The Overnight Report: Higher, Faster, Longer

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            [4] => ((CSL))
            [5] => ((MIN))
            [6] => ((S32))
            [7] => ((ASX))
            [8] => ((PPT))
            [9] => ((CXO))
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This story features WOODSIDE ENERGY GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: WDS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Pause for Thought

"At our board meeting yesterday, we discussed the lags in monetary policy, the effects of the large cumulative increase in interest rates since May and the difficulties that higher interest rates are causing for many households.

"We also discussed that, with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy.

"At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook."

Philip Lowe’s speech yesterday did little to reverse what had already been a downward adjustment for the ASX200 in the first hour yesterday, driven by Wall Street, in turn driven by Jay Powell. While Lowe is playing dovish to Powell’s hawkish, the above was sufficiently hinted at on Tuesday if one read between the lines of the RBA statement.

Which everyone does.

We now need to hope for weak February jobs and inflation data but before that, we need to see the same in the US. Or at least not stronger.

The standout sector fall yesterday was energy (-4.2%) but then Woodside Energy ((WDS)) went ex and dropped -7.2%. There are some real whoppers coming up today.

The next worst was materials (-1.1%), with gold miners being slapped hard. Ramelius Resources ((RMS)) fell -10.9% to top the losers board (Woodside second). If you match up the big fall in the USD gold price and the big fall in the Aussie on Tuesday night, the AUD gold price didn’t move.

The banks were also in on the act (-0.7%) to mark the first time in a few sessions resources and banks have moved in the same direction.

Bond yields were again an issue. If you reckon the stock market can be volatile, boy you oughta check out the bond market. After tanking on Monday and Tuesday, the Aussie ten-year rose 6 points to 3.74% yesterday and the two-year 9 points to 3.46%.

Real estate fell -0.5%.

All other sector moves were modestly to the downside except for healthcare and communication services which both rose 0.2%.

Wall Street was steady overnight after an early fall as Powell’s testimony to Congress continued to reverberate, but less so than Tuesday night, and our futures are up 32 points this morning.

That does not take into account a big opening discount for the day’s ex-dividends, which are listed below.

Either way, we continue to bounce around.

Size Matters

“We have not made any decision about the March meeting,” Jerome Powell told another Congressional committee last night, in reference to the 25 or 50 point debate. “We’re not going to do that until we see the additional data.” The larger point,” Powell said, is that the Fed is not on a “pre-set path.”

“We will be guided by the incoming data and the evolving outlook.”

In other words, Friday’s jobs number and next week’s CPI and PPI results. But last night’s data were unnerving as well.

The ADP private sector jobs report has never been a great indicator of where the non-farm payrolls number will fall, but last night’s 242,000 additions for February exceeded January’s 119,000 and a forecast of 205,000.

Note that January’s 119,000 was then matched by a non-farm of over 500,000.

Job openings fell in January to 10.8m from 11.2m which is a move in the right direction, except that 10m in isolation still implies a very tight labour market.

When the non-farm payrolls data hit on Friday night, arguably more important than the headline jobs number will be the weekly wage growth number therein, measuring wage inflation.

The Fed has made it pretty clear that rates will need to go higher, they may need to go higher faster, and they will have to stay there for longer.

Last night’s Fed Beige Book showed six of twelve Fed districts reported little to no economic growth in the new year, with the other six claiming “modest” growth. So overall economic activity increased slightly in early 2023 (slightly is good), and while inflationary pressures still remained widespread, price increases moderated in many Fed districts (also good).

The US ten-year rose one point to 3.99% last night while the two-year gained 6 points to 5.07%, further widening the inversion. The Dow was down over -200 points on the open but spent the session slowly grafting back.

Wall Street has one more session to get through tonight before the jobs data drop ahead of the open on Friday night. It should thus be quiet, but whenever I say that it never is.

Commodities

The US dollar steadied but other than a small bounce for copper, it didn’t have much effect.

The Aussie is steady at US$0.6591.

Today

The SPI Overnight closed up 32 points or 0.4%.

China will release February inflation data today.

Today’s list of stocks going ex-dividend is the longest in the ex-dividend season, but more notable is just who goes ex today.

That list includes BHP Group ((BHP)), Rio Tinto ((RIO)), CSL ((CSL)), Mineral Resources ((MIN)), South32 ((S32)), ASX ((ASX)) and Perpetual ((PPT)).

Core Lithium ((CXO)) reports earnings.

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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