The Monday Report – 04 September 2023

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            [1] => ((CRN))
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            [3] => ((FMG))
            [4] => ((CSL))
            [5] => ((QAN))
            [6] => ((BEN))
            [7] => ((NHF))
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            [6] => BEN
            [7] => NHF
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This story features WHITEHAVEN COAL LIMITED, and other companies.
For more info SHARE ANALYSIS: WHC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Let Us Begin

The S&P500 was down -0.2% on Friday morning but our futures were down -38 points or -0.5%. The ASX200 opened down -37 and clawed its way back to close down -27 points.

On Saturday morning the S&P500 closed up 0.2% and our futures closed up 31 points or 0.4%. Seems we were more worried about the US jobs report than Wall Street was.

That report turned out to be a non-event, if not a bit of a head-scratcher, and Wall Street is closed tonight. So locally we can now begin September in earnest. With results season over, the focus swings more so back to the macro, with tomorrow’s RBA meeting and Wednesday’s GDP result.

Friday saw weakness across the sectors with only communication services and discretionary slightly higher and energy up 1.6%. All others down.

Energy was driven by coal prices and led by Whitehaven Coal ((WHC)), up 3.9%, Coronado Resources ((CRN)) 3.7% and New Hope Corp ((NHC)) 3.0%. Santos also rose 1.8% after selling -2.6% of its PNG LNG stake to the locals.

Commodities were buoyed by more incremental stimulus out of China. Five of China’s biggest banks cut interest rates on a range of deposits in a coordinated effort to ease pressure on margins and stimulate spending. The iron ore price rose 2% but materials managed only a 0.4% gain.

Would the last executive to leave Fortescue Metals ((FMG)) please turn out the lights. Friday saw the CFO depart, three days after the CEO jumped ship, to be the eleventh senior executive to leave in three years. Fortescue shares fell -5.3%.

Healthcare was the biggest loser (-1.4%) with CSL ((CSL)) down -1.6%.

Bond yields fell only a tad but utilities (-0.9%) and real estate (-0.9%) were sold, as were staples (-0.6%).

Industrials fell only -0.1% but Qantas Airways ((QAN)) dropped another -1.5% as more knives come out for Australia’s least popular Irishman.

With Wall Street closed tonight we might normally expect a quiet session today, but the futures suggest we need to right the ship and perhaps push the index back above 7300.

Now What?

The US added 187,000 jobs in August and the unemployment rate rose to 3.8% from 3.5%. Forecasts were for 170,000 and an unchanged 3.5%.

While it was a “beat”, it’s the third month in a row the US has added less than 200,000 jobs and moreover, the July result was revised down to 157,000 from an initial 187,000 and June to 105,000 from 185,000.

Economists put down the spike in the unemployment rate to the impact of the Hollywood strike (you’re counted as unemployed if you’re on strike) and the collapse of the trucking company Yellow Inc. The information sector (Hollywood) lost -15,000 jobs and transportation lost -34,000.

Wages rose by 0.2% to tick down to a 4.3% annual rate.

The numbers suggest jobs, unemployment and wages are all heading in the right direction to provide the Fed with cause to pause this month. The US two-year yield was barely moved. But by the same token, they also suggest the US economy is indeed slowing. Or do they?

The ten-year yield rose 8 points to 4.17% which suggests a stronger than feared economy, or more specifically a soft landing.

The Fed wants to see job additions slow to 75,000-100,000 a month, and wage growth to slow to 3% or less, to be comfortable. Throw in a goal of core inflation at 2% (or at least under 3%) and there appears to still be “more work to do,” which means November’s is still a risk of being a “live” meeting.

Unless the Fed believes the catch-up effect is in play and rates should just be left alone for now. More and more commentators on Wall Street believe the Fed is now done.

The uncertainty of all of the above is why Wall Street didn’t really know how to respond on Friday night, and hey, a long weekend beckoned.

It’s back to work from tomorrow night so volumes will be restored from their summer holiday lows.

Commodities

A little bit of Chinese stimulus can go a long way.

The US dollar jumped 0.6% on the jobs report, so the Aussie is down -0.7% at US$0.6443.

The SPI Overnight closed up 31 points or 0.4%.

The Week Ahead

The local earnings result season is over. However, there are always a couple of late stragglers to report, and overburdened analysts will continue to update on results into this week. Hence, FNArena’s Corporate Results Monitor remains live:

https://www.fnarena.com/index.php/reporting_season/

We now move from the weight of daily results to an avalanche of daily ex-dividends. If September proves to be a weak month as seasonality suggests, this will not help.

Australia’s June quarter GDP result is due on Wednesday. Ahead of it we’ll see component numbers for company profits and inventories today and the current account tomorrow.

The RBA meets tomorrow. A pause is expected but not guaranteed.

We’ll also see job ads and the trade balance (July) this week, along with China’s trade balance (August).

The US is closed tonight. Numbers for factory orders and trade are due this week.

Tomorrow brings August services PMIs from across the globe.

A load of ex-divs today includes Bendigo & Adelaide Bank ((BEN)), Fortescue Metals and nib Holdings ((NHF)).

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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