The Overnight Report: Once More With Feeling

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This story features CODAN LIMITED, and other companies.
For more info SHARE ANALYSIS: CDA
The company is included in ASX200, ASX300, ALL-ORDS and ALL-TECH

By Greg Peel

Trying to Hold

The ASX200 shot straight down to under 7200 yesterday morning, bottoming out at 7185, down -120. It then managed to regain 7200 for most of the afternoon before slipping at the death to close at 7195.

We wouldn’t yet call that a convincing break, however the futures are down another -23 points this morning. Mind you, that’s only -0.3% to the S&P500’s -0.8% fall overnight.

Today is the first “Super Thursday” of the results season – the longest list of reporting companies to date, albeit still below the sorts of numbers we’ll see next week. Who might save the bacon?

It was not a good day to be reporting yesterday, though share prices responses need to be taken with a grain of salt amidst weak sentiment. In that context, Codan ((CDA)) rose 7.2% and Bapcor ((BAP)) 5.5%.

Property did well, with Mirvac Group ((MGR)) up 5.3% and Vicinity Centres ((VCX)) 2.7%.

On the other side of the ledger, Fletcher Building ((FBU)) lost -9.3%, Temple & Webster ((TPW)), -7.0%, Seek ((SEK)) -4.6% and Endeavour Group ((EDV)) -4.2%.

 Aussie bond yields had been tracking up US yields but yesterday fell -5 points. Recession fears off the back of China? Real estate was the “best” performing sector, down only -0.1%, with results helping.

All sectors closed in the red, with healthcare (-0.5%) and staples (-0.6%) playing defensive. After that it gets ugly.

Technology was worst hit (-2.9%), following down the Nasdaq. Materials woke up to the weak Chinese data the day before and fell -2.6%.

The banks were next worst on -1.7%, but that was net of Commonwealth Bank ((CBA)) going ex. All the majors dipped but CBA dropped -3.6%.

All other sectors lost -0.8-1%.

The index is now where it was back at the start of April. If 7200 fails to hold, and it will likely require solid earnings reports to do so, then the next stop is the July low at 7000.

We have jobs numbers out today. They could move the market.

The RBNZ kept its cash rate steady a 5.50% yesterday.

Within Minutes

The minutes of the July Fed meeting, at which the cash rate was raised 25 points to 5.25-5.50%, were released last night. They showed a majority of FOMC members agreed “further tightening of monetary policy” may be necessary to bring down inflation.

What was worse, this view is based on a perception of “significant upside risks” to inflation.

Then again, “some” officials seemed more worried about an economic downturn even as the economy looked resilient. Wall Street continues to expect the Fed to remain on hold in September, but are now less sure about July’s having been the last hike. More will be revealed, one assumes, at Jackson Hole next week.

The US ten-year yield rose 4 points to 4.26%, noting that it peaked at 4.25% at last October’s low for Wall Street.

Not helping was the release of July industrial production, which rose 1.0% when 0.5% was expected. This follows on the from the blow-away retail sales number earlier in the week, and was another case of good news is bad.

One caveat, nonetheless, is that industrial production includes output from energy utilities, and America’s heat wave of the past few weeks helped drive up that segment.

Wall Street did attempt to open higher last night, but from there slid steadily to the close.

Consensus suggests this pullback has further to run, but that it will not ultimately be major – maybe -5%. So far the S&P500 is down -4.2% from the July peak.

Commodities

China is still the pervading theme. Zinc plunged on a significant lift in LME inventories.

Despite lower than expected weekly US crude inventories, China dominates the oils as well.

The Aussie is down another -0.6% at US$0.6418. We used to jokingly call it the Aussie peso back in Keating’s day. Now it's looking more like the Aussie rouble (which is trading at less than one US cent).

Today

The SPI Overnight closed down -23 points or -0.3%.

July jobs numbers today.

A long list of reporters today includes Amcor ((AMC)), Evolution Mining ((EVN)), Goodman Group ((GMG)), Origin Energy ((ORG))), Super Retail ((SUL)) and Telstra ((TLS)).

ANZ Bank ((ANZ)) provides a quarterly update.

QBE Insurance ((QBE)) goes ex.

For all company reporting dates, please refer to the FNArena Calendar (https://www.fnarena.com/index.php/financial-news/calendar/) or the Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/). The latter summarises result responses from brokers following each day’s result releases.

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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