The Overnight Report: Slow Going

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            [0] => ((NAB))
            [1] => ((BOQ))
            [2] => ((APX))
            [3] => ((PDN))
            [4] => ((DYL))
            [5] => ((BOE))
            [6] => ((WBC))
            [7] => ((GNC))
            [8] => ((ORI))
            [9] => ((GMG))
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            [0] => NAB
            [1] => BOQ
            [2] => APX
            [3] => PDN
            [4] => DYL
            [5] => BOE
            [6] => WBC
            [7] => GNC
            [8] => ORI
            [9] => GMG
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)

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

Apologies, our data source is having issues this morning. The ASX200 closed down -8 points yesterday, the Dow closed down -30, the S&P500 rose 0.5% and the Nasdaq rose 1.0%.

Healthy

The only discernible sector response on the ASX yesterday to the budget was that of healthcare, up a chart-topping 1.0% in an otherwise choppy and tentative session ahead of last night’s US CPI release. Having fallen -28 points on the open, the ASX200 closed down only -8 thanks to what appears a big market-on-close buy order.

Healthcare was clearly the biggest winner from budget support.

There was little impact for shoppers, cost of living-wise, if a flat session for staples and +0.2% for discretionary are any indication.

Indeed most sectors closed on a mix of mildly positive or mildly negative. The exception were the banks, which fell -0.5% to provide the counter for healthcare. But that was because National Bank ((NAB)) and Bank of Queensland ((BOQ)) both went ex-dividend, falling -4.0% and -4.2% respectively.

Train crash of the day was AI company Appen ((APX)), which fell -28% following a trading update, albeit no longer in the index. Appen may be in danger of being mown down by the AI train currently thundering along in the US.

The big winner in the index was soon-to-be restarted uranium producer in Namibia, Paladin Energy ((PDN)), which seems every analyst’s favourite uranium play at present amidst surging global nuclear energy development. Paladin shares rose 8.4% on no new news, but have recently been on a roll.

Up even further (+12.5%) was Namibian neighbour Deep Yellow ((DYL)). And sucked along in the wake was Boss Energy ((BOE)), up 7.5%, which is enjoying a Honeymoon (in South Australia). The latter two are ASX300 members.

The ASX200 materials sector nonetheless closed down -0.3% yesterday.

The ASX200 is holding well above 7200, but is failing to find any traction at this point. The budget’s largesse, and a small surplus to boot, have economists suggesting the RBA is now more likely to hike again in June, but yesterday the Aussie ten-year yield closed unchanged.

Our futures are lower again this morning (-12) despite a 0.5% gain for the S&P500 following what was rather a damp squib of a CPI report. Westpac ((WBC)) does go ex today.

Attention now turns tonight to the US PPI.

Pulling Teeth

The US headline CPI rose 0.4% in April, having risen by a more encouraging 0.1% in March. The annual rate did dip to 4.9% from 5.0%, and 5.0% was forecast, but it’s slow going.

Similarly, the core CPI rose 0.4% and the annual rate slipped to 5.5% from 5.6%.

The pace of disinflation has clearly slowed, and the reduction is so far only about cycling last year’s soaring numbers, not actual disinflation. We are yet to see a month in which the CPI fell.

Wall Street was initially dumb-struck. Headline inflation is now below 5% for the first time in two years and that’s good news, perhaps enough to encourage the Fed to pause in June. But core inflation remains well above 2-3% and it looks like it could take an eternity to get there, which might encourage the Fed to hurry things along.

The response was the Dow took to lunchtime to gradually fall -320 points, and then rallied all the way back to down -30 by the close.

The S&P500 was in the green all day, while the Nasdaq surged, basically playing its own game. And that was all about Mega Techs.

Google held a conference and announced it is rolling out AI to its core search engine. And working on doing so for its other products. Google had been left in the wake of competitor Microsoft after that company turned the world on its head in launching ChatGPT on its Bing search engine, but last night rallied 4%.

Right now, anything AI is the new dotcom, and those who lived through the turn of the century and not planning to get caught out twice.

Amazon is also getting set to roll out a new AI-driven “home robot”. Don’t envisage the Jetsons, more a smarter type of Siri. Amazon rose 3.4%.

Back in the real world, the US bond market took the CPI numbers as not “cool” enough, returning to its recession expectation trend. The ten-year yield fell -8 points and the two-year -14.

US fixed income markets remain convinced the Fed will be forced to start cutting by perhaps as early as July. The Fed continues to shoot down this perception. Despite the market fighting the Fed, a poll taken on CNBC last night showed two-thirds of respondents do not believe the Fed will cut at all this year.

So take your pick.

In other news, Disney (Dow) has reported in this morning’s aftermarket and is down -4.5%.

Wall Street is coming to feel the PPI, which is due tonight, is actually more informative currently than the CPI, as the former tends to lead the latter. So we now move to anticipating that result.

Meanwhile, the meeting between Biden and Congressional leaders on Tuesday night was not even described by anyone as “constructive”. Everyone stood their ground. They will meet again on Friday night to, supposedly, actually negotiate the debt ceiling this time.

Good luck.

Commodities

Nothing much to see here, other than the oils appear to be following the bond market in recession fears.

The Aussie is up 0.2% at US$0.6779.

Today

The SPI Overnight closed down -12 points.

China will report April inflation numbers today.

The Bank of England meets tonight.

US PPI.

GrainCorp ((GNC)) and Orica ((ORI)) report earnings today, while Goodman Group ((GMG)) provides a quarterly update.

Westpac goes ex.

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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