The Overnight Report: News Shortly

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World Overnight
SPI Overnight	7288.00	+ 5.00	0.07%
S&P ASX 200	7263.30	– 16.20	– 0.22%
S&P500	4192.63	+ 0.65	0.02%
Nasdaq Comp	12720.78	+ 62.88	0.50%
DJIA	33286.58	– 140.05	– 0.42%
S&P500 VIX	17.21	+ 0.40	2.38%
US 10-year yield	3.72	+ 0.03	0.73%
USD Index	103.23	+ 0.03	0.03%
FTSE100	7770.99	+ 14.12	0.18%
DAX30	16223.99	– 51.39	– 0.32%

By Greg Peel

Waiting

As I write, Biden and McCarthy are meeting to discuss the debt ceiling and there will no doubt be news some time this morning. The meeting is a catch-up in proceedings after the Republicans halted talks between both sides’ minions while Biden was in Japan.

On Friday night news of said halt had Wall Street a little nervous and that carried through to the ASX yesterday, with the ASX200 falling -30 points to midday. A familiar pattern then arose – that of selling in the morning being tempered by buying in the afternoon.

On Friday, before the halt was called, things looked a lot more optimistic on the ceiling front, which had our banks up 1.5%. Yesterday they fell -0.6% to provide a major drag on the index.

Materials continued to slip back (-0.4%) with lithium the day’s main victim, which left the saviours of the day to be healthcare (+0.5%), as the port in the storm, and energy (+1.0%) on data showing a jump in Chinese LNG imports in April.

The Nasdaq continues to push higher thanks to the Mega Techs so technology was up 1.5%, led by WiseTech Global ((WTC)), up 2.5%, and Brainchip Holdings ((BRN)), up 8.5% ahead of its AGM today. The latter stock flies around every day.

Industrials sat it out, all other sectors fell by roughly -0.5%.

Train wreck of the day was Tyro Payments ((TYR)), which fell -16.9% when after eight months of due diligence, suitor Potentia said yeah, nah. Only last week the company upgraded FY23 guidance for the third time, prompting Macquarie to upgrade to Outperform.

There’s not much more to say on the subject with any news out of Washington likely to be the determinant of where we close today. With Wall Street stalled our futures are up 5 points.

…And Waiting

The S&P500 popped its head above 4200 last night but got scared and ran away, before closing flat.

The S&P was split yet again between increases for the Mega Techs, which having provided the Nasdaq with four consecutive weeks of gains pushed on again last night, and just about everything else, as indicated by Dow weakness.

Investors are increasingly worried about the lack of breadth on Wall Street – take out the Mega Techs and the emperor has no clothes – yet still the buyers line up.

Those not concerned about lack of breadth cite the game-changer that is AI as justification and hence not something to be worried about on an historical basis.

Tell that to the ghosts of the dotcom crash. The game-changing nature of AI has been compared to the arrival of the PC in the nineties, which indeed changed everyone’s lives. That arrival provided for access to the internet which then spurred the great dotcom boom, and what happened thereafter is a historical warning now of what might happen again.

Be careful of the AI pretenders.

Meanwhile, Wall Street awaits debt ceiling developments. Everyone pretends not to be worried – and the S&P500 would not be banging on 4200 if they were — but time is running out so there’s no reason to take on unnecessary risk right now.

If Biden and McCarthy can reach an agreement on paper then legislation needs to be drafted before it can go to the House, and then to the Senate, before it is signed off on. They have nine more days if Yellen’s deadline is accurate.

In other news, China has banned the import of some products from major US memory chipmaker Micron on the basis of national security. Micron derives 11% of its revenues from China, and will lose an estimated -2% due to the ban.

Given the US has banned exports of AI chips to China, it smacks of a bit of tit for tat, noting that Tik Tok is also currently appealing its full ban in the state of Montana on constitutional grounds.

Also, Beijing was not happy with the G7 and its discussions about how to deal simultaneously with the aggressor and trade partner. Beijing specifically signalled out host Japan for criticism – the country comfortably closest to Chinese missiles.

The G7 meeting was held in Hiroshima.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1971.80	– 5.80	– 0.29%
Silver (oz)	23.63	– 0.20	– 0.84%
Copper (lb)	3.69	– 0.04	– 1.17%
Aluminium (lb)	1.03	+ 0.00	0.13%
Nickel (lb)	9.68	+ 0.19	1.98%
Zinc (lb)	1.11	– 0.02	– 2.06%
West Texas Crude	71.99	+ 0.44	0.61%
Brent Crude	75.96	+ 0.38	0.50%
Iron Ore (t)	107.16	+ 0.06	0.06%

Signs of weak Chinese demand, and debt ceiling concerns, have metal prices falling.

The oils are nevertheless a little stronger and the Aussie is steady at US$0.6656.

Today

The SPI Overnight closed up 5 points.

Flash estimates of May PMIs are due across the globe today while the US will see new home sales data.

TechnologyOne ((TNE)) reports earnings today.

Brainchip and Viva Energy ((VEA)) hold their AGMs.

Amcor ((AMC)) and Elders ((ELD)) go ex-dividend – in Amcor’s case it’s a quarterly.

The Australian share market over the past thirty days…

Index	22 May 2023	Week To Date	Month To Date (May)	Quarter To Date (Apr-Jun)	Year To Date (2023)
S&P ASX 200 (ex-div)	7263.30	-0.22%	-0.63%	1.19%	3.19%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
APX	Appen	Upgrade to Hold from Sell	Bell Potter
ASB	Austal	Upgrade to Buy from Neutral	Citi
BPT	Beach Energy	Upgrade to Buy from Neutral	Citi
FCL	Fineos Corp	Downgrade to Accumulate from Buy	Ord Minnett
IPL	Incitec Pivot	Upgrade to Accumulate from Hold	Ord Minnett
		Downgrade to Hold from Add	Morgans
MTS	Metcash	Downgrade to Neutral from Outperform	Macquarie
SKO	Serko	Upgrade to Outperform from Neutral	Macquarie
UMG	United Malt	Downgrade to Neutral from Buy	UBS
XRO	Xero	Downgrade to Hold from Add	Morgans

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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