The Overnight Report: On Target

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            [1] => ((NWL))
            [2] => ((MQG))
            [3] => ((WHC))
            [4] => ((ALX))
            [5] => ((CWY))
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            [3] => WHC
            [4] => ALX
            [5] => CWY
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This story features NORTHERN STAR RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: NST
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Market-Wide

Yesterday, the ASX200 gave way to rising rates and geopolitical tension in an across-the-board sell-off, following Wall Street. Uniformity of sector falls suggests there was no discrimination, no rotation, just selling.

There were three sectors that did not perform as badly as others, being utilities (-0.3%) and communication services (-0.6%) but the fact energy fell -0.7% when oil prices were up again rather underscores the mood.

All other sectors fell around -1.5%.

If there was any joy it was in gold miners, with Northern Star Resources ((NST)) topping the index (+4.4%) on both the gold price and its own production report.

Gold was not enough to hold up materials (-1.4%), with lithium miners in particular being carted.

In financials (-1.5%), an update from Netwealth Group ((NWL)) was worth -7.8% to make it the worst index performer, while Macquarie Group ((MQG)) saw an oversized fall (-2.7%) based on fellow investment bank Morgan Stanley falling -7% in New York overnight on earnings.

In the background, the Aussie ten-year yield rose 13 points to 4.78% and is intent on chasing the US equivalent. The ten-year is up 84 points year on year, but 62 of those points have come in the last month.

One could argue the rise in yields was helped by unemployment falling to 3.6% in September from 3.7%, but that number is misleading. Australia lost -39,900 full-time jobs in the month while adding 46,500 part-timers, reducing hours worked. The participation rate fell back, hence the drop in the unemployment rate.

Overall, the numbers suggest the labour market is cooling, which is good news for the RBA. Next week’s CPI is now the critical data-point ahead of the Cup Day decision.

The ten-year yield has again risen in the US overnight and is almost at 5%. The S&P500 has fallen another -0.9%. Our futures are suggesting a fall of -0.6% today, with some resistance from yet higher oil and gold prices.

That -45 points fall would nevertheless take the index below the early October low of 6955, which was also the low marked in March post-SVB. A close below 6955 would mark the low for the year to date.

The previous low was 6676, marked, wouldn’t you know, on October 21 last year. Fortunately the ASX is not open tomorrow.

Powell Rated Neutral

Regarding the two big earnings reports in yesterday morning’s US aftermarket, Netflix kicked on last night in rising 16% but Tesla, which initially saw a non-reaction to misses on the top and bottom lines, fell -10% last night.

Netflix was once the “N” in FANG but that was in the olden days. The so-called Magnificent Seven, of which Tesla is one, have since left the streamer in the dust on a market-cap basis. Hence, Telsa’s fall last night was significant for both the Nasdaq and the S&P and Netflix’s gain was not.

The highlight last night was a speech made by Fed chair Jerome Powell, beginning midday. Wall Street was actually up ahead of the speech, then down, then up again, before collapsing, despite Powell’s remarks being less hawkish than previously.

He still offered a two-way bet between the speech itself and subsequent Q&A, so he could not be seen as dovish.

Powell said, yet again, the Fed may still have more to do. He also acknowledged, again, the lag effect, declaring the Fed would need to “proceed with caution”.

Powell has not spoken since the September meeting, and thus last night was his first chance to comment on the surge in yields since that time. In the Q&A, he acknowledged “tighter financial conditions” could aid the FOMC in its inflation-fighting efforts.

In response the futures market dropped the chance of a November rate hike to next to nothing, December into the teens and January below 50%. The US two-year yield fell -6 points to 5.16%.

But the ten-year yield rose 8 points to 4.99%. If for no other reason it was always going to get to 5%.

US yield curve inversion (2-10) had blown out to over -100 points, and last night it was -17. Inversion traditionally signals a recession in up to eighteen months’ time. De-inversion suggests “and here we are”.

Still, the US labour market remains solid. Last week saw weekly new jobless claims fall to 198,000 – a nine-month low. There is a clear “not in Kansas anymore” feeling with regard the traditional patterns of bond yields and recessions, which punters can only attribute to a pandemic we’ve never had before (in anyone’s lifetime).

A soft landing is still a possibility – one reason why long-end yields keep rising, although oversupply is the major driver.

For earnings-watchers, last night’s highlight, beyond the aforementioned, was AT&T which rose 6.6%. Shares in the lumbering telco giant – a Dow original — are unchanged year on year.

Attention now turns to next week’s results from other Mega Techs.

Commodities

So much for stronger Chinese data.

Not much we can do about oil until there’s peace in our time.

The Aussie is down -0.1% at US$0.6330.

Today

The SPI Overnight closed down -45 points or -0.6%.

Whitehaven Coal’s ((WHC)) production report is out today, Atlas Arteria ((ALX)) provides a quarterly, and Cleanaway Waste Management ((CWY)) and Worley ((WOR) are two companies holding AGMs.

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.

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