The Overnight Report: Summer Time

Array
(
    [0] => Array
        (
            [0] => ((CGC))
            [1] => ((UMG))
        )

    [1] => Array
        (
            [0] => CGC
            [1] => UMG
        )

)

By Greg Peel

Backing the Pause

In the first hour of trade yesterday, it appeared the ASX200 would be content with doing little ahead of today’s RBA decision. But then it took off and rallied in a straight line to the close.

Which would we prefer? A solid economy, showing no signs of likely recession, but forcing further rate hikes, or signs of a weakening economy, keeping the RBA on hold?

Depends where you sit on the socio-economic scale. Yesterday’s data showed housing loans increased by 4.8% in May to the highest level since October last. Owner-occupier loans grew by 4.0% and investor loans by 6.2%, despite higher rates.

House prices were up 1.1% in June.

Home building approvals rose a full 20.6% in May, driven mostly by NSW, with houses up 0.9% and apartments up 59.4%. Looking more like Singapore every day.

These are not the signs of an economy in trouble.

Yet the market is apparently convinced the RBA will pause today. It would have been risky buying yesterday if not. The two-year bond yield fell -17 points yesterday.

The ten-year fell only -6 points, and we recall both were up 10 points on Friday on non-fundamental end-of-year selling. The yield curve is inverted, by all of -7 basis points on yesterday’s trade. In the US, it’s -107.

So all good news for the likes of consumer discretionary, which led with a 1.4% gain yesterday. The banks rose 0.4% and real estate 0.6%.

The resource sectors were also solid on better commodity prices. Energy gained 0.8% and materials 1.1%.

Staples were up 0.6%, which was mostly all about selling the farm.

Market gardener Costa Group ((CGC)) has agreed to be bought out by US private equity. It rose 8.8%.

Craft beer supplier United Malt ((UMG)) has given in to the French. It rose 8.6%.

With Wall Street going nowhere and the RBA due this afternoon, trading will likely be quiet today to that point. The futures are down -1 point.

There are several economists who will not be at all surprised if the RBA hikes today.

Thanks for Coming

Expectations were for little action in an abbreviated session for US markets last night, and Wall Street didn’t disappoint.

Wall Street is closed tonight.

There were few participants around to notice the US manufacturing PMI contracted further, to 46.0 from 46.9 in May, when economists had forecast a slowing in pace to 47.3. This flies in the face of opinions the US will not even see a recession.

There is no recession in EV land, nevertheless.

Tesla announced it had delivered 466,140 vehicles in the June quarter, when analysts had forecast 445,000. In the June quarter last year Tesla delivered 254,695 vehicles. Tesla, one of the Magnificent Seven, rose 6.9%.

Success did rather depend on price discounting nonetheless.

Small EV rival Rivian announced its delivery numbers, and jumped 17%. Yet another, Lucid, went along for the ride (+7.3%).

Not all twenty-first century trends appear to be sticking. A company called Tattooed Chef fell -46% last night after announcing it would file for bankruptcy. It makes plant-based food.

The bottom line is Tesla’s gain rather flattered the Nasdaq and S&P500 last night when otherwise, nothing happened.

Commodities

Not a lot happening here either.

The Aussie is steady at US$0.6672.

Today

The SPI Overnight closed down one point.

The RBA does its thing at 2.30pm.

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