The Monday Report – 12 December 2022

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            [6] => ((NAB))
            [7] => ((LNK))
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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

Ore Else

Following a bounce on Wall Street on Thursday night that ended a five-day losing streak, our futures said up 33 on Friday morning and the ASX200 closed up 37. But it wasn’t plain sailing.

The index started slipping in the morning to ultimately be down -38 points at lunchtime, likely as investors squared up ahead of Friday night’s US inflation data and ahead of the office Christmas lunch. But then Chinese iron ore prices started to rise.

The materials sector thus closed up a standout 1.9%.

While metals remain volatile despite China’s reopening, iron ore has been staging a comeback based on expectations of further government support for China’s struggling property sector.

Next best was technology (+1.0%) followed by staples (+0.6%) which just goes to show investors are not quite sure where to park their money right now. Risk or defence?

The Aussie ten-year yield fell -7 points to 3.29% on Friday which would have helped technology, but not real estate (-0.1%) or the banks (-0.2%).

After a strong week, utilities saw some profit-taking (-0.8%).

All the action remains among the various commodities – up or down each day – which have been the primary driver of the index this month. By rights we should go quiet now ahead of the US CPI print tomorrow night and the Fed statement on Wednesday night, and the fact we’re winding down towards the summer break.

The US PPI came in a little “hot” on Friday night, so our futures were down -35 points on Saturday morning.

So there goes Friday.

A Bit Warm

The US headline producer price index rose by 0.3% month on month to November when 0.2% was forecast, and the core PPI did the same. Wall Street called the result “hot”.

But not too hot. For the annual headline rate fell to 7.4% from 8.1% in October and the core to 4.9% from 5.4%.

Wall Street traded off the conflicting results, decided it would not alter expectations of a 50 point hike from the Fed, and did nothing.

Right up until the last hour, when the sellers moved in. Again most likely a squaring up ahead of the CPI, Fed and the weekend more than anything sinister.

The US ten-year yield rose 8 points to 3.57% on the PPI, but had been up and down all week.

Michigan Uni’s latest consumer sentiment index showed a gain to 59.1 from 56.8 at end-November, which is heartening for US retailers ahead of Christmas. The inflation expectations measure fell to 4.6% from 4.9% over one year, which is likely why.

It may yet be a merry Christmas for the consumer sectors but 2022 was the year of the post-covid rebound, so 2023 may not shape up so well.

Especially if everyone keeps warning of a recession.

We’ve had the last RBA meeting before February, and we’re about to get the last Fed meeting before February, so after this week it will start to get thin.

Commodities

European traders noted on Friday night demand for nickel is waning.

Demand for all metal ores is waning in Europe as the cost of energy renders smelting unviable.

Increased demand that should be flowing from a reopened China, but is being offset by runaway growth in covid case numbers, which presumably now will only get worse without lockdowns. No good if all your workers are sick.

Foxconn founder Terry Gou reportedly said China’s zero-covid policy threatened its position in global supply chains. Apparently he was one of the voices the authorities listened to in deciding to roll back the restrictions.

You’ll recall Foxconn, which makes iPhones for Apple, was the early flashpoint in the protests when some workers rioted after being locked in and others escaped, never to return.

The Aussie is up 0.2% at US$6788.

The SPI Overnight closed down -35 points or -0.5%.

The Week Ahead

US CPI tomorrow night, Fed on Wednesday, and retail sales and industrial production on Thursday.

The Bank of England and ECB both hold policy meetings on Thursday night.

China reports November retail sales, industrial production and fixed asset investment on Thursday.

Locally we’ll see the NAB business and Westpac consumer confidence surveys tomorrow.

Thursday brings the November jobs numbers. Big day, Thursday.

Thursday will also see the December quarter expiry of ASX derivatives (futures, options).

Westpac ((WBC)), Magellan Financial ((MFG)) and Orica ((ORI)) hold their AGMs on Wednesday.

ANZ Bank ((ANZ)), Computershare ((CPU)) and Elders ((ELD)) hold their AGMs on Thursday.

National Bank ((NAB)) and Link Administration ((LNK)) hold their AGMs on Friday.

And that will end AGMs for the year.

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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