The Overnight Report: Ongoing

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This story features RESMED INC, and other companies.
For more info SHARE ANALYSIS: RMD
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Momentum

The Australian market has taken its lead from Wall Street in terms of rallies for stocks and bonds off their lows (yield highs) on the assumption the bottom is now in. Yesterday the ASX200 opened higher and chopped higher still during the session.

All sectors closed in the green bar healthcare, which closed dead flat. That sector will be under pressure today given ResMed ((RMD)) has taken a -4% hit overnight in New York.

US-listed hospital and medical device companies were all down last night on news one biotech company had completed its trial of Ozempic to treat diabetes and kidney disease a year early as it had already been so successful.

Otherwise, the trend to buy beaten-down interest rate-sensitive sectors continued yesterday, with the Aussie ten-year down -3 points but more so a bounce from oversold conditions. Technology rose 1.7%, led by Block ((SQ2)), up 4.0% after the US listing benefited from a broker upgrade.

Discretionary gained 1.2%, industrials 1.1%, led by Transurban ((TCL)), communication services 0.9%, led by Telstra ((TLS)), and real estate 0.7%.

The banks managed 0.4% in the face of a -7.4% trashing for Bank of Queensland ((BOQ)), despite prior analyst warnings, on a miss on earnings and margins.

The resource sectors also got in on the act, with materials up 1.0%, including solid moves for “exotics” miners of uranium et al, and energy up 0.7% despite a dip back in oil prices which has continued overnight.

Wall Street was up solidly again last night, despite a hot PPI number, and the US ten-year has again fallen.

Our futures are up only 6 points this morning, against 0.5% for the S&P500, likely because we have a jobs number out today and because we tend to be more cautious ahead of critical US data, with the CPI out tonight.

There will also be a drag from ResMed and, probably, the energy sector on lower oil prices.

Highly Uncertain

The minutes of the September Fed meeting showed officials were “highly uncertain” about the future path of the economy and decided to proceed in a careful meeting-by-meeting approach to interest-rate policy.

One only has to listen to divergent views from Wall Street commentators to know uncertainty is pretty rife outside of the FOMC as well.

The members were split on whether or not another hike was needed, but from the meeting to the peak in US yields earlier this month, the ten-year rose 42 points. This has led to a new mantra among officials, including Fed governor Christopher Waller last night, that tighter financial conditions have already done the Fed’s work for it.

The US headline PPI saw 0.5% growth in September when 0.3% was forecast, due to higher energy prices. This was down from August’s 0.7% but the annual rate moved up to 2.2% from 2.0%.

The core PPI nevertheless rose 0.2% as forecast, matching August’s gain, and the annual core rate ticked down to 2.8% from 2.9%.

Something for everyone. Wall Street fell initially on the release, turned and continued to rally to the close. The US ten-year yield fell -6 points to 4.60%.

In other news, the Republican Congress has chosen a new candidate for Speaker. The situation in the Middle East means Congress really needs to get back to business asap but given the winning candidate managed only 113 votes to the Freedom Caucus candidate’s 99, when 217 votes are needed in the House to be Speaker, resolution seems further away than ever.

Still, Wall Street would prefer to concentrate on the rebound in stocks and bonds, and an oil price that’s pulling back from the war-driven pop, as well as tonight’s CPI and Friday night’s bank results.

The war in Israel is recognised as a tragedy, dysfunction in Congress is seen as a concern, but data suggest most fund managers are underweight equities ahead of the seasonal turn which typically has stocks running up to year-end.

Commodities

Bloomberg reports Beijing is “mulling” fresh stimulus in the form of raising the budget deficit, ie borrowing ever more money. Why not? The Americans wrote the book.

It would appear metal markets are poised, awaiting any news.

Gold continues to push higher nevertheless on falling US yields and some safe haven support.

As long as Iran stays out of the conflict, oil prices will likely fall back to where they were.

The Aussie is down -0.3% at US$0.6415.

Today

The SPI Overnight closed up 6 points.

We’ll see the September jobs report today.

The US is braced for the CPI.

Aurizon Holdings ((AZJ)), Brambles ((BXB)) and Beacon Lighting ((BLX)) hold AGMs today.

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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