The Overnight Report: Caution Returns

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            [3] => ((HUB))
            [4] => ((A2M))
            [5] => ((ADH))
            [6] => ((TLS))
            [7] => ((DTL))
            [8] => ((PRN))
            [9] => ((ACL))
            [10] => ((KGN))
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            [12] => ((COL))
            [13] => ((WOW))
            [14] => ((BHP))
            [15] => ((ARB))
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            [19] => ((STO))
            [20] => ((MFG))
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            [9] => ACL
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            [19] => STO
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)

This story features MEGAPORT LIMITED, and other companies.
For more info SHARE ANALYSIS: MP1
The company is included in ASX200, ASX300, ALL-ORDS and ALL-TECH

By Greg Peel

Clean-Up Aisle 3

A choppy session on the ASX yesterday was dominated by earnings results, with the exception of the Nasdaq rebound overnight giving technology a boost.

Technology (+5.2%) was also boosted by a 25.9% jump for design software/cloud company Altium ((ALU)), and 16.9% for network company Megaport ((MP1)), on results. Otherwise, the Nasdaq lifted a lot of tech boats, and Audinate Group ((AD8)) kicked on 9.3% on top of Monday’s surge.

In financials, Hub24 ((HUB)) scored an 11.3% pop on its numbers, while elsewhere a couple of Monday losers on results rebounded on broker assessments, namely a2 Milk ((A2M)), up 5.9%, and Adairs ((ADH)), up 5.3%.

A couple of late broker assessments for Telstra ((TLS)) post result had that stock up 3.3%, and communication services up 1.9% to take the sector silver.

Then there were the losers, which outnumbered the winners by a margin, but then it all comes down to market weight. Hence the index closed flat.

Losers included Data#3 ((DTL)), down -18.8%, Perenti ((PRN)), -12.4%, Australian Clinical Labs ((ACL)), -12.1%, Kogan ((KGN)), -11.2%, Alumina Ltd ((AWC)), -8.0%, and then the biggie – Coles ((COL)), down a whopping -7.1%, which is unheard of for a grocer.

Coles posted a solid increase in sales but also a big jump in shoplifting. I presume that’s all the caviar being called carrots at the DIY checkout rather than people in large overcoats. Consumer staples fell -2.5%, with Woolworths ((WOW)), which reports today, falling a cautious -3.0%.

BHP Group ((BHP)) was the real big-hitter of the day, and it slightly disappointed on dividend and fell -0.7%. Materials closed flat.

Consumer discretionary fell -0.8%, with ARB Corp ((ARB)) down -4.1% on result.

Healthcare lost -0.9%, largely on falls for the big names, but Healius ((HLS)) fell -5.3%.

Real estate rose 0.8% thanks to a 3.8% gain for Scentre Group ((SCG)) on result.

The reporting season had begun well in terms of beats versus misses, but as we move into the thick of the season, particularly today and tomorrow, the misses are catching up.

Sentiment is fragile on the macro level, which makes for a bad time to post a miss.

Wall Street was a little weaker overnight but there were nevertheless some solid moves up in metals prices. Our futures our down -17 points this morning.

Today’s is the longest list of reporting companies to date, and then comes Super Thursday.

Thanks Scoop

Recently ratings agency Fitch downgraded the credit rating of US bonds and Moody’s downgraded several smaller banks, while putting some larger banks on warnings. Last night Standard & Poor’s also downgraded smaller banks.

Ratings agencies are notorious for downgrading after the fact; after the damage has been disclosed and the market has repriced accordingly. As one commentator aptly suggested, “like putting sun-screen on sunburn”.

Still, the market responds as if it it were new news. There were plenty of losses amongst smaller US banks last night, and a -2.7% fall for JP Morgan helped the Dow lower.

Nike also contributed in falling -1.4%, with investors likely shocked by an earnings result from a company called Dick’s Sporting Goods, which led to a -24% plunge.

To rub more salt into the discretionary wound, department store Macy’s fell -14% on its result. Saving the day to some extent was Lowe’s, which is up 3.8% on its aftermarket result. Perhaps positive signs for Bunnings ((WES)).

Otherwise, the excitement in play on Monday night, particularly for the Nasdaq, dimmed last night as the US two-year yield rose 5 points to 5.04%. Wall Street ignored a big move up in the ten-year on Monday night but round numbers are psychologically significant.

There is also some consternation brewing over Jerome Powell’s Jackson Hole speech on Friday night. The common assumption has been that he would say nothing much different to the recent rhetoric – data-dependent, maybe some more to do, yada yada – but attention has turned to the actual theme of this year’s central bank symposium: “Structural Shifts in the Global Economy”.

A suggestion from Powell “that investment and therefore potential economic growth may be moving higher, as a result of the climate transition or digital infrastructure required for artificial intelligence, could be perceived as hawkish, since it would suggest that the policy rate could stabilize at a higher level,” said one investment strategist last night.

Then there’s Nvidia, reporting in tonight’s aftermarket, if we’re talking AI.

August continues to play its familiar seasonal game – caution amidst thin volumes.

Commodities

Surprise data showing Chinese “apparent” demand of refined copper grew by around 9% in the first half of this year, even though the global market moved into surplus, turned metals prices around last night, as did the PBoC’s attempts to prop up a falling yuan. The lower the yuan, the more Chinese have to pay for USD-priced commodities.

The Aussie is up 0.2% at US$0.6427.

Today

The SPI Overnight closed down -17 points or -0.2%.

The world will see flash estimates of August PMIs today.

Biggest day yet in the local earnings season. Biggies include Woolies, as noted, as well as Santos ((STO)). But there’s loads.

Magellan Financial ((MFG)) 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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