The Monday Report – 23 October 2023

Array
(
    [0] => Array
        (
            [0] => ((LTR))
            [1] => ((IFL))
            [2] => ((RGN))
            [3] => ((S32))
            [4] => ((NHC))
            [5] => ((RMD))
        )

    [1] => Array
        (
            [0] => LTR
            [1] => IFL
            [2] => RGN
            [3] => S32
            [4] => NHC
            [5] => RMD
        )

)

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

By Greg Peel

Friday Selling

Friday was always going to be weak on the ASX as Wall Street fell again overnight with the US ten-year yield at the edge of 5%. There is little appetite for stocks under current geopolitical circumstances, reducing any desire to take risk home over the weekend.

A slight easing in Aussie bond yields on Friday was not enough to stem the tide, albeit the ASX200 did manage to recover to the 6900 level by the close, having hit 6878.

To no avail unfortunately. Wall Street was in no mood to buy on Friday either and our futures were down another -65 points on Saturday morning.

It didn’t help that resilience in iron ore appears now to be giving way to China’s property market woes, with developer Country Garden looking to join peer Evergrande in default and in need of government-assisted restructuring. Iron ore fell -4%, and the materials sector fell -1.7% to be the worst performer.

After Albemarle walked away, Liontown Resources ((LTR)) came back on the board following a tough time raising fresh capital and fell -32%. No sign of Gina Rinehart.

Financials was the other major contributor in falling -1.3%, having already taken a big hit during the week on higher yields. The CEO of Insignia Financial ((IFL)) announced his resignation and that stock fell -12.8%.

Energy was the only sector to close in the green, but 0.2% was hardly impressive given higher-still oil prices.

Healthcare saw further selling (-1.4%) as did technology (-1.4%) and communication services (-1.4%), with all other sectors falling by less than -1%.

Utilities (-0.3%) and industrials (-0.3%) tried to play defensive.

The afternoon recovery for the index to 6900 was likely a technical move, as the 200-day moving average is currently at 6898. We look set to crash through that today which itself is a significant technical trigger.

Not to the upside.

More Friday Selling

The US ten-year yield dropped back -6 points to 4.92% on Friday night and the two-year fell -9 points, but this was not enough to provide any relief on Wall Street. Oil prices dipped slightly as well but there are just too many risks across the board.

On Friday, the Republican party again failed to elect a nominee for House Speaker, sending the second choice out of the race and leading to no less than seven others putting up their hands. If they can’t agree between two, how will they agree between seven?

The circus rolls on as members meet again from tomorrow our time. In the meantime, Congress is shut as Biden looks to secure aid packages for both Israel and Ukraine. Wall Street has become more concerned about the government farce that looks to have no means to resolution.

Otherwise, the situation is only getting more tense in the Middle East. Another reason not to take risk home over the weekend.

There is also no point in thinking about buying ahead of earnings results this week from Microsoft and Google tomorrow night, Meta on Wednesday and Amazon on Thursday. These are companies that hold the power to make or break the market, and will report during the busiest week to date in the season.

Regional bank earnings were in the spotlight on Friday night as one large regional, Regions Financial, reported and fell -12.4% after posting a miss, dragging down a raft of peers all around -8%.

Large paper losses on long bond holdings, higher deposit costs and lower loan demand are crunching net interest margins in the mid-range sector of US banking. The big banks are deemed to be okay, as are small banks, but this cohort is where the pain has been felt.

American Express (Dow) reported on Friday night (not earlier in the week as I had mistakenly reported) and posted a solid beat. Amex also pointed to healthy spending from customers and strong credit metrics. Its shares fell -5.4%.

Which sums up the current mood. We could also go back aways to when Nvidia reported yet another mind-blowing quarter but actually fell slightly on the day. If this is going to be the response to positive results, what hope is there of earnings season saving the market and setting off the traditional end-of-year rally?

The S&P500 also closed smack on its 200-day moving average.

Commodities

Ignoring volatile nickel, iron ore is the standout.

The slight dip in oil prices is not much of a relief.

The Aussie is down -0.2% at US$0.6318.

The SPI Overnight closed down -65 points or -0.9% on Saturday morning.

The Week Ahead

The release of September quarter CPI data on Wednesday will be critical to an RBA who appears to have its finger on the trigger.

We will likely see a rise in the headline number due to higher petrol prices, but the core will be key, particularly with regard services inflation and rents.

For the US, the highlight next week, economically, is the first estimate of September quarter GDP on Thursday, followed by September PCE inflation on Friday. The US will also see numbers for new home sales, durable goods orders and consumer sentiment.

Earnings are the other element.

The ECB meets on Thursday.

New Zealand is closed today.

Tomorrow brings flash estimates of global October PMIs.

The local AGM season and quarterly reporting season roll on this week. Region Group ((RGN)) holds its meeting today while South32 ((S32)) reports production and sales.

New Hope Corp ((NHC)) goes ex today.

ResMed ((RMD)) reports September quarter earnings on Friday.

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