economy -US$2bn a day.

Who’s next? The teamsters?

If we really are going to get a seventies Christmas this year, then in Australia we should be expecting strikes from postal workers, airport baggage handlers and brewery workers. Ah those were the days.

The Cleveland Fed president and FOMC voting member Loretta Mester appeared on CNBC last night and all but confirmed the Fed will only go 50 next month, while emphasising that was only her personal opinion. When pushed as to whether a slowing in pace would then lead to 25 point hikes in 2023, Mester refused to be drawn other than to insist the latest data would inform that decision.

The minutes of the November Fed meeting will be released tomorrow night.

There was absolutely no response from Wall Street to Mester’s musings. The market locked in 50 points long ago.

The mood was nonetheless dour on Wall Street last night and the indices slipped towards the close.

The Dow was supported by a 6% gain for Disney, after it was announced the current CEO would be replaced by a new CEO who was actually the previous CEO.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1737.80	– 13.30	– 0.76%
Silver (oz)	20.81	– 0.14	– 0.67%
Copper (lb)	3.58	– 0.10	– 2.80%
Aluminium (lb)	1.17	– 0.02	– 1.77%
Lead (lb)	0.96	– 0.04	– 3.73%
Nickel (lb)	10.93	– 0.26	– 2.36%
Zinc (lb)	1.32	– 0.05	– 3.34%
West Texas Crude	79.73	– 0.35	– 0.44%
Brent Crude	87.18	– 0.44	– 0.50%
Iron Ore (t)	91.54	– 1.35	– 1.45%

The WSJ reported last night that OPEC was prepared to increase production in order to help ease tensions with the Biden administration and provide a cushion as new efforts aimed at curbing Russia’s energy industry kick in on December 6.

Oil prices fell -6%.

The Saudi energy minister then responded with, and I paraphrase, don’t be bloody ridiculous. If anything we will cut production to maintain a stable demand/supply balance.

Oil prices bounced 6%.

Falls in metal prices were all about China but also a resurgent US dollar, which jumped 0.9% overnight. This is mainly due to renewed weakness in the euro, which is 57% of the trade-weighted dollar index.

The Aussie is thus down -0.9% at US$0.6603. Here we go again.

Today

The SPI Overnight closed up 32 points or 0.5%.

The RBA governor will speak today. He’s been in hiding since the release of the RBA’s own review which decided the “no hike before 2024” call was a complete [insert word here]-up.

The US will see house prices.

TechnologyOne ((TNE)) will report earnings, while today’s long list of AGMs includes those of BlueScope Steel ((BSL)), Fortescue Metals ((FMG)) and Star Entertainment ((SGR)).

Amcor ((AMC)) goes ex (quarterly dividend).

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ABP	Abacus Property	Upgrade to Accumulate from Hold	Ord Minnett
ABY	Adore Beauty	Downgrade to Neutral from Buy	UBS
AKE	Allkem	Upgrade to Add from Hold	Morgans
AWC	Alumina Ltd	Downgrade to Hold from Buy	Ord Minnett
BWP	BWP Trust	Downgrade to Lighten from Hold	Ord Minnett
GNC	GrainCorp	Upgrade to Buy from Neutral	UBS
HLS	Healius	Downgrade to Lighten from Hold	Ord Minnett
HMC	Home Consortium	Downgrade to Hold from Buy	Ord Minnett
LOV	Lovisa Holdings	Upgrade to Buy from Neutral	UBS
NAN	Nanosonics	Downgrade to Hold from Add	Morgans
NHF	nib Holdings	Upgrade to Accumulate from Lighten	Ord Minnett
NSR	National Storage REIT	Downgrade to Hold from Buy	Ord Minnett
NUF	Nufarm	Upgrade to Accumulate from Hold	Ord Minnett
PPT	Perpetual	Downgrade to Neutral from Outperform	Credit Suisse
RRL	Regis Resources	Upgrade to Neutral from Sell	Citi
S32	South32	Downgrade to Neutral from Outperform	Macquarie
SFR	Sandfire Resources	Downgrade to Neutral from Buy	Citi
		Downgrade to Sell from Hold	Ord Minnett

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms