The Overnight Report: Yield Turnaround

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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

Get the Lead Out

The bad news is the ASX200 fell another -56 points yesterday to mark a fourth day of selling. The good news is it all happened in about the first twenty minutes. Thereafter, the index went nowhere. Not up, but not further down either.

There was also a clearer shift away from the Sell Everything tone into looking for opportunities in defensives. Healthcare rose 1.5%, with ResMed ((RMD)) continuing to make a comeback, staples rose 0.7%, utilities scraped into the green and real estate only fell -0.2% even as bond yields ticked higher.

Still, the banks were down another -0.5%, but all the action was in the resource sectors.

Energy fell -3.0%. That was, however, net of New Hope Corp going ex-div which took that stock down -8.5% to appear the worst index performer. Viva Energy ((VEA)) provided a quarterly and fell -2.5%.

Materials fell -2.3%, with lithium producers again taken to the cleaners. The next four of the top five losers were Pilbara Minerals ((PLS)), Liontown Resources ((LTR)), Mineral Resources ((MIN)) and IGO Ltd ((IGO)), all down between -5% and -7%.

The shorters will be happy with the first two, which are both over 10% shorted. But they will be in pain elsewhere, as Syrah Resources ((SYR)) is also over 10% shorted and it shot up 41.5% yesterday.

Fellow graphite names Renascor Resources ((RNU)) and Novonix ((NVX)) were up 36.4% and 22.1% respectively.

The move came as the world’s biggest graphite producer – China – moved to limit exports due to “national security concerns”. Shaw and Partners noted yesterday “Syrah Resources is the only vertically integrated natural graphite active anode material producer of scale in the world outside of China”.

More fun and games from Beijing no doubt, but we note Treasury Wine Estates ((TWE)) rose 1.4% yesterday as hope grows ahead of Albo’s visit. Wine is a staple, by the way.

South32 ((S32)) was another drag on materials, falling -3.0% on its quarterly.

Consumer discretionary closed flat, with ARB Corp ((ARB)) rising 5.3% after Citi double-upgraded the stock to Buy from Sell.

A -0.4% fall in technology was net of a 15.2% jump for memory technology company and recent ASX200 addition Weebit Nano ((WBT)), after it signed an agreement last week with a Korean foundry.

The stock is a wee bit volatile, having been trashed the moment it joined the index.

Wall Street also tried to find a bottom last night and while not ultimately successful, the signs are there the market may have reached an oversold level.

We still need more signs too. Our futures are down -15 points this morning.

The Peak?

Wall Street began in more-of-the-same mode last night as the US ten-year yield rose over 8 points to trade above 5%. The Dow again fell over -200 points.

But mid-morning respected billionaire investor Bill Ackman tweeted that he has closed his long-standing short position in 30-year bonds. Ackman said he closed the trade because “there is too much risk in the world to remain short bonds at current long-term rates,” and because “the economy is slowing faster than recent data suggests”.

The explanation is hardly good news. But when the ten-year yield turned tail, it was good news for stocks. The Nasdaq spun and took off. The Dow rose to be up over 100 points.

Ultimately the ten-year closed down -8 points from Friday night’s close at 4.84%. While bond prices held their gains to the close, stocks didn’t.

The final hour saw the indices ease back, with the Nasdaq closing only slightly positive, the S&P returning to the negative, and the Dow down almost -200 points again. As Ackman said, there is just too much risk in the world.

Aside from the potentially explosive Middle East, there is critical risk with regard tonight’s earnings reports from the two big AI rivals, Microsoft and Google. If they meet expectations, then, maybe, Wall Street can find some stability. If they beat it’s a matter of whether or not they’ll be rewarded.

If they miss…let’s hope they don’t miss.

The chip industry was upended last night after Nvidia announced that not satisfied with its AI dominance, it is planning to move into PC chips using ARM architecture – a market dominated by Intel (Dow). Nvidia shot up and Intel down.

In a case of physician heal thyself, a company called Okta began falling precipitously on Friday night and was at it again last night after it had revealed it had been hacked.

Not a good look for a cybersecurity firm.

Commodities

Oil prices eased back last night as aid moved into Gaza and more hostages came out, but subsequent US intelligence suggests Iran is planning attacks on US bases in Syria and Iraq.

The drop in US yields led to gold falling back a bit after its solid run while the US dollar index slipped -0.5%.

The Aussie is up 0.3% at US$0.6334.

Today

The SPI Overnight closed down -15 points or -0.2%.

Flash estimates are due today across the world for November PMIs.

Today’s handful of AGMs includes those of Ansell ((ANN)), Bendigo & Adelaide Bank ((BEN)), Bega Cheese ((BGA)), Region Group ((RGN)) and there’ll probably be some red faces at Credit Corp’s ((CCP)) meeting.

Cooper Energy ((COE)) and Perseus Mining ((PRU)) provide production reports.

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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