The Overnight Report: All Quiet

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This story features LYNAS RARE EARTHS LIMITED, and other companies.
For more info SHARE ANALYSIS: LYC
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Bond Bounce

A big drop in Aussie bond yields was the driving force behind yesterday’s rally for the ASX200, ahead of today’s RBA meeting. It had little to do with policy speculation – a 25 point hike is baked in – but more a case of follow the leader.

US yields had shot up on Thursday night, with the ten-year crashing through 4%. That move was swiftly reversed on Friday night as investors saw 4% as too attractive not to buy. Aussie yields had risen modestly on Friday but tanked yesterday, with the ten-year dropping -13 points to 3.76%.

Consumer discretionary was the greatest beneficiary of the move (+2.0%), followed by technology (+1.8%) and real estate (+1.7%), and even staples got in on the act (+0.7%). But the most influential move was that of the banks (+1.2%).

It seems that on a daily basis, investors are never quite sure which influence on bank performance they should be backing. Rising rates should be positive, unless that leads to rising bad debts, thus lower rates must be positive, until that leads to lower margins. Anyway, yesterday investors chose mortgage stress relief.

Last week the banks were out of favour, and resources were in. Yesterday energy (-1.1%), materials (-0.3%) and utilities (-0.4%) were the only losing sectors on the day.

Investors were disappointed in the new Chinese premier’s target GDP growth rate of 5% for 2023. Coming out of lockdown, a more rapid pace was hoped for. That’s as low as China has ever set a target, and usually they are extraordinarily accurate, but even Beijing couldn’t cook something up during lockdown, admitting 3% growth.

Elon Musk was not doing the materials sector any favours at Tesla’s investor day last week, revealing the company’s next generation vehicles will involve a “complete paradigm change”, including eliminating rare earth elements.

Already struggling with processing plant issues, yesterday Lynas Rare Earths ((LYC)) fell -4.5% to be the worst performer in the index. All top five losers on the day were miners across the spectrum.

There were three miners on the leaders’ board as well, all of the lithium variety. The coin came up heads.

Pipping lithium was the influence of the latest global fad – AI. Brainchip Holdings ((BRN)) jumped 16.7% after launching a second generation of its Akida “AI of Things” platform.

Shoot me when I’m no longer needed.

Wall Street has gone quiet ahead of Jay Powell’s testimony to Congress tonight but while the S&P500 is mildly higher, our futures are down -12 points this morning.

Thirteen Days

(Great movie, if you haven’t seen it.)

The Fed chair will testify before committees in both chambers over the next two nights. Typically anything market-moving is revealed on the first night. The next jobs report comes out on Friday and next week brings the CPI and PPI, and then the Fed meets the following week.

That’s a thirteen-day run of crucial information for both the Fed, and Wall Street, to absorb. And probably more crucial since the major indices have again turned positive after February’s rout.

The bounce has been credited to a great extent to Apple, which has jumped 6% since the bottom. As the biggest company, and a member of all three indices, Apple is rather influential. There’s been no startling new news out of Apple.

Last night kicked off with more strength, with the Dow jumping 180 points. Although a lot of that was down to Merck (+4.0%) and its new cholesterol pills.

Enthusiasm waned and indices slid back, giving the appearance no one was prepared to take any more risk until Powell speaks tonight and the clock starts on the run of crucial events.

So, that’s about all.

In other news, the US government is moving closer to banning TikTok. That had Snap up 11% last night.

Commodities

US undersupply, Russian supply cuts, China’s reopening and a recession in US/Europe as yet failing to materialise has led to oil prices creeping steadily higher. WTI has now reclaimed US$80/bbl.

The Aussie is down -0.3% at US$0.6727 ahead of today’s RBA meeting.

Today

The SPI Overnight closed down -12 points.

Aside from the RBA, we’ll see January trade numbers today.

China will report February trade numbers.

Wall Street will be closely following the testimony tonight.

There are some decent ex-divs on the list today from Lovisa Holdings ((LOV)), Universal Store ((UNI)), Sonic Healthcare ((SHL)) and Viva Energy ((VEA)), among others.

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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