Daily Market Reports | Oct 04 2023
This story features CSL LIMITED.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 6929.00 | – 35.00 | – 0.50% |
| S&P ASX 200 | 6943.40 | – 89.80 | – 1.28% |
| S&P500 | 4229.45 | – 58.94 | – 1.37% |
| Nasdaq Comp | 13059.47 | – 248.31 | – 1.87% |
| DJIA | 33002.38 | – 430.97 | – 1.29% |
| S&P500 VIX | 19.78 | + 2.17 | 12.32% |
| US 10-year yield | 4.80 | + 0.12 | 2.54% |
| USD Index | 107.03 | + 0.02 | 0.02% |
| FTSE100 | 7470.16 | – 40.56 | – 0.54% |
| DAX30 | 15085.21 | – 162.00 | – 1.06% |
By Greg Peel
Not About the RBA
The RBA decided yesterday to leave its cash rate on hold at 4.10% for the fourth consecutive month and that the board room needed new curtains. It became clear at 2.30pm yesterday’s selling from the open was not about the fear of a hike, as the market did not blink at the release.
The surprise -96 point down move in the futures yesterday morning was likely cover for a big sell order to hit the physical market from the open, probably from offshore. Early sector falls showed sufficient uniformity to suggest a Sell Australia move.
The rest of the session was spent sorting out which sectors were oversold and which were not. While the Aussie ten-year yield rose 5 points to the US equivalent’s 10 points overnight, rate-sensitive sectors saw mixed moves.
Utilities fell -2.9%, real estate -2.1% and technology -2.1%. Consumer discretionary held in there (-0.2%), while staples (-0.5%), the banks (-0.6%) and communication services (-0.7%) also “outperformed”, suggesting at least some relief from no rate rise.
The true outperformer was healthcare, closing up 0.2% as investors turned to CSL ((CSL)) as a safe haven and in response to yet another positive research update, this time from Morgan Stanley. CSL’s 0.9% gain was enough to put it on the ASX200 top five winners’ board.
The real damage was done in resources, with energy down -3.7% as coal prices fell. Materials fell -2.2% despite metals prices falling only modestly.
After surging the previous two sessions, lithium stocks saw selling.
As for where the RBA goes from here, it is assumed that while on-hold prevails for now, the risk of another hike before year-end has risen.
“The recent data are consistent with inflation returning to the 2–3 per cent target range over the forecast period,” but…
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks”.
US bond yields have surged again overnight, and this time Wall Street could not hang on. We might argue we had the big fall yesterday to cover Wall Street’s fall last night, but our futures are down another -35 points this morning.
Yesterday, the ASX200 closed below the March low of 6955, which leaves last October’s low of 6676 looking ominous.
We’re about to hit a quarterly reporting/AGM season so it remains to be seen whether the micro can overcome the macro, but right now the macro (US bonds) is holding sway.
Turmoil
The US Congress has this morning voted to remove Kevin McCarthy as Speaker. There is no obvious alternative.
While chaos in Washington was not the prime driver of selling on Wall Street last night (the vote began at 4pm, but the outcome was expected), it did not help the mood.
What tipped the market was yet another big move up in US yields. The ten-year jumped 12 points to 4.80%. While on Monday night Wall Street largely took a 10 point jump in the yield to 4.68% in its stride, last night was too much.
The Dow fell -1.3% to be down -0.5% for the year to date. The S&P 500 fell -1.5%, to be down -8% from its previous high and 10.1% up for the year. The Nasdaq lost -1.8%, leaving it up around 25% for the year.
The S&P500 closed at 4229. The critical level for market-watchers is 4200, which is where the 200-day moving average currently sits. It is assumed a break of the 200MA would unleash solid technical selling.
And if you really want to get into the tea leaves, 4200 is also near both a -38.2% Fibonacci retracement of the stock market rally off the October 2022 low and a -50% retracement of the rally seen off the March low.
Hence, there is not only a risk of capitulation, there is also a risk of a bounce. Short term signals suggest both the stock and bond markets are oversold.
While US yields have been in a relentless upward trend, last night’s latest surge was triggered by data on US job openings (JOLTS).
Having risen to 8.92m openings in July, August saw 9.61m when economists had forecast 8.8m. Good news for the US labour market, bad news for Wall Street.
At the end of the day, it were the Mega Tech’s that did most of the damage, which was a turnaround from Monday night. Defensives provided some safety.
Technology, communication services and consumer discretionary were the hardest hit, but also in the middle of the group were the banks.
The banks will kick off the September quarter earnings season in just over a week.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1823.60 | – 3.50 | – 0.19% |
| Silver (oz) | 21.16 | + 0.14 | 0.67% |
| Copper (lb) | 3.62 | – 0.03 | – 0.71% |
| Aluminium (lb) | 1.02 | – 0.01 | – 1.21% |
| Nickel (lb) | 8.31 | – 0.06 | – 0.71% |
| Zinc (lb) | 1.14 | – 0.05 | – 4.02% |
| West Texas Crude | 89.53 | + 0.76 | 0.86% |
| Brent Crude | 91.10 | + 0.54 | 0.60% |
| Iron Ore (t) | 119.85 | – 0.05 | – 0.04% |
The zinc price fall is attributed to an expected increase in supply.
Having surged on Monday night, the US dollar was little changed last night. Yet the Aussie is down another -1.0% at US$0.6303.
The US two-year yield is over 100 basis points higher than the Aussie two-year.
Today
The SPI Overnight closed down -35 points or -0.5%.
The RBNZ meets this morning.
The US will see private sector jobs numbers for September.
The world reports September services PMIs.
The Australian share market over the past thirty days…
| Index | 03 Oct 2023 | Week To Date | Month To Date (Oct) | Quarter To Date (Oct-Dec) | Year To Date (2023) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 6943.40 | -1.49% | -1.49% | -1.49% | -1.35% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ALX | Atlas Arteria | Downgrade to Hold from Add | Morgans |
| BKW | Brickworks | Downgrade to Hold from Buy | Ord Minnett |
| BOE | Boss Energy | Downgrade to Neutral from Outperform | Macquarie |
| DRR | Deterra Royalties | Downgrade to Neutral from Outperform | Macquarie |
| S32 | South32 | Upgrade to Buy from Neutral | Citi |
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