The Overnight Report: Not Happy Jay

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            [0] => ((NAB))
            [1] => ((WBC))
            [2] => ((SUL))
            [3] => ((ANZ))
            [4] => ((MQG))
            [5] => ((CBA))
            [6] => ((REA))
            [7] => ((NWS))
            [8] => ((SQ2))
        )

    [1] => Array
        (
            [0] => NAB
            [1] => WBC
            [2] => SUL
            [3] => ANZ
            [4] => MQG
            [5] => CBA
            [6] => REA
            [7] => NWS
            [8] => SQ2
        )

)

This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies.
For more info SHARE ANALYSIS: NAB
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Nabbed

The local market posted a resilient effort yesterday in all but one sector. The banks fell -2.5% while all other sectors were either flat or up on the day.

Wednesday night’s Fed rate hike was not a surprise, but a failure to signal a pause was, triggering another sell-off in US regional banks. If there was any flow-on in concern to the local banking sector, it’s lost in the wash. National Bank ((NAB)) reported half-year earnings and fell -6.4%, leading to selling in The Rest, with Westpac ((WBC)) worst on -4.1%.

It was not about NAB’s 17% year on year increase in profit, nor a return on equity of 13.7% to mark the highest level since 2019, but about the net interest margin crashing to 1.77% quarter on quarter from 1.79%. Dear God.

March was supposed to be the last hurrah quarter for bank margins before credit tightening and deposit competition heated up.

The ASX200 dropped -56 points on the open, and then ten minutes later spun on a dime. NAB aside, it appears investors were not prepared to blindly follow Wall Street on this one, and Aussie bond yields gave back a lot of Tuesday’s post-RBA gains (this in doing so following the US).

The index spent the rest of the session fighting its way back to be relatively flat at 7193, suggesting solid support at 7200, which was smashed on the open, is still solid. Or at least a pivot point.

Materials provided the biggest counter in rising 1.2%, largely driven by gold miners though the big miners found some buyers as well.

Australia posted its second highest monthly trade surplus in March, surpassing June last year, with a $1.1bn increase to $15.3bn. Exports surprisingly rose 3.8%, mostly rural goods and metals, while imports rose 2.5% largely due to the lower Aussie.

Real estate was the biggest percentage mover (+2.0%), while energy, industrials, utilities and technology all rose 1.0-1.2%.

NAB was not the biggest train crash of the day. That was left to Super Retail ((SUL)) which fell -7.1% following a trading update. Yet consumer discretionary rose 0.6%. Communication services rose 0.5%.

Staples and healthcare had the day off.

Following on from NAB’s result we have ANZ Bank ((ANZ)) and Macquarie Group ((MQG)) today, with Westpac on Monday and an update from Commonwealth Bank ((CBA)) on Tuesday.

Meanwhile, on closer consideration of the Fed’s efforts on Wednesday night, Wall Street sold off again, and our futures are down -29 this morning.

7200 is in jeopardy.

At Odds

The Fed hiked by 25 points on Wednesday night, made no commitment to an impending pause, and ensured there would be no rate cut this year.

The market expected the Fed to hike but would have preferred it not to, has priced in a pause in June at an over 80% chance, and as of last night, is pricing a 60% chance the Fed will cut in July.

In July. There will follow three more cuts to year-end.

To hammer home the point, the US two-year bond yield fell another -17 points last night to 3.76%, following an -11 point fall post-Fed, in the wake of a 25 point hike.

Wall Street is forecasting a recession. Or least the bond market is. The stock market, insists many an observer, has not yet woken up. Despite two sessions of post-Fed falls.

The failure of the Fed to signal a pause reignited regional bank fears, or is that regional bank short-selling? PacWest Bancorp fell -50% and another regional, Western Alliance, fell -40%. Wall Street was shocked by the Fed’s dismissal of regional bank woes as a storm in a teacup.

PacWest has declared it is considering all options. Recent history suggests “considering all options” is a death knell.

Meanwhile, the ECB also hiked by 25 points last night and signalled “more to come”.

There have also been some pretty wild earnings report responses.

Multimedia giant Paramount reported and fell -28%. Retail software platform Shopify rose 24%. After the bell, Uber rival Lyft is down -15% and crypto exchange Coinbase is up 8%.

But the one that really matters is Apple. It’s up 2%. Doesn’t sound like much but for a US$2.5trn company – America’s biggest – it is. And Apple is in all three indices.

The US March jobs report is out tonight, although pundits agree the numbers don’t quite matter as much now as they did last year, given the Fed’s determination. It is unlikely there’ll be a big jump in unemployment as the Fed would like to see. The private sector report showed the biggest gain in jobs in nine months.

Commodities

In a first response to the Fed, base metals saw a US recession.

Gold is the safe haven.

The oils had already made their moves.

The Aussie is up 0.3% at US$0.6695 with the US dollar up slightly, likely in response to the trade surplus.

Today

The SPI Overnight closed down -29 points or -0.4%.

The RBA releases a Statement on Monetary Policy today.

Japan is closed again.

The US sees March non-farm payrolls.

As noted, we have ANZ and Macquarie reporting today, and we’ll also see releases from REA Group ((REA)) and News Corp ((NWS)).

Block ((SQ2)) reported last night and rose 1.9% in the US.

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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