The Overnight Report: Snap-Back

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            [3] => ((EDV))
            [4] => ((DRR))
            [5] => ((ORG))
            [6] => ((ASG))
            [7] => ((BKW))
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This story features WHITEHAVEN COAL LIMITED, and other companies.
For more info SHARE ANALYSIS: WHC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

New Low

The ASX200 traded down through its prior 52-week low of 6776 from the open yesterday as the futures had suggested, down -75 points to 6751 in the first 40 minutes. A weak Wall Street on Friday night was the primary driver.

But there it bounced hard as buyers appeared, rising all the way back to down only -26, but the 6800 level proved resistance and amidst generally weak sentiment, the index faded to the close.

Selling on Wall Street on Friday night was as much about not wanting to take risk home over a weekend which might see an escalation in Middle East conflict. The invasion continued but nothing else untoward transpired, so Wall Street has bounced hard overnight. Still, our futures are only up a cautious 29 points this morning.

Yesterday was almost a Sell Everything day, with technology the only sector to manage a gain (0.4%). This was because the Nasdaq did actually close a tad higher on Friday night, and came despite another 5-6 point gain in Aussie bond yields.

Bond yields rose as a result of yesterday’s September retail sales data, which showed a surprise 0.9% gain for the month when 0.3% was forecast.

While there were some one-off factors impacting the number, such as warm weather bringing out the DIYers, a new iPhone for sale, the introduction of 60-day prescriptions, and an energy rebate in Queensland lifting demand for white goods, the numbers only add to expectations the RBA will hike on Cup Day.

Retail sales have not this year been as solid as they look, because a lot of the apparent gain is down to inflation. Actual volumes have been down over the past three quarters despite rapid population growth. ANZ Bank economists suggest that after yesterday’s figure, volumes might just squeak into the positive for the September quarter, but only just.

The strong number did nothing for the consumer sectors, with discretionary down -0.6% and staples down -1.2% as one or maybe two RBA rate hikes are on the table for Christmas. Ditto real estate (-0.8%), seeing no joy for retail REITs.

As fall in oil prices on Friday night led to energy being the worst performer (-2.6%), exacerbated by Whitehaven Coal ((WHC)) falling -5.6% after an activist investor sold 35m shares in a block trade.

Materials was the “best” performer outside tech, in falling only -0.1%. This despite solid moves up for iron ore and gold prices. IGO Ltd’s ((IGO)) production report didn’t help, sending that stock down -9.0% to be the worst index performer.

It was then left to the banks to cause some major damage (-1.2%). The banks will start reporting earnings from the end of this week (Macquarie Group ((MQG)).

Bounce

It had been a tough week on Wall Street last week before Friday night saw additional selling ahead of a weekend offering Middle East risk. As nothing new transpired over the weekend, buyers had a reason to come back in last night.

Ongoing falls in oil prices underscored.

The S&P500 also hit the -10% correction zone on Friday night, prompting calls of oversold, and another reason to bounce.

Otherwise, with no major earnings reports (other than McDonalds, which saw a slight gain) or economic data last night, Wall Street was relieved when the US Treasury announced it expected to borrow US$776bn in the December quarter, which is -US$76bn lower than the prior estimate made three months ago.

Otherwise, the market is still holding its breath ahead of further details to be announced tomorrow night regarding the Treasury’s refunding issuance and specifically where across the yield curve the bulk of borrowing will be undertaken. A package of three-year, ten-year and thirty-year bonds is anticipated.

This announcement will have as much, if not more, impact on US yields as the Fed’s policy decision on the same day. US yields were only a point or two higher last night.

Along with event risk provided by the Treasury and Fed, other potentially market-moving events this week will be Apple’s earnings report on Thursday night and the October jobs numbers on Friday night.

Together these events will determine whether last night saw a typical short-term snap-back rally after last week’s bout of selling, or whether the rally has any legs as we enter the traditional season of Wall Street strength to the end of the year.

If we are heading towards the old Santa Rally, last week ensured it’s a long way back and even if Santa does his bit, Wall Street may not get back to its July highs.

Commodities

Gold gave back half of Friday night’s gain last night and it is unsurprising to see consolidation around the US$2000/oz level, which has (thereabouts) been a high three previous times since the GFC.

The oils continue to fall on no impact on supply from the Gaza conflict, and to date no overt action from Iran. The US has strongly warned Iran to stay out of it, but there remains a risk the White House will move to sanction Iranian oil exports once more.

The strong retail sales number has the Aussie up 0.5% at US$0.6375.

Today

The SPI Overnight closed up a tentative 29 points, or 0.4% to the S&P500’s 1.2% bounce.

It’s the last day of the month which might have some impact on activity today, otherwise today’s economic release is private sector credit.

China will report October PMIs today.

The eurozone reports September quarter GDP tonight.

The US will see monthly consumer confidence.

Having provided a trading update yesterday, Endeavour Group ((EDV)) holds its AGM today, as does Deterra Royalties ((DRR)), and a couple of others.

Origin Energy ((ORG)) releases its quarterly report.

Autosports Group ((ASG)) and Brickworks ((BKW)) go ex-dividend.

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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