Daily Market Reports | Apr 11 2023
This story features NETWEALTH GROUP LIMITED.
For more info SHARE ANALYSIS: NWL
The company is included in ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7248.00 | 0.00 | 0.00% |
| S&P ASX 200 | 7214.90 | – 22.30 | – 0.31% |
| S&P500 | 4109.11 | + 4.09 | 0.10% |
| Nasdaq Comp | 12084.36 | – 3.60 | – 0.03% |
| DJIA | 33586.52 | + 101.23 | 0.30% |
| S&P500 VIX | 18.97 | + 0.57 | 3.10% |
| US 10-year yield | 3.42 | + 0.13 | 3.86% |
| USD Index | 102.54 | + 0.45 | 0.44% |
| FTSE100 | 7741.56 | + 78.62 | 1.03% |
| DAX30 | 15597.89 | + 77.72 | 0.50% |
By Greg Peel
Thursday
In thin trading ahead of the holiday, and the US March jobs report on Friday night, the ASX200 drifted off to 2pm to a nadir of -38 before recovering some ground in the late afternoon, closing down -18 points. While it was a nothing-to-write-home-about session, trading took a decidedly defensive bent, in line with Wall Street on Wednesday night.
Healthcare was the best performing sector (+0.9%), joined by staples (+0.6%), utilities (+0.4%), communication services (+0.3%) and industrials (+0.3%).
Once upon a time we’d label real estate a defensive but in a time if frenetic bond market volatility, not right now. It fell -0.4% despite the Aussie ten-year yield falling -9 points to 3.18% and the two-year -6 to 2.83%.
Once upon a time lower yields were positive for technology but right now the Nasdaq is decoupled from bond prices as it responds to overbought conditions, hence our technology sector was obliged to fall -0.8% on Thursday.
Cyclical play consumer discretionary was the next worst performer (-0.6%), while the mega-sectors had a quiet day, with energy down -0.4%, materials -0.2% and the banks flat.
Despite the soggy Thursday, the ASX200 closed up 0.6% for the week.
Highlights, if you can call them those, from the RBA’s Financial Stability Review, released on Thursday, include:
“Australian banks are well regulated, well capitalised, profitable and highly liquid.”
…in case you were worried.
The RBA also noted about 16% of households with a home loan are in “mortgage prison”, unable to refinance to a lower rate because they do not meet tough serviceability assessment rules. Another 1% rise would see that number jump to 20%.
And about 45% of the poorest quarter of households with a mortgage are spending more than 30% of their income on repayments, which is considered a proxy for “mortgage stress”. So that would be 11.25% of all households with a mortgage.
March trade data released on Thursday showed a -2.9% fall in exports, mostly iron ore and LNG, and a whopping -9.1% fall in imports due mostly to transport (cars), which fell -35%. While demand for cars is clearly impacted by higher rates, this lumpy component was actually up strongly in February so the end of the world is not nigh.
Thursday Night
The Dow closed up 2 points, while the S&P500 gained 0.4% thanks to strength in the Nasdaq, which rebounded 0.7%. Indices recovered through the session from a weak opening.
After six-straight days of declines, the US two-year yield rose 6 points and the ten-year one point. As noted, the Nasdaq is not joined at the hip with bond prices anymore.
For the week, the Dow rose 0.6%, the S&P lost -0.1% and the Nasdaq fell -1.1%.
Labour market data were in the spotlight all week beginning with a weak job openings number, then a weak private sector jobs number, and on Thursday night weaker new jobless claims data which, after adjusting for the government’s new seasonal adjustment model, suggest the labour market has softened more than it had appeared.
Wall Street would have been thrilled with such weakness last year, as it suggests the Fed should now be pausing, but this year the reality of a pause being the result of a pending recession has set it.
Last week’s weak PMI data only exacerbated fears.
By the close, Wall Street had largely squared up on the week ahead of Friday night’s non-farm payrolls release.
