The Monday Report – 11 September 2023

Array
(
    [0] => Array
        (
            [0] => ((MIN))
            [1] => ((SQ2))
            [2] => ((AD8))
            [3] => ((CSL))
            [4] => ((SYR))
        )

    [1] => Array
        (
            [0] => MIN
            [1] => SQ2
            [2] => AD8
            [3] => CSL
            [4] => SYR
        )

)

This story features MINERAL RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: MIN
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Late Comeback

Weak sentiment continued to pervade on Friday as the ASX200 fell through the morning, plateaued for a while before hitting a low of down -37, and then staged a fightback in the last hour.

It was the fourth straight day of losses and you can take your pick of negative drivers at present – a fear of more rate hikes globally, ever-rising oil prices, higher yields, a weak Chinese economy and the Tech Cold War hotting up between China and the US. The index closed down -1.7% for the week.

A weak China was behind falls in commodity prices and a -1.0% drop for materials on Friday to be the worst performing sector. The big iron ore miners slipped and Mineral Resources ((MIN)) went ex.

While bond yields may be front of mind, on Friday the Aussie ten-year fell -8 points and the two-year -5 points but this failed to excite discretionary (-0.8%), staples (-0.4%) or real estate (-0.3%).

Technology fell -0.4% with Block ((SQ2)) under pressure (-2.9%). Block fell -5.3% in the US on Friday night.

Audinate Group ((AD8)) fell -9.7% on a capital raising but it is not in the index.

The banks managed to gain 0.1%, perhaps on yields, while the ups and downs of healthcare continued with a 0.6% gain.

Energy rose 0.2% after talks between Chevron and LNG workers broker down, suggesting a strike and supply will be curtailed.

Utilities won the day with a 1.1% gain, with both big energy providers up 1%.

With Wall Street flat on Friday night, our futures are up 4 whole points this morning.

There are some important economics releases due this week both here and in the US. We’ll see the August jobs report and the US will see inflation and retail sales numbers.

It’s also another big week for ex-dividends, so to stage a rally on the day requires two steps forward after an initial step backwards.

Have a Rest

Not much action on Wall Street on Friday night.

The S&P500 managed a tick higher to end three days of losses but closed down -1.3% for the week while the Nasdaq lost -1.9%.

Weakness had a lot to do with falls of -6% for both Apple and Nvidia over the week, sparked by Beijing’s ban on government officials using iPhones, which followed an earlier US ban on high-end AI chips to China. Investors fear the Cold War will only escalate.

It doesn’t help that both Biden and Xi decided not to attend the ASEAN summit in Indonesia. Xi snubbed the G20 meeting in India as well. Things aren’t likely to get warmer any time soon.

There was a deal of Fedspeak over the week, which failed to clarify anything. The Dallas president suggested more rate increases may be needed, the New York president is content with the level of rates, but will watch the data, while the Chicago president suggested the Fed is “almost done”.

Having risen to 3.3% in July from 3.0% in June, the US headline CPI is expected to have ticked up again in August on higher energy prices, which doesn’t make for confidence the Fed is done. It’s the core rate that matters, so we’ll see on Wednesday night.

It is nonetheless the stubbornly tight labour market that is most likely to drive the Fed to another hike. Not next week, but in November or December. Unless the Fed truly believes 525 points of hikes to date need to make their mark on the lag.

That lag includes corporate debt refinancing which is a rolling affair across years. Many a company is still sitting on zero-era debt that will bounce significantly on rollover. A bit like Australia’s mortgage cliff. Commercial real estate is one area causing angst, with a lot of smaller US banks in CRE lending business.

And just how resilient can the consumer remain? Low unemployment is providing support but household savings are running down, as evidenced by increasing use of credit cards. Credit card delinquencies are on the rise.

Then of course there’s the self-fulfilling seasonally weak September overlay.

Commodities

Metals down, oil up is the current trend.

The Aussie is 0.1% higher at US$0.6387.

The SPI Overnight closed up 4 points on Saturday morning.

The Week Ahead

The US CPI is out on Wednesday night and the PPI on Thursday night along with retail sales. Industrial production and consumer sentiment are due on Friday.

As China’s woes continue, Friday brings August retail sales, industrial production and fixed asset investment numbers.

In Australia we’ll see the NAB business and Westpac consumer confidence reports tomorrow, and August jobs numbers on Thursday.

It’s another big week of ex-dividends, meaning ongoing handicaps for each day’s opening. CSL ((CSL)) will kick things off today.

Syrah Resources ((SYR)) reports earnings on Wednesday.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms