The Overnight Report: Can’t Win

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(
    [0] => Array
        (
            [0] => ((WDS))
            [1] => ((RIO))
            [2] => ((LKE))
            [3] => ((BLD))
            [4] => ((AMP))
            [5] => ((QBE))
            [6] => ((DOW))
            [7] => ((NCM))
            [8] => ((NWS))
            [9] => ((REA))
            [10] => ((BBN))
            [11] => ((JHG))
        )

    [1] => Array
        (
            [0] => WDS
            [1] => RIO
            [2] => LKE
            [3] => BLD
            [4] => AMP
            [5] => QBE
            [6] => DOW
            [7] => NCM
            [8] => NWS
            [9] => REA
            [10] => BBN
            [11] => JHG
        )

)

This story features WOODSIDE ENERGY GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: WDS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

It’s a Gas

The ASX200 opened down early in the session yesterday before a mixed batch of earnings reports and news from the gas industry had the index tracking higher for the rest of the session.

Yesterday workers on offshore gas platforms owned by Woodside Energy ((WDS)) and Chevron, which together represent 10% of global LNG supply, voted to go on strike over pay and conditions. It would be the first such strike in 30 years.

The union is obliged to provide seven days’ warning, so an agreement may yet be reached, but European gas prices jumped 40% in response.

Buyers thus poured into listed gas names, with Woodside up 1.9%, Santos up 2.6% and the energy sector up 2.3%. The next best performing sector was consumer discretionary, with 0.6%. Woodside investors will need to trade off higher gas prices against the potential loss of production.

Outside energy it was a fairly lacklustre session ahead of last night’s US CPI release. Healthcare is having its ups and downs and yesterday was up 0.5%, while the banks sat it out after Wednesday’s gains and materials managed a 0.3% increase against the drag of Rio Tinto ((RIO)) going ex.

Lithium hopeful Lake Resources ((LKE)) jumped 27% on the mere announcement of an upcoming update on its flagship facility. The stock is down over -80% from its high, and is over 7% shorted.

Otherwise, earnings results were in focus.

In the winners’ circle were Boral ((BLD)), up 8.5% and AMP ((AMP)), up 4.6%.

Among the losers were AGL Energy ((AGL), down -3.1%, QBE Insurance ((QBE)), down -1.2%, and Downer EDI ((DOW)), down -6.4% to be the worst index performer.

The Aussie ten-year rose 5 points yesterday to be back over 4%, which helped technology to a -1.8% drop, but did not impact discretionary or real estate (+0.4%).

Today’s list of reporters includes Newcrest Mining ((NCM)), News Corp ((NWS)) and REA Group ((REA)). Also Baby Bunting ((BBN)), but that copped a hiding last week on a pre-release.

Wall Street posted an interesting response to what was seen as a “soft” set of CPI data last night, giving up an early rally to close flat.

Our futures are down -20 points this morning. Oil prices were down last night.

Sell the Fact

The annual US headline inflation rate rose last month for the first time in over a year. The S&P500 shot up 1.3% and the Dow gained 455 points.

The reason this seemingly “bad” result was seen as good was because the increase in headline CPI to 3.2% from 3.0% in June was below a 3.3% forecast, and the core CPI fell to 4.7% from 4.8% as expected.

The point is the numbers are enough to support a Fed pause in September.

Then the indices turned tail and the S&P closed flat. What happened?

Around lunchtime, a Treasury auction of thirty-year bonds was poorly received and the ten-year yield rose 7 points, which was enough to prompt selling in tech names once more. The San Francisco Fed president also weighed in, suggesting despite the inflation numbers there’s “more work to do”.

The bottom line is Wall Street is currently trading in a range. If the S&P falls, the buyers come in below. If it rises, profit are taken above. Fast bowlers would call it the “corridor of uncertainty”.

Technical analysts will call it a necessary consolidation period. And seasonally, the month of August is typically a consolidation period on light summer volumes.

The market is now pricing in only a 10% chance of a rate hike in September, and a 26% chance of an October hike.

In between is Jackson Hole, at which it is assumed Jerome Powell will give the opening address on August 24. Last year’s address sent Wall Street into a tailspin.

Commodities

Falls in oil prices, after a steady run up, are put down to concerns over Chinese demand following this week’s deflationary data.

The Aussie is down -0.2% at US$0.6520.

Today

The SPI Overnight closed down -20 points or -0.3%.

The US PPI is out tonight, along with consumer sentiment.

The UK releases June quarter GDP.

Japan is closed today.

Today’s reporting companies noted above.

Janus Henderson ((JHG)) goes ex-div.

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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