The Overnight Report: Same, Same

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This story features LAKE RESOURCES N.L., and other companies.
For more info SHARE ANALYSIS: LKE

By Greg Peel

All Shook Up

Some days there’s just so much going on on the ASX, it’s hard to know where to begin. Yesterday certainly was not one of them.

The ASX200 bungled along with little conviction and only closed higher thanks to materials (+1.1%) holding up everything else. Utilities rose 0.1% but all else closed in the red.

Materials was driven by gains in iron ore and gold miners with a bit of help from lithium, but not from Lake Resources ((LKE)) – one of the most volatile stocks on the market at present – which fell -8.0%.

The other train wreck of the day was Star Entertainment ((SGR)), down -7.4% after announcing it would cut 500 jobs. Sometimes job cuts are seen as a positive trimming of dead weight to gain efficiency, as has been the case for US Big Tech this year, resulting in massive share price rallies. Not so for Star.

In a statement to the ASX, the casino operator said it would cut 500 jobs, freeze salaries and cancel executive bonuses to try to improve its financial outlook. Star is seeking to cut costs by -$100m amid "rapidly deteriorating" operating conditions.

Bummer. Discretionary fell -1.1% to be the worst performing sector, already fearful of another rate hike post the release this week of the April RBA minutes.

On that subject, the treasurer today will impose a “sweeping overhaul”, according to the press, of the RBA including creating two boards – one that sets interest rates and one overseeing governance.

Philip Lowe will respond in a press conference at midday.

That rate hike fear had the Aussie ten-year yield up 4 points yesterday to 3.51% and the two-year 9 points to 3.19%.

Not good for real estate (-0.6%) or technology (-0.4%).

The other loser of any note was energy (-0.3%) on lower oil prices and after that it didn’t much matter.

The banks were flat, as was the mood.

The futures are down -7 this morning.

Electrifying, Not

It was no more exciting on Wall Street overnight.

On Tuesday night investors were waiting around for the aftermarket result release from Netflix. Last night it was Tesla’s turn.

Tesla met forecasts for earnings but missed on gross margin, which was under the microscope following no less than six consecutive price cuts to Tesla’s EV fleet. The price of a base level Model Y has been cut by a total of -29%.

The price cuts have come as the rest of world catches up, particularly China but also legacy carmakers in Europe in the US, forcing Tesla to switch from exploiting first mover advantage to using its superior scale to drive earnings. At the expense of margins.

In other earnings reports on the day, Travelers failed to hold up the Dow with a 6.2% gain, while Morgan Stanley posted a beat on revenues and earnings but was rewarded with only 0.7%. United Airlines jumped 7.5% but the winner on the day was Bed, Bath & Beyond – the latest GameStop – which jumped 35% after social media got behind the company’s plans to file for bankruptcy.

Having fluctuated from down -10% to down -0.5% in Tuesday night’s aftermarket, Netflix closed down -3.2%. Having reported in last night’s aftermarket, IBM (Dow) is down -1.1%.

Otherwise the focus was on the release of the latest Fed Beige Book.

The Beige Book showed US economic activity was “little changed” in late March and early April. Of the twelve Fed districts, nine districts reported either no change or just slight change in activity, while three indicated modest growth.

No blaring recession signals there.

Amidst assumptions of strict credit tightening post SVB, the Fed said both lending by banks and demand for loans among consumers and businesses “generally declined” in the period. The drop-off was especially sharp in the San Francisco region where SVB was based.

No great panic there.

The US ten- and two-year yields nevertheless rose 4 points each last night on the back of big jumps in UK bond yields.

The UK two-year rose 15 points to 3.83% following yet another headline CPI above 10%. The 10.1% print was down from 10.4% in February, but economists had forecast a single-digit result.

The numbers are not going to provide any impetus for the Fed to pause next month.

The US earnings season is so far proving a net fizzer, which is positive given overwhelming opinions earnings forecasts remain too high.

But as Karen said, we’ve only just begun.

Commodities

News from the Shanghai Exchange is that “surging risk aversion” has hammered the commodity market. With the drop in natural gas prices, some overseas zinc smelters have gradually resumed their production, but overseas premiums fell rapidly, indicating consumption weakened significantly.

The oils continue to fall as the US dollar rises on rate hike expectations.

The Aussie is down -0.2% at US$0.6717.

Today

The SPI Overnight closed down -7 points.

The NAB business conditions survey for the March quarter is out today.

The treasurer will announce RBA reforms this morning and the RBA governor will respond at midday.

New Zealand reports March quarter CPI numbers.

The US will see existing home sales and the Philly Fed index.

Having pre-released the main numbers, Bank of Queensland ((BOQ)) will issue its full earnings report today.

In a big day for quarterly reports, all of Allkem ((AKE)), Brambles ((BXB)), Challenger ((CGF)), Evolution Mining ((EVN)), Rio Tinto ((RIO)), Santos ((STO)) and Zip Co ((ZIP)) will pipe up today.

Iress ((IRE)) hosts an investor day, while G8 Education ((GEM)) holds its AGM.

OZ Minerals ((OZL)) goes ex a very big dividend. The stock has disappeared from the ASX200. In its place came Bellevue Gold ((BGL)).

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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