Commodities
There were very small movements in commodity prices on Thursday night, mostly to the downside. Gold fell -US$12/oz.
The Aussie was down -0.8% at US$0.6674.
The SPI Overnight closed up 9 points.
Friday Night
The US added 236,000 jobs in March when 238,000 were forecast. That’s down from revised additions of 326,000 in February and 472,000 in January. The unemployment rate fell back to 3.5% from 3.6% in February.
Wages grew 0.3%, taking the annual growth rate down to 4.2% from 4.6%.
Monday Night
What does one do with this information?
Had the jobs number been much lower than expected, it would have been positive from a Fed perspective, suggesting if not a pause in May but at least a pause thereafter, but negative from an economic perspective, only heightening recession concerns.
Had the number been much higher than expected, as was the case in the prior two months, it would have cemented a rate hike in May and increased fears of more hikes thereafter, but would have eased recession concerns.
Unsurprisingly thus, the Dow fell -140 points from the open and closed up 100. Wall Street was not at all sure what to do. The US ten-year yield rose 3 points to 3.42% and the two-year 4 points to 4.01%.
If anything the jobs number, which may have been the weakest this year but is still strong on an average basis, did somewhat ease the recession concerns that had built in the past couple of weeks. While tech was weak again, so too were the defensive sectors that were in vogue last week while cyclical sectors closed in the green.
Apple (Dow) dragged down the tech sector, falling -1.6% following data showing a -29% year on year fall in personal computer shipments, and -40% specifically for Apple Macs.
With jobs out of the way, Wall Street’s attention now turns to the March CPI data due on Wednesday night.
Thereafter it’s retail sales on Friday night, but Friday also sees the March quarter earnings season kick off, with results due from JPMorgan (Dow), Citigroup and Wells Fargo.
The ensuing couple of weeks of earnings results will be where the rubber hits the road in terms of how the US economy is actually performing. Forecasts have come down a fair way from the start of the year.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1991.50 | – 16.10 | – 0.80% |
| Silver (oz) | 24.86 | – 0.11 | – 0.44% |
| Copper (lb) | 4.01 | + 0.01 | 0.27% |
| Aluminium (lb) | 1.15 | – 0.00 | – 0.06% |
| Lead (lb) | 0.96 | – 0.00 | – 0.37% |
| Nickel (lb) | 10.33 | + 0.21 | 2.10% |
| Zinc (lb) | 1.28 | – 0.01 | – 0.84% |
| West Texas Crude | 79.74 | – 0.96 | – 1.19% |
| Brent Crude | 84.30 | – 0.63 | – 0.74% |
| Iron Ore (t) | 119.75 | + 0.59 | 0.50% |
The LME was closed last night so the base metal price movements above are from Thursday night.
All other prices reflect last night’s movements.
Gold has taken another step lower as US bond yields rise once more, suggesting an easing of recession fears.
The Aussie is down another -0.5% at US$0.6644.
There was no overnight trading in the SPI futures last night.
The Week Ahead
US CPI on Wednesday, along with the minutes of the March Fed meeting, followed by the PPI on Thursday and retail sales, industrial production and consumer sentiment on Friday.
China reports March inflation and trade data this week.
Locally we’ll see the NAB business and Westpac consumer confidence surveys today and the March job numbers on Thursday.
Netwealth ((NWL)) provides a quarterly update on Thursday as a canary in the quarterly reporting season coal mine that builds up from next week.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| GOR | Gold Road Resources | Downgrade to Neutral from Outperform | Macquarie |
| IAG | Insurance Australia Group | Downgrade to Hold from Accumulate | Ord Minnett |
| STO | Santos | Downgrade to Neutral from Buy | Citi |
| VEA | Viva Energy | Downgrade to Hold from Accumulate | Ord Minnett |
| WDS | Woodside Energy | Downgrade to Sell from Neutral | Citi |
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
CHARTS
For more info SHARE ANALYSIS: NWL - NETWEALTH GROUP LIMITED
