The Overnight Report: Dark Clouds

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            [1] => ((IMU))
            [2] => ((LYC))
            [3] => ((NVX))
            [4] => ((MFG))
            [5] => ((STO))
            [6] => ((BKW))
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            [0] => CXO
            [1] => IMU
            [2] => LYC
            [3] => NVX
            [4] => MFG
            [5] => STO
            [6] => BKW
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)

This story features CORE LITHIUM LIMITED, and other companies.
For more info SHARE ANALYSIS: CXO
The company is included in ALL-ORDS

By Greg Peel

Beat the Traffic

The futures said down -13 but the ASX200 jumped up 26 points from the open yesterday. By late morning it was back down again and then everyone went home. Or so it seemed.

With Easter and school holidays kicking off after today, Wall Street doing not a lot again, and our futures down -7 points this morning, today will likely be much the same. There’ll be tumbleweeds rolling down Bridge St by lunchtime.

You know it’s a quiet day when the winning sector is telcos (+0.8%).

There was no particular cyclical/defensive bent evident either with healthcare, industrials and technology all up 0.7%, the banks up 0.1%, and real estate down -0.4%. Bond yields didn’t move.

Countering the green were the resource sectors. Energy fell -0.6% as it continued to drift back from increases earlier this week, but all the action was in materials.

That sector also fell -0.6% but in a battle that saw four of the top five index winners on the day being miners and four of the top five losers being miners (or mining-related). And it was a hotchpotch.

Core Lithium ((CXO)) announced it had maiden spodumene concentrate ready for export and jumped 8.1%. The rest of the top five was made up by two gold miners and a copper miner, along with Imugene ((IMU)), which announced a new trial for its cancer drug.

Lynas Rare Earths ((LYC)) fell -4.8% on lower rare earth prices while battery technology company Novonix ((NVX)) joined a coal miner and an iron ore miner in the losers, along with Magellan Financial ((MFG)), after the latter announced ongoing falls in funds under management.

Tell us a new one.

All major commodity prices were slightly lower overnight whether or not anyone cares, but the Aussie was also down again.

Economically the focus was on Philp Lowe’s follow-up speech to the Press Club regarding Tuesday’s rate decision. “The decision to hold rates steady this month does not imply that interest rate increases are over,” said the governor.

We sort of knew that too. Indeed, economists are forecasting anywhere between one, two or three more hikes beginning later this year or as early as May.

In other words, they’ve got no idea either.

Have a good weekend.

When Bad News is Simply Bad

Wall Street has changed its tune. Over the past year weak economic data have been cheered on by investors on the implication the Fed will have to pause its rate hikes lest it tips the economy into recession. The problem is data have remained largely solid, until now.

The US bond market is already pricing in a recession whereas the stock market, post-SVB, has tried to look ahead to the Fed rate cuts the Fed will deliver due to signs of economic weakness, despite the Fed assuring it will do no such thing.

The problem with cheering on economic weakness is that Wall Street eventually comes to realise recessions are not good for stock markets, and thus signs of a slowdown and not actually something to be happy about.

Earlier this week Wall Street saw a drop in manufacturing activity, as measured by the PMI. Last night the March services PMI showed a collapse to 51.2 from 55.1 in February.

While manufacturing gets a lot of the attention, the services sector is the largest part of the US economy. We recall that last year, post-covid, consumers switched from buying goods, as they’d bought enough during lockdowns, to spending on the services they had missed out on or put off, be it trivial (travel, dining, entertainment) or serious (healthcare).

That spending spree is now waning, according to the data.

The ADP private sector report released last night showed an addition of only 145,000 jobs in March when 210,000 was forecast, down from 261,000 in February. Interestingly, all the job additions were in services while job losses were in manufacturing.

Put this together with the JOLTS report earlier in the week, showing fewer job openings, and the US labour market is also showing signs of easing.

If a recession is on the horizon, it’s time to shift into defensives and out of cyclicals. Last night S&P500 sector winners were healthcare, staples and utilities while the losers were consumer discretionary, technology and industrials.

The Nasdaq was slapped again as investors continued to take profits in high-flying tech names, mostly Big Tech names, with pundit after pundit suggesting the overblown tech rally should be “faded”.

Another defensive play is fixed income, but on the Treasury bond side that ship has largely sailed. Yet investors are still buying, with yields falling again last night.

Normally the Nasdaq likes falling yields.

Wall Street will now look ahead to more bad news in Friday’s non-farm payrolls report, which they’ll have to wait until Monday to respond to, and then next week’s March CPI, for which bad news could really be bad.

Commodities

Nothing much to cheer about.

Having shot up earlier in the week on the step-jump in oil prices, the Aussie has fallen back ever since and last night dropped another -0.5% to US$0.6727.

Today

The SPI Overnight closed down -7 points.

Australia will see February trade numbers today and the RBA will issue a Financial Stability Review, made more pertinent in the wake of SVB and Credit Suisse.

Santos ((STO)) holds its AGM.

Brickworks ((BKW)) goes ex.

All non-Asian developed markets are closed for Good Friday and most on Monday, but not the US.

The US jobs numbers are out tomorrow night.

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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