The Overnight Report: Mega Selling

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            [3] => ((BHP))
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            [6] => ((FMG))
            [7] => ((JBH))
            [8] => ((WES))
            [9] => ((WHC))
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            [8] => WES
            [9] => WHC
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This story features WOOLWORTHS GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: WOW
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Here Comes Another One

The ASX200 took the risk and followed Wall Street from the open yesterday in rising 41 points, despite the looming CPI data which dropped at 11.30am. An hour after the release the index was down -24.

The recovery to a flat close was all about materials and communication services, with every other sector closing in the red.

Australia’s annual headline inflation fell to 5.4% in the September quarter from 6.0% in June. The core rate fell to 5.2% from 5.9%. So why all the fuss?

The problem is the headline rose 1.2% quarter on quarter compared to 0.8% in June, with 1.1% expected, and the core rate rose 1.2% compared to 1.0% when 1.0% was expected. Inflation is not heading in the right direction on that basis, and Michelle Bullock said on Tuesday she will “not hesitate” in hiking if inflation is a worry.

So now economists expect a hike next week. The futures are pricing in a 70% chance.

The main sticking point is housing, and therein rents. House prices are going back up and rents are still rising. So let’s have another hike and make mortgage costs more expensive so that landlords will be forced to increase rents.

At the headline, we can blame fuel (+7.2%) and electricity (+4.2%, would have been +18.6% without government credits). These offset a -13.2% drop for childcare, again thanks to the government, -3.7% for fruit & veg, and -2.5% for domestic travel.

Having fallen -7 points on Monday, the Aussie two-year bond shot up 12 points yesterday to 4.33%. Another hike would put the cash rate at 4.35%.

Real estate was the hardest hit, down -2.0%. Surprisingly, discretionary closed near flat but staples fell -1.4% to be second worst sector performer. This was due to an unrelated -2.0% fall for Woolworths ((WOW)) on its quarterly update, which revealed further weakness in the New Zealand business.

The damage was done by the banks (-0.6%) and healthcare (-0.7%). In the latter case Healius ((HLS)) fell -6.5% to be the worst index performer.

Otherwise, sector falls were modest. Communication services rose 0.8% thanks to a 2.0% gain for Telstra ((TLS)).

Materials otherwise saved the day with a 1.6% gain, with iron ore front and centre. BHP Group ((BHP)) rose 2.6%.

Last night Wall Street took another tumble. But because it was all about Mega Tech, our futures are sensibly only down -18 points this morning with the S&P500 down -1.4%.

Combine that with the flat close yesterday, despite the threat of another hike, and the index is holding up quite well under the circumstances.

Google It

Meta has reported in the US aftermarket this morning and is currently up 2.9%. Meta shares fell -4.2% in the day-session as (almost) all things tech were wiped out. Shares are up 150% year to date.

IBM (Dow) has also reported and is up 1.9%. But it’s cold comfort.

Microsoft posted a solid beat on revenue and earnings in Tuesday night’s aftermarket and rose 3.1% last night, but it was not enough to counter Google’s -9.5% fall after it also reported on Tuesday night.

Selling in Google was specifically related to a miss in cloud, hence Amazon, which reports tonight, fell -5.6%.

Sorry to upset all the young girls reading this Report. Mattel reported this morning and is down -6.8%.

The Nasdaq is now down over -10% which, if you’re that way inclined, means a "correction". The Mega Techs were supposed to save the day from rising bond yields, but it’s not happening. The problem is winners are being only mildly rewarded while losers are being trashed. See Microsoft versus Google.

And to rub in the salt, the US ten-year yield jumped back 11 points to 4.95% last night. So much for one billionaire closing out his shorts. Weighing on sentiment was poor demand for a Treasury auction of five-year bonds.

In shock news, that made no difference to Wall Street last night, the Republicans have successfully elected far right hardliner Mike Johnson as Speaker. The shock is they could agree on anyone. Presumably the moderates decided the party could simply not afford to maintain the circus, and anyone will have to do.

Meta’s 2.9% initial jump on result this morning is not enough to stem the tide. Amazon will have to knock it out of the park tonight.

There are, nevertheless, plenty of real-world earnings results to come.

Commodities

The oils are back up again. Syria fired missiles and Israel fired back.

It’s not every day a pending RBA rate hike has the Aussie down -0.8%. But US$0.6309 reflects the US dollar and US yields.

Today

The SPI Overnight closed down -18 points or -0.3%.

The first estimate of US September quarter GDP is out tonight, along with durable goods data.

The ECB meets tonight.

Today’s Super Thursday for the AGM/quarterly update season is reminiscent of Super Thursdays in results season. The list is very long.

Highlights (one or the other) include Brambles ((BXB)), Coles Group ((COL)), Fortescue Metals ((FMG)), JB HiFi ((JBH)), Wesfarmers ((WES)), and Whitehaven Coal ((WHC)).

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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