The Overnight Report: Awaiting CPI

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This story features ANZ GROUP HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: ANZ
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Cold Water

The ASX200 opened slightly higher yesterday for all of ten minutes, seemingly ready to make good on the futures suggestion of up 24 points, and then dropped into the negative.

Aside from the fact 24 points was a tepid response anyway to Wall Street’s surge on Friday night, as that surge was all about Big Tech, ANZ Bank ((ANZ)) released a disappointing earnings result which included less than 100% dividend franking.

Add in the fact Macquarie Group ((MQG)) went ex-dividend and financials were the main driver of weakness.

The index did make an attempt to recover lost ground to lunchtime before the RBA warned of "potential for further upside surprises to inflation", citing domestic cost pressures and hinted at further interest rate hikes to tame inflation. Assistant governor Marion Kohler said that the “next stage in bringing inflation back to target is likely to be more drawn out than the first”.

We kinda knew that. But the Aussie ten-year yield rose 5 points and we were back to selling in rate-sensitive sectors, and indeed every sector closed in the red except for utilities (+0.3%) after Origin Energy ((ORG)) promised a farewell special dividend.

Financials ultimately fell -0.5% while energy lost -0.9% despite higher oil prices and materials -0.3% with gold miners weighing. A 5.1% jump for building materials company Boral ((BLD)) on an update didn’t make the difference.

Likewise staples (-0.2%), despite an 18.3% pop for Elders ((ELD)) on its result. This stock had been written off by the market in the face of El Nino, following its bonanza La Nina years.

Communication services lost -0.4%. TPG Telecom ((TPG)) ended talks with Macquarie-backed Vocus Group for the sale of some of its non-mobile fibre assets and fell -11.7%.

Real estate was the other sector to be one of the worst performers (-0.6%).

But just when you thought it wasn’t safe to go back in the water, especially with tonight’s US CPI looming, the futures are up 68 points this morning.

Yes, 68.

As there is no obvious catalyst for this move, one can only assume a big market buy order is going to hit from the open.

If that is the case, we’ll be testing 7000 yet again.

Squaring Up

With tonight’s October CPI critical to Fed rate expectations, Wall Street unsurprisingly stalled last night following its solid rally on Friday night, with profit-taking evident in the Nasdaq.

Economists are assuming another tick-up in the headline number, despite oil prices coming off during the month, but a steady core rate.

The other issue becoming increasingly worrisome is the upcoming government shutdown on Friday. While typically an eleventh-hour agreement is always reached, this time it appears there really is a risk given the lack of negotiation to now, although the market is only ascribing a 40% chance.

Ratings agency Moody’s is not so sure, cutting its US credit rating qualification to negative from stable, citing a dysfunctional government, which really means a dysfunctional Republican-led House.

This week also brings that phase of the US earnings result season in which the big retailers all report. Home Depot, Target and Walmart will be on the blocks, among a slew of others.

This follows reports to date from 92% of S&P500 companies which, according to FactSet, have posted 81% beats on earnings and 61% on revenues, which is only a little better than average. They don’t tally guidance downgrades/warnings.

So, bring on the CPI.

Commodities

An indicator of Chinese consumer demand for recreation and transport, published by a mob in Paris, an independent survey of consumer sentiment from the US, and a poll of private business sentiment from a Chinese Graduate School of Business, all released yesterday, all showed signs of slowing Chinese consumption.

Yet the table below is decidedly tinged with green, suggesting expectations Beijing will need to do more.

The Aussie is up 0.4% at US$0.6381.

Today

The SPI Overnight closed up 68 points or 1.0%.

We’ll see the NAB business and Westpac consumer confidence surveys today.

The US CPI comes out at the open on Wall Street.

ALS ((ALQ)) reports earnings today.

Commonwealth Bank ((CBA)) provides a quarterly update.

Telstra ((TLS)) hosts an investor day while Beach Energy ((BPT)) and Goodman Group ((GMG)) hold their AGMs.

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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