The Monday Report – 06 March 2023

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            [4] => ((RHC))
            [5] => ((SBM))
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This story features AMPOL LIMITED, and other companies.
For more info SHARE ANALYSIS: ALD
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Modest Close

The surprise technical bounce on Wall Street on Thursday night in the face of a surge in US bond yields had the ASX200 following suit warily on Friday, keeping a close eye on local yields. The index closed about where it opened.

By the close the Aussie ten-year rose only 4 points to 3.90% and only one sector closed in the red. Real estate lost -0.3%. The ten-year is up 52 points in a month.

Otherwise modest gains across the board coloured the day, led by communication services (+0.9%) and healthcare (+0.6%), while the buy resources/sell banks theme of the past couple of sessions ended with both financials and materials rising 0.5%. Energy rose 0.3%, held back by Ampol ((ALD)) going ex. Ampol shares fell -5.8% to appear to be the worst index performer on the day.

Economic data on Friday showed a month on month fall in total housing loan demand of -5.3%, split into -4.9% for owner-occupiers and -6.0% for investors. All three numbers are down around -35% year on year.

ANZ Bank economists warn that while the average house price only fell -0.1% in February, a -10% fall over 2023 is still expected as demand backs off.   

Assuming some percentage of those choosing not to get a home loan are currently renting, and noting that new building approvals have fallen sharply just as migration picks back up, the chance of rents coming down anytime soon seems remote.

The RBA meets tomorrow to provide another 25 point hike, although one out of 28 economists polled by reporters is suggesting only 15 points. Ten of the 28 see the peak rate at 4.10%, one has 4.35%.

The good news is the 4% level in the US ten-year yield did actually prove to be a line in the sand on Friday night, prompting a sharp fall back to below that level. This was all Wall Street needed to kick on from Thursday’s technical bounce.

Our futures were up 63 points on Saturday morning.

This week the ASX200 is nevertheless going to require two steps forward to counter each morning’s one step back in the biggest week of the season for ex-dividends.

Fixated

The US ten-year yield fell -11 points to 3.96% on Friday night as more and more investors turn to fixed income as a safe alternative to stocks at this time, after over a decade of low yields. Throw in ongoing recession risk, and hiding in fixed income seems but a sensible choice.

Typically when the ten-year crossed over 4% last year the stock market would be sent packing. The trend was broken on Thursday night only because the S&P500 bounced off its 200-day moving average, sparking a somewhat contrarian rally.

So when bond yields pulled back on Friday night, it was a red rag to a bull for stocks. The major indices closed higher for the week after a run of losses.

Tech was back in favour, again, leading to Nasdaq outperformance.

If Wall Street is to take another trip up to the top of its now well-established range, there are two hurdles it has to jump first. Tomorrow night the Fed chair will testify before a Congressional committee, which will ask where rates are going.

On Friday night it’s the February jobs report. We recall it was the January jobs report, showing new jobs in excess of 500,000 when 200,000 were expected, that killed off the January rally, before hot inflation numbers fuelled the February fall. Economists are again predicting a number around 200,000 for February.

Once we get past jobs, next week brings the February CPI and PPI numbers, before the Fed meets later in the month.

For now though it looks as if Wall Street is happy to go on a bit of a run.

Commodities

Lower US and bond yields and a subsequently lower US dollar had gold traders excited on Friday night.

The US oil rig count fell for the third week in a row last week, down -8 to 592, while gas rigs rose 3 to 154. The fall in oil rigs is attributed to lower oil prices.

Which then pushed prices up on Friday night.

The Aussie is up 0.2% at US$0.6747.

The SPI Overnight closed up 63 points or 0.9% on Saturday morning.

The Week Ahead

The RBA meets tomorrow and we’ll also see January trade numbers.

China reports February trade and inflation numbers this week.

The Bank of Japan meets on Friday.

The US will also see January trade numbers, along with factory orders and the ADP private sector jobs report on Wednesday. The non-farm payroll report is on Friday.

Jerome Powell will testify before Congress tomorrow night and Wednesday night.

As noted it’s a big, big week for ex-divs on the local market. We kick off today with Bendigo & Adelaide Bank ((BEN)), QBE Insurance ((QBE)), REA Group ((REA)), Ramsay Health Care ((RHC)) and Sims ((SBM)), to name but a few.

The Australian share market over the past thirty days…

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