The Overnight Report: No Buyers

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This story features AGL ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: AGL
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Bonds Run Amok

Yesterday the futures had suggested only a -0.3% fall for the ASX200 against a -1.4% drop for the S&P500 which seemed underdone, except that Wall Street weakness was all about Mega Techs we don’t have, mainly Google.

But there was also a jump back in US bond yields and that spilled over locally, with the double-whammy effect of an expected RBA rate hike.

The two-year yield rose another 6 points to 4.39%, now exceeding the 4.35% RBA cash rate another hike implies, while the ten-year jumped 15 points to 4.87% and that’s just too much to handle.

Every sector closed lower yesterday bar two. Utilities rose 1.3% against the tide as AGL Energy ((AGL)) gained 2.4% after being fined -$6m by the energy regulator, which must either be lower than feared and/or the simple removal of an overhang.

Ongoing strength in the iron ore price had materials up 0.1%.

Three of the worst performing sectors were technology (-2.6%), communication services (-1.9%) and discretionary (-1.0%), which happen to be the three sectors in which US Mega Techs reside.

Real estate fell -2.1% as one might expect on bond yields. Industrials were down -1.1% and staples -0.8%.

The banks held on relatively well in falling -0.5%, while another jump in oil prices still had energy down -0.1%.

Healthcare fell -0.8% but it has become the flip-flop sector in recent weeks.

In individual stocks, Megaport ((MP1)) reported a record quarterly profit and maintained guidance, and fell -16.3%. Slow growth in customer numbers was to blame, and in the current market mood, you don’t want to disappoint.

Block ((SQ2)) dropped -8.0%, following its US listing, as BNPL competitor Affirm posted weak numbers in the US.

Against the odds, Super Retail ((SUL)) has been on the up throughout the recent sell-off after posting a strong quarterly. It rose another 4.6% yesterday.

Mega Tech woes continued last night on Wall Street as Meta, which was up in Wednesday night’s aftermarket on result, fell back, as did Microsoft, which had rallied earlier in the week, and the others just kept on falling.

This despite the US ten-year yield falling back -11 points to 4.85%. The S&P500 fell -1.2%.

Yesterday morning our futures said down -18 despite Wall Street’s significant fall, and the index closed down -42. This morning the futures are down -3.

Aside from the fall back in US yields, yesterday the ASX200 bottomed out at 6777, down -77 points at the time, before recovering. The 52-week low is 6776. Have we found support?

No Joy

Amazon has reported in the US aftermarket this morning. After initially being up 5%, currently the shares are flat.

Ford (Dow) is down -4.4% on result, having agreed to a costly deal with the UAW, and continuing to lose money in its EV division.

Chipotle Mexican is seen as a bellwether for US consumer spending, and it was up over 5% initially but again, has slipped back to be up 2.5%.

Mastercard beat on earnings but warned of a slowing consumer, and fell -5.6%, while United Parcel Service fell -5.9% for much the same reason.

So hurray for lumbering, go-nowhere, veteran chip maker Intel (Dow). It’s up 7.5%. And another veteran, IBM (Dow), rose 4.9%.

For now.

24 hours ago Meta was up 2.9% on result. Last night it fell -3.7%. Microsoft, which had posted stellar numbers on Tuesday night, fell -3.8%. While no one has really knocked it out of the park, it seems a simple beat is not enough to swing Wall Street’s current mood.

The US economy grew 4.9% annual in the September quarter, beating 4.7% forecasts. The primary driver was 4% growth in consumer spending. Slowing consumer spending?

Despite being rather old news, such strength should by rights have had yields moving higher, but the ten-year fell -11 points. This was because the Bank of Canada kept its cash rate on hold for the second time and more notably, so did the ECB – for the first time since mid-last year.

This underscores the assumption global central banks are at or near done with policy tightening. The Fed is expected to remain on hold next week.

Commodities

Oil prices have also been flip-flopping of late. Last night’s fall appears to be due to further commentary the war in Gaza is not having an impact on demand or supply.

The Aussie is up 0.2% at US$0.6323.

Today

The SPI Overnight closed down -3 points. We’ll see.

We’ll also see September quarter PPI data today.

In the US it's September PCE inflation, along with consumer sentiment.

Exxon and Chevron (Dow) report tonight.

After yesterday’s avalanche there’s only a small number of AGMs today, including Carsales ((CAR)) and Fletcher Building (FBU)).

Cochlear ((COH)) hosts a capital markets day, Coronado Resources ((CRN)) provides a quarterly, while quarterly earnings results have been released by ResMed ((RMD)), with those from SiteMinder ((SDR)) and Vulcan Energy Resources ((VUL)) to follow soon.

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…

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