The Overnight Report: Electrifying

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            [8] => ((TPG))
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This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Kraken Wakes

Beijing chose the weekend to release its August inflation numbers, which showed the headline CPI rising by 0.1% annual, thus ending a period of deflation, at least for now. The July number was -0.3%. Economists had nevertheless forecast 0.2% for August.

After staging a late comeback on Friday, yesterday the ASX200 opened lower, again, despite a flat Wall Street, falling -22 points to late morning. That was nonetheless inclusive of the day’s ex-divs, with CSL ((CSL)) the biggie.

Then more news from Beijing revealed China’s credit expanded more than expected in August after the central bank pushed lenders to boost loans and the government accelerated the sale of bonds. Aggregate financing, a broad measure of credit, came in higher than thought with financial institutions writing a larger amount of new loans in the month.

Maybe Beijing’s incremental stimulus is starting to work. The index then tracked a straight line upwards to the close, following three sessions of losses.

In other news from the north, the Bank of Japan governor said yesterday an end to the country's negative interest rates was possible. The Aussie ten-year yield jumped 8 points to 4.16%.

This did not deter the banks, which led the index gains in both percentage (1.3%) and index points. Staples was the next best on 0.9%.

The China news pushed up the iron ore price, and all metals prices last night, helping materials to a 0.6% gain, which was net of Sims ((SGM)) falling -10.6% on a profit warning. Energy also rose 0.6%.

Real estate (-0.4%), technology (-0.4%) and industrials (-0.1%) succumbed to higher yields while healthcare (-0.7%) reflected CSL.

Other sectors posted modest gains.

There was trouble in battery land with lithium miners Pilbara Minerals ((PLS)) and Global Lithium ((GL1)) both making investor presentations, and falling -2.2% and -6.5% respectively.

Syrah Resources ((SYR)), which reports earnings tomorrow, jumped 7.0% to top the index on news of a loan from the US government for its graphite operations in Mozambique as part of the Biden administration's efforts to foster trade and partnerships between the US and Africa.

Wall Street also had a solid session last night but it was largely about Big Tech, hence our futures are only up 7 points this morning to the S&P500’s 0.7% gain.

Still, 7200 is in sight.

The Mojo of Dojo

Morgan Stanley’s Tesla analyst, who presumably has just returned from some sort of samurai training camp, last night upgraded the stock to Overweight from Equal-weight and lifted his target to a Street-high US$400 from US$250. Tesla shares rose 10% to US$273.58 in response.

The upgrade was not about selling EVs per se, with the analyst basing most of his newfound optimism on Tesla’s new machine-learning supercomputer, Dojo.

Tesla’s move rather lit a fire under the Nasdaq. Gains were also supported by other Mega Tech names after Asian countries stepped in to prop up their currencies in the face of relentless US dollar strength. The dollar index subsequently fell -0.5%.

Nothing to do with bond yields – the US ten-year rose 4 points and remains above the 4.25% mark.

While only a handful of stocks drove the Nasdaq, and thus the S&P, the Dow still managed a gain, suggesting there is some dip-buying afoot following a weak August. Can it last?

Last night’s rally comes ahead of tomorrow night’s CPI data, followed by the PPI and retail sales on Thursday night. Economists are forecasting a 0.6% month on month gain for August headline inflation, up from 0.2% in July, largely on higher energy prices.

For the core rate, a 0.2% gain is expected.

The other issue hanging over Wall Street at present is a potential strike by the US United Auto Workers union which, according to one commentator, has the potential to “disrupt supply chains, be very disruptive to consumer spending, and put upward pressure on the automobile component of inflation”.

About 146,000 auto workers are set to go on strike this week if General Motors, Ford and Stellantis (Chrysler) fail to meet their demands for big pay raises and the restoration of concessions the workers made back in the GFC when the companies were in financial trouble. 

While Tesla may now be another AI stock to help drive the hype, not all is well in AI land. Oracle, seen as the fourth biggest cloud company and another AI developer, reported earnings after the bell last night and is currently down -8.7%.

Commodities

Clearly oil prices have run a bit too far, too fast, as all other commodities responded to the news from China.

With the US dollar down -0.5%, the Aussie is up 0.7% at US$0.6432.

Today

The SPI Overnight closed up 7 points.

The NAB business (August) and Westpac consumer (September) confidence surveys are out today.

Today’s larger ex-divs include those of BlueScope Steel ((BSL)), Lovisa Holdings ((LOV)), News Corp ((NWS)) and TPG Telecom ((TPG)).

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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