The Overnight Report: More Fallout

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            [1] => ((SUL))
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            [3] => ((PME))
            [4] => ((AMC))
            [5] => ((MND))
            [6] => ((MIN))
            [7] => ((WTC))
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            [5] => MND
            [6] => MIN
            [7] => WTC
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This story features BHP GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: BHP
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Ex-Acerbated

Dividends are of course a zero-sum affair. Stocks going ex fall in value representing the conversion into cash for shareholders, and then not long after those dividends are paid to shareholders and that cash is reallocated into the market. But the timing gap between the two rather distorts market moves.

No less than 21 stocks under FNArena’s daily broker coverage went ex from the bell yesterday, most prominently BHP Group ((BHP)). Throw in weakness on Wall Street, as the Tech Cold War between the US and our largest trading partner hots up, and it was always going to be a tough session.

Which meant 7200 offered no support, but then what was earlier a pivotal level has been brushed aside in more recent up and down bursts for the ASX200. The current range appears to be 7100-7300, the recent low and high, but we did see 7000 in July.

The index did flatten out towards the close yesterday and our futures are up 7 points this morning. Nothing flash, but Wall Street was down again.

The worst performing stock in the index yesterday was Super Retail ((SUL)). Guess what? It went ex. BHP came in fourth. Stocks did nonetheless fall further than their franked dividends suggested on weak sentiment. Iron ore prices were down, for one.

Hence, materials fell -3.2% to be the standout worst performer. Energy, which had played the defensive this week on rising oil prices, succumbed to lower coal prices and fell -1.5%.

Healthcare was next worst (-0.9%), but then Ramsay Health Care ((RHC)) and Pro Medicus ((PME)) went ex.

Otherwise falls ranged from -0.1% for real estate (bond yields up a bit) to -0.5% for industrials, noting Amcor ((AMC)) went ex, as did Monadelphous ((MND)).

To sum up, it would have been a weak session anyway, but not as much as -86 points if not for dividends.

The good news is today’s list of ex-divs is relatively small, with Mineral Resources ((MIN)) the biggie and WiseTech Global ((WTC)) in there as well.

The bad news is there’s quite a packed ex-div calendar next week.

In yesterday’s economic news, Australia’s trade surplus declined to $8.0bn in July, to the lowest level in 17 months. From the start of 2021, the surplus has dipped below $8bn on only three occasions. The July outcome represented a -$2.2bn narrowing in the surplus from the June result, which was revised lower by -$1bn to $10.3bn.

Exports fell -2.0% on lower commodity prices and imports rose 2.5% on higher volumes.

Flip that over, and Chinese imports declined -7.3% in August. So prepare for more surplus weakness. Exports fell -8.8%. The only silver lining is both results were not as bad as forecast.

The Bigger Picture

There are three factors weighing on Wall Street at present – rising oil prices, rising bond yields and a rising US dollar. While rising yields inform a rising dollar, oil prices are pushing higher against the weight of a stronger dollar. It’s not about demand, but lack of supply.

Oil prices and yields saw modest relief last night, but the dollar is up again. Nevertheless, it was another session in which Apple was the centre of attention.

Apple fell -2.9% last night, on top of Wednesday night’s -3.6%. Hard to believe, but that’s the worst two-day run for the stock in almost three years.

The fallout continues from Tuesday’s directive from Beijing banning Chinese government officials from using their iPhones at work. Seems relatively innocuous, but to quote Tiriel Mora, it’s the vibe. Apple draws 20% of its revenues from China, and it and the US are now locked in an escalating Tech Cold War.

Last night selling spread to those companies which supply Apple with iPhone components, such as chipmaker Broadcom and others. Sentiment spread through the wider tech sector as well. Who’s next?

Nvidia also fell. Chinese tech giants have millions of orders for Nvidia chips in the works. Are those orders now at risk? And Chinese tech stocks also fell, on Cold War implications.

The Nasdaq was down for a fourth straight session.

Beneath the surface lies the promise of an AI revolution, and the hype that surrounds it. One early winner in the AI surge sparked by the introduction of Microsoft’s ChatGPT was a company called C3.ai. It was agreed at the time it was the company name more than anything else that drew retail investors interest.

C3.ai reported earnings last night in line with analyst forecasts. The stock fell -12.2%. In line is not good enough when Nvidia is the benchmark.

Commodities

If China’s trade numbers were not as bad as feared, no one told commodity traders.

The Cold War would not be helping sentiment either.

The Aussie is down -0.1% at 0.6378 with the US dollar up 0.2%.

Today

The SPI Overnight closed up 7 points.

There is nothing of note on the calendar today other than ex-divs.

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.)

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