The Overnight Report: Bouncing Off The Ceiling

Array
(
    [0] => Array
        (
            [0] => ((NAB))
            [1] => ((BRN))
            [2] => ((WEB))
            [3] => ((APE))
            [4] => ((TLX))
        )

    [1] => Array
        (
            [0] => NAB
            [1] => BRN
            [2] => WEB
            [3] => APE
            [4] => TLX
        )

)

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

Bumbling About

The ASX200 traded in a 30 point range yesterday, up and down with no conviction, before closing flat. Sector moves were half up, half down.

We can but wait until the US eventually gets its act together on the debt ceiling – and nothing has changed there beyond ongoing talks inevitably always described as “productive”. The RBA meets in a couple of weeks, and the Fed the week after that.

Meanwhile, the index has gone a whole lotta nowhere since early April.

What’s going on in the banks? Up, down, and yesterday up by 0.8%. Maybe National Bank’s ((NAB)) announcement yesterday it has increased variable rates by 0.1% for new home loan customers had something to do with it. This decision follows NAB’s removal of its mortgage cashback offer and is part of an effort to prioritise profits over volume growth.

Thanks guys.

Materials has at least been consistent lately (-0.7%) as China’s reopening fails miserably but in general, the market did not pay much attention yesterday to reports of a new wave of covid in China – the latest omicron variant – that could see cases peak at 65 million by June.

China is rushing to roll out new vaccines to match the new strain, but given Sinovax had little effect against the original strains, one cannot hold great hope.

What does Xi do now? Lockdowns didn’t work, the reopening hasn’t worked, he refuses offers of mRNA vaccines from the US, what’s left?

Meanwhile, Aussie bond yields tick ever higher, with the ten-year up 6 points to 3.65% yesterday and the twos up 7 to 3.54%. Investors are losing faith in the Aussie consumer. Yesterday discretionary fell -1.0% to be the worst sector performer and staples were not far behind on -0.8%.

Real estate seems to go up and down each day for no new reason and, despite higher bond yields, rose 0.6% yesterday. Moves elsewhere were more modest, up or down.

Technology had a quiet one (+0.2%), despite BrainChip Holdings ((BRN)), which jumped 8.5% on Monday for no reason, falling -17.6% yesterday post AGM. Mind you, BrainChip, despite being in the ASX200, is a 42c stock and popular retail plaything these days thanks to its involvement in one simple thing – AI.

The new covid wave in China was not lost on Wall Street last night, although a pullback there is of no great surprise. Our futures are down -35 points this morning.

It least it’s moving.

No Surprise

When the S&P500 hit the top of its range at 4200 there was every chance it would fall back yet again without any significant catalyst to push it through.

One catalyst might be a debt ceiling resolution but analysts agree it would likely only be short term, as Wall Street has long remained adamant a last-minute agreement will be reached.

Meanwhile, the circus rolls on. For Wall Street it’s a case of would you clowns please bloody well just get on with it!

The fact the rally to 4200 has been thanks almost entirely to the Mega Techs, causing much consternation, ensured that at some point investors would look to take some profits in case the AI feeding frenzy suddenly lost some exuberance.

Throw in China’s new covid wave and there was plenty of reason to pull back last night. Nothing major – just a breather.

US bond yields didn’t do much but right now all attention is on the short end of the curve. The six-month T-bill yield last night hit 5.40% — its highest level since 2000. Short-end bills that will reach maturity by or in early June are trading close to 6%. It’s all a reflection of the risk (but not necessarily the expectation), that the US will default.

And so we wait, and wait. We’re now down to eight days to D-Day, although comforting news last night out of one US think tank was that D-Day will actually not be June 1, as Yellen has suggested, but June 2.

Oh thank God.

Commodities

The Saudi oil minister last night warned speculators shorting oil had better “watch out,” raising expectations of another OPEC production cut. The most recent production cuts come into effect this month, but that’s assuming OPEC members pay any attention to the quotas, which is highly unlikely.

That’s why oil prices rose last night amidst a general sell-off in commodities driven by China’s new wave.

The Aussie is subsequently down -0.6% at US$0.6614.

Today

The SPI Overnight closed down -35 points or -0.5%.

The minutes of the May Fed meeting are out tonight.

The UK will report April inflation data.

The RBNZ meets this morning.

Webjet ((WEB)) reports earnings today while Eagers Automotive ((APE)) and Telix Pharmaceuticals ((TLX)) hold their AGMs.

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.

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