The Overnight Report: It’s The Real Thing

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

By Greg Peel

Tenuous

Wall Street had closed mildly lower on Monday night but yesterday the ASX200 attempted to find a base. There was a clear turnaround in risk appetite, though caution prevailed.

The defensive sectors that had held up on Monday went the other way yesterday, while the beaten-down cyclicals had a moment in the sun.

Staples proved a drag in falling -1.0% to be the worst performing sector. The supermarkets were sold and Elders ((ELD)) lost -4.3% as fires rage in Queensland.

Healthcare (-0.3%) was Monday’s winner and utilities (-0.5%) was another that took a turn.

Real estate fell -0.2% on Monday and -0.2% again yesterday yet Aussie bond yields fell -7-9%. The banks, discretionary, industrials and technology all paid attention but each moved up only 0.1-0.2%.

It was left to materials to drive the modest index gain, rising 0.9%. But again, a 3% jump in the price of iron ore should have garnered a more positive response.

And the move includes a 12.4% jump for Lynas Rare Earths ((LYC)) after Malaysia walked back its stance on the company’s processing plant. Lithium miners also saw some relief after falling on Monday. Gold miners pressed on.

Watch this space today, as overnight Albo has pledged to double support to the “critical miners” industry to $4m so the US can buy the stuff. Based on capex spend, that might not exactly be earth-moving (pun intended).

Energy managed to rise 0.4% despite lower oil prices, which were lower again last night.

Falls in bond yields came despite Michelle Bullock (Sandra’s sister is the new RBA governor) warning she “will not hesitate” to hike rates again if inflation is not brought under control. Our yields followed the US influence.

Well, D-Day is upon us then, with today’s September quarter CPI data due for release.

That release may explain why our futures are up only 0.4% this morning when the S&P500 jumped 0.7% and yesterday looked like a bottoming session. Caution will prevail until late morning.

Earnings Make Their Mark

The scorecard for this morning’s US aftermarket earnings releases: Microsoft (Dow) up 4.1%; Google down -6.6%; Visa (Dow) up 0.9%, Texas Instruments down -4.6%; Snap, initially up 20%, currently up 0.2%.

No clear pattern there.

The scorecard for releases before the session: Verizon (Dow) up 9.3%; Coca-Cola (Dow) up 2.9%; 3M (Dow) up 5.3%; General Electric up 6.5%; General Motors down -2.3%.

GM’s response is misleading as 5000 UAW workers walked off the job at the company’s SUV factory in Texas, which is GM’s biggest and provides some 20% of production.

Otherwise, last night’s results heartened a market that appeared on Monday night it was ready to rebound, but was not yet prepared to take the risk ahead of Microsoft/Google earnings.

After Monday night’s falls, US bond yields remained steady last night.

This allowed the morning’s earnings result to drive a rebound regardless of the aftermarket releases. Of 23% of the S&P500 to report to date, 77% have posted earnings beats.

In economic data, an estimate of US November services PMI edged up to 50.9 from 50.1, while manufacturing managed to get back to neutral at 50.0, up from 49.8 (assuming the estimates prove accurate).

It’s further evidence the economy may yet manage a soft landing, but services inflation is an issue for the Fed.

The Fed will deliver its verdict next Wednesday, and at the same time the US Treasury will announce its latest refunding requirements, implying how much money it needs to raise by selling short-end Treasuries.

It is the latter that has Wall Street most concerned about ongoing rate rises, not so much another 25 points from the Fed which is deemed highly unlikely at this meeting.

Meta reports in tonight’s aftermarket, with Dow names Boeing and IBM reporting during the day.

Last night Republicans elected a new candidate for House Speaker, being the third following McCarthy’s ouster, and he swiftly became the third to drop out given he could not assure the 217 votes required.

Tom Emmer leans towards the more moderate side of the party, as did prior candidate Scalise, while prior candidate Jordan is a Trumpian election-denier who was one of the eight to vote out McCarthy. Of the seven candidates remaining, there is a mix of moderate and far right, election-deniers and more of the eight. [Stop press: two more candidates have dropped out.]

In other words, how will anyone manage 217 votes? To avoid a November 17 shutdown the Democrats need to negotiate with the Republicans which, as we well know, is a time consuming process. Right now, the Democrats have no one to negotiate with.

Commodities

Beijing has approved a plan to issue more sovereign debt and increase its budget as a means of economic stimulus.

Base metals yawned but iron ore liked it.

Oil prices continue to drift back as so far there is no sign the war in Gaza is impacting supply.

The Aussie is up 0.4% at US$0.6357.

Today

The SPI Overnight closed up 24 points or 0.4%.

Australian inflation numbers today.

It’s a big day for AGMs and quarterly reports, which will be pipped only by the seasons’s Super Thursday tomorrow.

Meetings include those of Corporate Travel Management ((CTD)), Dexus ((DXS)), Super Retail ((SUL)) and Tabcorp Holdings ((TAH)), while reports are due from Ampol ((ALD)), Beach Energy ((BPT)), Mirvac Group ((MGR)), Mineral Resources ((MIN)) and Woolworths Group ((WOW)).

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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