The Monday Report – 30 October 2023

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            [1] => ((RMD))
            [2] => ((BHP))
            [3] => ((COL))
            [4] => ((QAN))
            [5] => ((EDV))
            [6] => ((IGO))
            [7] => ((AMC))
            [8] => ((JHG))
            [9] => ((CSR))
            [10] => ((MQG))
            [11] => ((SQ2))
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            [3] => COL
            [4] => QAN
            [5] => EDV
            [6] => IGO
            [7] => AMC
            [8] => JHG
            [9] => CSR
            [10] => MQG
            [11] => SQ2
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)

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

By Greg Peel

Testing Times

The local market proved resilient on Friday despite further weakness on Wall Street, having bounced off its 52-week low on Thursday. Unfortunately, that technical rally, for what it was worth, will not be sustained today. We’ll be testing that 52-week low from the open.

The ASX200 was up 33 points at lunchtime but faded to the close, which is not unsurprising on a Friday when geopolitics prevail.

Staples found some buying (+1.3%) after a tough time of late while materials (+0.6%) and energy (+0.7%) were the major drivers. Utilities helped with +0.9%.

The banks gained 0.2%.

The ten-year yield eased off -6 points but not enough to prevent further weakness in discretionary, which fell -0.1% despite Harvey Norman ((HVN)) rallying 4.8% on a sales update and announced buyback. Technology fell -0.8%, industrials -0.6% and communication services fell -0.6%.

Real estate managed only +0.1% while healthcare lost -0.3% on a -4.0% drop for ResMed ((RMD)) on its quarterly result.

Aussie yields fell following Wall Street, but Australia’s PPI rose 1.8% in the September quarter having risen only 0.5% in the March quarter. This number only ratifies expectations of an RBA rate hike next week, despite the annual rate ticking down to 3.8% from 3.9%.

We can blame higher prices for construction outputs, petrol and electricity, compounded by broad-based price increases in services, particularly health and childcare services.

Metals prices were all higher on Friday night, likely reflecting hope in China’s new stimulus plan. Oil prices rose 2% and gold once again returned to the US$2000/oz level.

In the latter cases, Israel’s invasion of Gaza was the driver. Fears of a wider conflict in the Middle East have intensified.

Which would explain to some extent why our futures were down -67 points on Saturday morning, or -1.0% to the S&P500’s -0.5%. The S&P’s fall was mostly about earnings results, and strength in commodity prices would at any other time be supportive for our market.

A fall of -67 points would take the index quickly down through the 52-week low of 6776, swinging the technicals in the other direction.

Results Disappoint

The Gaza invasion was but imminent on Friday night; there would have been little appetite to take risk home over the weekend.

The US headline personal consumption & expenditure measure of inflation rose a higher than expected 0.4% in September, leaving the annual rate unchanged at 3.4%.

The Fed’s preferred core PCE rose 0.3% as expected. The annual core rate ticked down to 3.7% from 3.8%.

The US ten-year yield was, for once, unchanged at 4.84%

This provided some solace for the Nasdaq, which managed a 0.4% gain when all about was on the slide once more. The gain was helped by Amazon, which rose 6.8% after releasing its result on Thursday night to be the only one of the Magnificent Seven to see buying of any note post-result.

Elsewhere, results disappointed. Dow names were the main culprits, leading to Dow underperformance.

Chevron fell -6.7%, Johnson & Johnson -2.3% and Ford -12.3% after it withdrew guidance due to the UAW strike. Stellantis has settled with the UAW, GM is still in negotiations, but Ford is holding out.

One bright light was Intel, which rose 9.3% after reporting on Thursday night. Demand for PC chips is apparently back.

And in (slightly) good economic news, the final Michigan Uni consumer sentiment survey for October showed a rise to 63.8 from 63.0, bearing in mind 100 is neutral.

The bottom line so far for results season is overall beats are running above average levels but not among the large caps on a net basis. And beats alone are not enough. A failure to raise fourth quarter/2024 guidance has been met with selling irrespective of the result.

The S&P500 has now fallen -10.3% from its July high, joining the Nasdaq in “correction” territory. Is this where the buyers begin to reappear? The Middle East may lead to caution.

Critical this week will be Apple’s result on Thursday, but it’s also the biggest week of the results season.

Commodities

A good-looking table, but unlikely to make a lot of difference.

The Aussie is up 0.2% at US$0.6342.

The SPI Overnight closed down -67 points or -1.0%.

The Week Ahead

US earnings results aside, The Fed will make its decision on Wednesday night. It is also the day the US Treasury reveals its budget borrowing requirements, which will be critical for bond yields.

The US will also see consumer confidence, private sector jobs and non-farm payrolls for October this week.

The first estimate of eurozone GDP is out and the Bank of England holds a policy meeting.

China reports October PMIs tomorrow ahead of reports from across the globe on Wednesday and Friday.

In Australia we’ll see retail sales (today), private sector credit, building approvals and trade numbers.

Last week saw the peak in the AGM season but the season rolls on into November. This week’s highlights include meetings for BHP Group ((BHP)), Coles Group ((COL)) and Qantas Airways ((QAN)).

Endeavour Group ((EDV)) is among those holding an AGM today while IGO Ltd ((IGO)) provides a quarterly trading update.

Quarterly earnings reports are due this week from Amcor ((AMC)), Janus Henderson ((JHG)), CSR ((CSR)), Macquarie Group ((MQG)) and Block ((SQ2)).

The Australian share market over the past thirty days…

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