The Overnight Report: Sleigh Bells Ring

Array
(
    [0] => Array
        (
            [0] => ((ORG))
            [1] => ((TLS))
            [2] => ((TPG))
        )

    [1] => Array
        (
            [0] => ORG
            [1] => TLS
            [2] => TPG
        )

)

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

As You Were

Yes, well, if you’d blinked you would have missed it. The panic of the Bank of Japan’s change of policy which sent the world into a tailspin on Tuesday was apparently just a one-day wonder. The ASX200 dropped -100 on Tuesday and made it almost all the way back yesterday.

Underscoring that the market is very pre-holiday thin right now.

The trigger was the fact Wall Street did not join in with everyone else on Tuesday night and rather found some support from both a technical and “oversold” view. Has the US recession-fear pullback ended? Last night showed some signs it may have.

Beijing also came up yesterday with a brilliant excuse to support the complete about-face on zero-covid – change the definition of “covid death”. If you have a pre-existing condition to make you vulnerable to covid, and die, that’s no longer death by covid. Only if there’s nothing otherwise wrong with you, and you die, that’s death by covid.

The change will mean China will vastly under-report covid fatalities, even more so than to date in which a death-count of 5421 in a population of 1.4bn is a little at odds with the rest of the world, despite a vaccine that doesn’t work. This will provide justification for further reopening.

Which sadly is good news for the rest of the world. Unless a runaway death count shuts down the economy anyway.

Late in the session the US futures markets started to rise thanks to pre-released earnings reports from Nike and FedEx that beat expectations.

It was pretty much a Buy Everything session on the ASX yesterday, albeit with a few variations. The fact real estate was up 2.8% with the ten-year yield unchanged suggests buyers were on the hunt for bargains.

Utilities topped the boards (+3.8%) on a 6.6% gain for Origin Energy ((ORG)) after it confirmed its suitors are still interested.

Materials (+2.3%) and energy (+2.6%) reflected more China reopening, although every one of the top five index winners yesterday were gold miners.

The banks only rose 0.5% but did not plunge on Tuesday with everything else. There were similar gains among the more defensive staples, healthcare and industrials.

Communication services was the only wallflower (flat) after the ACCC knocked back the proposed merger of Telstra’s ((TLS)) and TPG Telecom’s ((TPG)) regional networks. There will now be an appeal.

Having not fallen on Tuesday night, Wall Street took off last night, on all of the above, plus some domestic news.

Confident Once More

Nike and FedEx have both suffered this year from the end of the lockdown-driven online shopping binge, and in Nike’s case ongoing lockdowns in China and excess inventory built up during supply shortages. Both thus surprised last night with solid earnings beats.

FedEx rose 3.4% and Nike a whopping 12.3%, which is a lot for a Dow stock.

With Wall Street having found tenuous support on Tuesday night, these results helped to spur greater confidence that, maybe, the recession, if there is one, won’t be too bad. Even more confidence was garnered from confidence itself.

The Conference Board’s monthly index of US consumer confidence bounced back this month after two consecutive falls. A reading of 108.3 was well ahead of expectation.

This result allowed Wall Street to overlook a -7.7% fall in existing home sales in November, compared to a -5.2% forecast, to be down -35% year on year.

Investors are more heartened that the average 30-year mortgage rate is now around 6.3% having peaked earlier at 7.2%.

Put it altogether and Wall Street sees hope the Fed will not have to push as hard as it has suggested next year. Combine that with technical support and cries of “oversold” and Santa just might be firing up the sleigh after all.

Commodities

A winter freeze is descending on most of the US ahead of holiday travel, and last week’s US crude inventory numbers came in lower than expected. Hence the rally for the oils.

Not a lot happening elsewhere.

The Aussie had dropped well into the 66s as the yen surged but has bounced back 0.5% to US$0.6707 – again unchanged over two days.

Today

Noting that part of what drove Wall Street last night was priced in on the ASX yesterday, the SPI Overnight closed up 41 points or 0.6%.

There is nothing of note on the economic calendar today other than yet another revision of the US September quarter GDP, as December comes to a close.

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.

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