The Overnight Report: Focus At Home

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            [7] => ((NCM))
            [8] => ((RIO))
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This story features FLETCHER BUILDING LIMITED, and other companies.
For more info SHARE ANALYSIS: FBU
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Caution Prevails

The weak session on Wall Street on Friday night led to further weakness in the local market yesterday but not to the same extent. We might argue that aside from a low US consumer confidence print and higher inflation expectations, selling on Wall Street was as much about taking risk off ahead of a weekend of Middle East volatility.

Nothing much changed on the weekend, and the idea of risk-off selling is supported by Wall Street rallying strongly last night. Our futures are up 48 points this morning, so it looks like we’re in for a relief rally.

It was notable yesterday that despite US bond yields leaping higher again on Friday night, yesterday our yields remained steady. This didn’t stop selling in rate-sensitive sectors, but then all sectors were trimmed bar three. Technology nevertheless followed the Nasdaq (-2.8%).

Caution was evident in timid moves up for energy (+0.6%) and materials (+0.4%) when oil and gold prices surged. All of the top five index winners were nonetheless gold miners.

Materials also saw a drag from Fletcher Building ((FBU)), which posted an index-topping -8.6% fall after it came out of a trading halt following issues with its plumbing division.

Speaking of trading halts, lithium miner Liontown Resources ((LTR)) has gone into one after Albemarle took its bat and ball and went home. Liontown has gone from a potential takeover to likely needing to raise capital – a prospect that’s been on the cards for weeks.

Staples closed flat but discretionary was hit (-0.8%), as were real estate (-0.7%), communication services (-0.6%), utilities (-0.5%) and, most importantly, the banks (-0.6%), all despite steady yields.

Industrials dropped -1.0%. Qantas Airways ((QAN)) dropped -2.4% after it lost its loyalty CEO. Oh the irony.

Staples saw some support from Treasury Wine Estates ((TWE)), which rose 1.4% after an AGM that seemed to be about fingers crossed for a lifting of Chinese tariffs.

The losers’ board was dominated by tech stocks. The Nasdaq spun around last night.

While oil and gold prices have eased slightly overnight, Wall Street relief should flow through today. Other metal/mineral prices have gone to sleep but the Aussie has jumped back 0.6% on a fall in the US dollar.

Earnings in Focus

With nothing new transpiring in the Middle East over the weekend, Wall Street swung from risk-off on Friday night to risk-on last night. There were no other specific drivers, economic or otherwise.

The rally came despite another 8 point rise in the US ten-year yield, which puts the snap-back rally for the Nasdaq into perspective.

The US dollar also fell -0.4%, which is an unusual combination.

Investors are focused on what is expected to be a strong earnings result season – the season that represents the trough as earnings begin growing again. It is assumed forecasts are too low, but then that’s always the case.

The season has only just begun, but has to date been positive. American Express (Dow) reported last night and rose 1.1%. Tonight brings results from Bank of America and Goldman Sachs (Dow).

Then it's Morgan Stanley tomorrow night along with Netflix and Tesla. A slew of US regional banks report this week, which might be scary, but then no one has collapsed for a while.

A pall of uncertainty will no doubt remain, and sentiment could spin on a dime if the situation deteriorates in the Middle East. While this conflict might be the most significant in the history of post-1948 conflicts in the region, history suggests initial stock market volatility is typically short-lived.

September retail sales numbers are out tonight, which will be critical.

Commodities

Just a slight easing back for gold and the oils.

Metals are still waiting for Beijing to do something.

The Aussie is up 0.6% at US$0.6343.

Today

The SPI Overnight closed up 48 points or 0.7%.

The minutes of the October RBA meeting are out today.

New Zealand sees September quarter CPI data.

Along with retail sales, the US will see industrial production and housing sentiment.

There are several AGMs on the calendar today including that of Telstra ((TLS)).

Providing quarterly updates are Challenger ((CGF)) and Hub24 ((HUB)).

Providing quarterly sales/production reports are Newcrest Mining ((NCM)) and Rio Tinto ((RIO)).

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.

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.)

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