The Overnight Report: All Too Much

Array
(
    [0] => Array
        (
            [0] => ((CSL))
            [1] => ((WHC))
            [2] => ((BHP))
            [3] => ((NCM))
            [4] => ((CCP))
            [5] => ((ASX))
            [6] => ((ORA))
            [7] => ((PPT))
            [8] => ((TCL))
            [9] => ((NST))
            [10] => ((STO))
            [11] => ((NWL))
        )

    [1] => Array
        (
            [0] => CSL
            [1] => WHC
            [2] => BHP
            [3] => NCM
            [4] => CCP
            [5] => ASX
            [6] => ORA
            [7] => PPT
            [8] => TCL
            [9] => NST
            [10] => STO
            [11] => NWL
        )

)

This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

It’s Academic

China saved the day on the ASX yesterday as another run-up in bond yields threatened to undercut the market. The ASX200 drifted down to its low at midday but the release of economic data from China had it at its high an hour later.

The index managed to close at that high but only with the help of a market-on-close buy order that was worth 10 points, and will be regretted today. Wall Street has tumbled overnight and our futures are down -81 points this morning, meaning a retest of 7000 support.

Following the US, the Aussie ten-year yield rose 10 points to 4.65% and the two-year 9 points to 4.25%, which now puts it clearly above the RBA cash rate of 4.10%, bearing in mind the RBA minutes released on Tuesday hinted at another hike.

Six of eleven sectors closed in the red yesterday and all are rate-sensitive. Utilities down -1.0%, discretionary -0.5%, technology -0.4%, industrials and real estate -0.3% and communication services down -0.1%.

Countering were a 0.5% gain for materials and 0.9% for healthcare, as buying returned to CSL ((CSL)) once more. The banks and staples managed 0.2% but energy was the standout, up 2.5%.

This came as Whitehaven Coal ((WHC)) won the long-awaited auction for BHP Group’s ((BHP)) thermal coal assets and jumped 11.5%.

The move in materials was net of Newcrest Mining ((NCM)) going ex-dividend and falling -6.6%.

The move in financials included a -30.5% trashing for Credit Corp ((CCP)) after it wrote down the value of a US purchased debt ledger.

China posted 1.3% quarter on quarter growth in September, up from 0.5% in June. Annual growth was 4.9% compared to 4.6% forecasts.

For the month of September, a 5.5% year on year rise in retail sales and 4.5% in industrial production also exceeded expectations. Only fixed asset investment disappointed, rising 3.1% year to date when 3.2% was forecast. Property investment is down -9.1% year to date.

As noted, it’s all academic. A new high in US yields and elevated Middle East tension brought Wall Street undone last night, along with a couple of disappointing earnings results.

A warning: US lithium miners were thumped on Wall Street last night after a research note from BofA suggested the market is in oversupply.

From Morgan Stanley:

"The recent drop in lithium prices raises questions on whether we are close to a trough. However, falling cost curves are providing some support to producer margins, and the demand outlook remains challenged for now. We may see a temporary pause, but stronger demand is needed for a sustained bounce."

New High

Having shot up on retail sales numbers on Tuesday night, the US ten-year yield rose another 6 points to 4.90% last night to mark a new cycle-high. This was enough in itself to tip over Wall Street, although recently equity moves have often been counter to bond moves.

Up to now, Wall Street has been prepared to overlook the Gaza situation given it’s seen this movie often enough before. But the disputed bombing of the Gaza hospital has brought a new level of tension to the region, only intensifying the prospect of Iran getting involved.

This puts US$100/bbl oil back in the frame, and last night prices rose 1%, while gold again played safe haven in rising US$27/oz. The missing link is bonds, which should by rights also be a safe haven, implying lower, not higher, yields. But it’s a complicated equation at this point.

Higher oil prices mean higher inflation implies rate hikes/higher yields. Stronger than expected recent US data (jobs, retail sales) imply higher yields. The vast amount of supply of government/Fed Treasuries is a major headwind to lower yields.

Despite the strong data, the Fed’s Beige Book last night showed activity was little changed to slightly weaker in nine of the twelve Fed districts. The Book is anecdotal, but commentators point to it being the story of “now” as opposed to data which are backward-looking.

Earnings reports on the day were not helpful. Morgan Stanley fell -7.6% after posting a weak result – its biggest one-day fall since the covid crash. United Airlines descended -9.7% after guiding to December quarter headwinds of higher fuel prices and suspension of flights to Israel hitting its numbers.

The good news is Netflix posted a beat in this morning’s aftermarket and is currently up 12%.

Tesla has missed on both the top and bottom lines and, importantly, on gross margins but the shares are currently up 0.8%. Tesla was down -10% month to date on low expectations, albeit it has still doubled in price this year.

Next week sees more of the Mega Techs reporting. Tonight Jerome Powell will make his first speech since the September Fed meeting, and his last before the November meeting.

Commodities

Nice to see green for once in base metals, but not a lot of joy from Chinese data.

The Aussie is down -0.5% at US$0.6337 as it continues to yo-yo in the 63s amidst relative yield movements.

Today

The SPI Overnight closed down -81 points or -1.2% which would imply a break of 7000.

September jobs today.

Powell speaks tonight.

It’s the biggest day to date in the local AGM season and it includes ASX ((ASX)), Orora ((ORA)), Perpetual ((PPT)) and Transurban ((TCL)) on that list.

Northern Star ((NST)) and Santos ((STO)) provide production reports and Netwealth Group ((NWL)) quarterly numbers.

US earnings season calendar: https://www.ii.co.uk/investing-with-ii/international-investing/us-earnings-season

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.)

(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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms