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The Overnight Report: No Relief

Daily Market Reports | Sep 22 2023

This story features TRANSURBAN GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TCL

World Overnight
SPI Overnight 7013.00 – 97.00 – 1.36%
S&P ASX 200 7065.20 – 98.10 – 1.37%
S&P500 4330.00 – 72.20 – 1.64%
Nasdaq Comp 13223.99 – 245.14 – 1.82%
DJIA 34070.42 – 370.46 – 1.08%
S&P500 VIX 17.54 + 2.40 15.85%
US 10-year yield 4.48 + 0.13 3.01%
USD Index 105.38 + 0.03 0.03%
FTSE100 7678.62 – 53.03 – 0.69%
DAX30 15571.86 – 209.73 – 1.33%

By Greg Peel

Selling Begets Selling

The ASX200 dipped from the open yesterday, before beginning a steady slide downward. It was not a plunge, rather more of a controlled fall through the morning, suggesting momentum trading as selling begat selling. The market settled to be flat in the afternoon.

The index waltzed through the 7100-7150 zone which provided the lows in August and earlier this month. Next stop is the July low of 7000. Given Wall Street has sold off again this looks set to provide no support today.

The futures are down -97 points this morning. This suggests our market did not sufficiently price in the Fed’s higher-for-longer stance yesterday and even if it did, right now we’re in a sell-first-and-ask-questions later mood.

Aussie bond yields jumped yet again, with the twos up 10 points to rise above 4% once more and the tens up 9 points. It rather makes a mockery of the RBA extended pause implied by the September minutes, suggesting the RBA’s hand may yet be forced by offshore influences, references to which are a staple in past statements.

Let’s just say that having ignored higher yields on Wednesday, yesterday the banks fell a significant -1.8%. This outpaced even the most rate-sensitive sector, real estate, which fell -1.1%.

Resources were at it again. Oil prices are continuing their slow rollover and energy fell -2.0%. Iron ore also tipped over yesterday and materials fell -1.3%.

Healthcare is hardly a defensive when it falls -1.7%. Industrials dropped -1.6%, but included a -3.7% fall for sector heavyweight Transurban ((TCL)), after the ACCC finally said enough is enough and blocked Transurban from bidding for Melbourne’s East Link.

But wait, there’s more.

Discretionary actually did rather well in only falling -0.9% when staples fell -0.8%. The true defensives on the day were communication services (-0.3%) and utilities (-0.2%).

The shock of the day was technology, which fell less than -0.1% when the Nasdaq was down -1.5% post-Fed. Link Administration ((LNK)) rose 3.0% to top the index, for no obvious reason, but still one might have expected a bigger tech exodus, particularly when Block ((SQ2)) falls -4.8% (it’s down again in the US overnight).

In overnight news, the King is dead. Long live the King.

Well, apparently Rupert is going to hang around like a bad smell and is calling himself Chairman Emeritus but Lachie now has the reins. This didn’t seem to bother US investors, as News Corp ((NWS)) shares rose 1.3% on the Nasdaq last night.

Oh the Pain

It is not unusual for Wall Street to shoot up/down in the volatile period following a Fed statement release, only to turn and go the other way the next day once investors have had time to absorb the implications. But not last night.

Last night Wall Street doubled down on Wednesday night’s post-Fed selling. It was the bond market that waited to respond. After minor moves on Wednesday night, last night the US ten-year jumped 13 points to 4.48% and the twos rose a few points to as high as 5.20% — a level last seen in 2006.

In the long end, 4.25% was seen as a pressure point and once past helped set off recent selling on Wall Street. The next pressure point is 4.50%.

Not helping the mood was the ongoing farce in Washington. Hopes are fading that a compromise will be found on the US budget bill and this time a government shutdown will not be averted at the last minute. But it’s not the Republicans and Democrats who can’t agree, it’s just the Republicans.

With a handful of far right representatives holding the entire party to ransom (it only has a four-seat majority in the House), Republican members have been sent home for the week. It was assumed some bills, in a multi-bill process, would be put forward tonight and tomorrow night. With no progress being made, time is very much running out.

Not helping the mood were weekly new jobless claims, which fell last week by -21,000 to 201,000 to mark the lowest level since January. Forecasts were for 225,000. Jerome Powell focused on Wednesday night on the strong US economy and stubbornly tight labour market as being the drivers of a possible extra 25 point hike before year-end.

I noted earlier this week that with US mortgage rates above 7% (hitting 7.5% last night), anyone with a 30-year fixed rate mortgage set at 3% or lower pre-2022 is not going to look to move house. US existing home sales fell -0.7% in August to be down -15% year on year.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1919.50 – 10.30 – 0.53%
Silver (oz) 23.38 + 0.16 0.69%
Copper (lb) 3.67 – 0.08 – 2.17%
Aluminium (lb) 0.98 – 0.01 – 1.46%
Nickel (lb) 8.58 – 0.22 – 2.53%
Zinc (lb) 1.13 + 0.01 1.10%
West Texas Crude 89.63 – 0.65 – 0.72%
Brent Crude 93.30 + 0.12 0.13%
Iron Ore (t) 118.06 – 3.72 – 3.05%

Higher for longer US rates to do not make for solid demand in commodities.

Higher rates overnight hit gold.

The Aussie is down -0.5% at US$0.6417.


The Bank of Japan meets today. Any further easing of yield curve control could lead to even higher US rates.

Flash estimates of September PMIs are due across the globe.

Strike Energy ((STX)) reports earnings.

The Australian share market over the past thirty days…

Index 21 Sep 2023 Week To Date Month To Date (Sep) Quarter To Date (Jul-Sep) Year To Date (2023)
S&P ASX 200 (ex-div) 7065.20 -2.94% -3.29% -1.92% 0.38%
29M 29Metals Upgrade to Overweight from Equal-weight Morgan Stanley
BHP BHP Group Downgrade to Lighten from Hold Ord Minnett
DRR Deterra Royalties Upgrade to Overweight from Equal-weight Morgan Stanley
IGO IGO Downgrade to Underweight from Equal-weight Morgan Stanley
NHC New Hope Downgrade to Sell from Neutral Citi
Downgrade to Hold from Accumulate Ord Minnett
S32 South32 Upgrade to Accumulate from Hold Ord Minnett

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)

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