The Overnight Report: Over To You Jerome

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

By Greg Peel

Done for Now

The minutes of the September RBA meeting released yesterday revealed the board again debated whether to hold or hike, and again decided the argument for holding was the stronger one.

Since late last year the board has considered its decision in the context of two issues, noted Westpac’s economists. Firstly, to raise the cash rate due to concerns about taking more time than planned to return inflation to the target, or secondly, to hold steady because policy had already been tightened substantially, there were signs that the economy was slowing, conditions in the labour market were easing, and inflation was coming down. 

Whereas the former argument prevailed in May and June, the latter argument has now prevailed for the last three months and looks like being sustained for the remainder of the cycle.

Westpac is not alone in believing the RBA is now on hold for the foreseeable future. There is, of course, the ongoing caveat of “some further tightening in policy may be required should inflation prove more persistent than expected”.

The minutes could not, nevertheless, save the ASX200 yesterday. The release did bring in some buying, but that was overcome, and an attempt was also made to hold the 7200 level, but that also failed. The index closed just below and the futures are down -16 points this morning on mild weakness on Wall Street.

With commodity prices drifting back again, looking for more stimulus/positive data from China, tonight’s Fed meeting will be the decisive factor in where we go from here. Bearing in mind we’re back to January levels again.

All sectors were weaker yesterday barring energy (+0.2%), discretionary (flat) and utilities (flat).

Bond yields slipped a few points.

Leading the market down were materials (-0.8%) and the banks (-0.4%) along with staples (-0.7%) and healthcare (-0.6%).

Miners dominated both sides of the winners and losers table while they must be feeling a wee bit nano over at Weebit Nano ((WBT)), which fell -8.9% after falling -9% on Monday on its ASX200 debut.

Exiting the index was Imugene ((IMU)). It fell -10.2% yesterday.

One ominous movement yesterday was that of Johns Lyng Group ((JLG)). With bushfires already upon us, and the BOM officially declaring El Nino, the disaster recovery builder rose 3.3% to make it in to the top five winners’ board.

Meanwhile, the September blues drag on. If history is any guide, we’ll have to wait until the second half of October before sentiment improves.

Tomorrow morning (our time) we’ll be joining the dots, and before then it appears we’re in for another lacklustre session.

One More Sleep

I suggested yesterday that following a flat session on Wall Street on Monday, last night would likely be much the same ahead of the Fed decision tonight. I wasn’t too wrong, but on another tick up in US bond yields of 4 points, Wall Street was a little weak.

The US gasoline price has now hit US$3.85/gal which is the highest it’s ever been (nominally) if we exclude last year’s spike on the Russian invasion.

Bond yields and oil prices are the biggest concern for Wall Street at present – the latter specifically feeding into inflation fears and thus informing yields, along with the failure of the US economy to recede and bring about rate cuts.

There’s also the autoworkers strike, of course, and now looming is the potential for a government shutdown at the end of the month if Congress can’t agree on the budget. The far right fruitcakes are at it again, attempting to hold the Republican party, and particularly the Speaker, to ransom, insisting on measures such as ceasing funding to Ukraine and defunding the Department of Justice (because it’s going after Trump).

No doubt a resolution will be reached at five minutes to midnight, as it always is, but it only takes five fruitcakes to shut the government down.

I highlighted yesterday US homebuilder sentiment had fallen into the negative. Last night’s data showed US housing starts falling -11.3% in August to their lowest level since June 2020 (lockdowns).

With 7%-plus mortgage rates being blamed, homebuilders, too, will be closely watching for hints in tonight’s dot plots of when the first rate cut might come.

In other news, because there’s not much more to say, another IPO hit the boards last night in the wake of the 2022 IPO hiatus. Grocery delivery company Instacart jumped over 40% on its open and closed up 14%.

Unlike your average tech start-up (and Instacart revolves around tech), the company has been in business for years and is profitable, but having built a solid business, analysts suggest it lacks growth.

Commodities

A little bit of positive sentiment stemming from China last Friday is waning.

The Aussie is up 0.3% at US$0.6454. It spiked on the RBA minutes, for some reason, before drifting back last night.

Today

The SPI Overnight closed down -16 points or -0.2%.

Fed decision and dot plots tonight.

KMD Brands ((KMD)) and Sigma Healthcare ((SIG)) report earnings today.

Flight Centre ((FLT)) goes ex.

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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