The Overnight Report: All Systems Go

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            [0] => ((NAB))
            [1] => ((ANZ))
            [2] => ((ORG))
            [3] => ((TLS))
            [4] => ((ALQ))
            [5] => ((360))
            [6] => ((CAT))
            [7] => ((ALL))
            [8] => ((NUF))
            [9] => ((SKO))
        )

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            [1] => ANZ
            [2] => ORG
            [3] => TLS
            [4] => ALQ
            [5] => 360
            [6] => CAT
            [7] => ALL
            [8] => NUF
            [9] => SKO
        )

)

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

By Greg Peel

Beyond 7000

If it was a big buy order hitting the ASX yesterday morning, and it looks that way, it was a very prescient move. The futures are up 91 points this morning. 7000 will be left in the dust.

It nonetheless took two early sorties to try to break through the 7000 wall – one on the open and one around 11am – in each case followed by a fallback to regroup. By around 3pm the troops finally broke the line. Only just mind you, but today that’s not going to matter.

It was not a uniform rally across sectors, but there were extenuating circumstances. For starters, bond yields remained unmoved.

Technology, real estate and industrials all rose over 1%, but the consumer sectors were more muted, with staples up 0.5% and discretionary 0.3%.

The banks also looked muted (+0.4%), but that was net of National Bank ((NAB)) going ex-dividend and ANZ Bank ((ANZ)) copping broker downgrades following Monday’s weak result.

Utilities fell -1.1% due to the ongoing, and confusing, drama around the Origin Energy ((ORG)) bid. AusSuper has increased its stake to 16.5%, so Origin fell -3.2%.

Telstra ((TLS)) fell -2.0% on its investor day. It appears the market was disappointed by a lack of guidance upgrade in the face of the Optus debacle. Communication services fell -0.8%.

Energy starred, rising 2.5% after OPEC upgraded its global demand forecast, while materials gained 1.5% on a still-rising iron ore price and relief for gold, which was up solidly last night.

The industrials rally included an 8.5% pop for ALS Ltd ((ALQ)) on its earnings result. Technology included a 6.0% rally for Life360 ((360)), ahead of its quarterly result.

Outside the index, sports wearables tech company Catapult ((CAT)) flung itself up 15% on result.

Little more to say than to strap in, although investors are not being offered a great opportunity with a step-jump open yesterday and the same to come today.

Oh Blessed Relief

The US headline CPI rose 0% month on month in October having risen 0.4% in September, when economists had forecast 0.1%. The annual rate fell to 3.2%, down from 3.7%, when the forecast was for 3.3%.

The core rate rose 0.2% month on month when 0.3% was expected. The annual core rate fell to 4.0% from 4.1% when 4.1% was forecast.

Doesn’t seem like much, does it? The US ten-year bond yield plunged -19 points to 4.44% and the two-years -21 points to 4.83%. The two-year is now -42 points below the bottom end of the Fed funds range.

The Fed may not be prepared to say it in polite company, but the bond market is telling Powell emphatically: you’re done mate.

The stock indices took off.

Big Tech got involved, of course, with the Nasdaq up 2.4% and the consumer discretionary sector in particular rising 3.3% (Amazon and Tesla dominate, but Home Depot jumped 5.5% on its earnings result). This was pipped by utilities (+3.9%) and real estate (+5.3%).

Those sectors benefit most from lower rates but the impact is felt more among small caps. Gobs were smacked when the Russell 2000 closed up 5.4%.

Banks (+1.9%) also had a good day. Regional banks dominate the Russell.

Hence, it was a widespread rally for once. Not just a magnificent rally.

There was a little bit of profit-taking to the close – the Dow was up 550 at its peak, and there was much excitement when the S&P500 rally exceeded 2% for only the second time this year, but it wasn’t quite to be.

Not only does Wall Street now firmly believe the Fed is done hiking, the odds are growing for up to five cuts next year. The futures now have a 27% chance of the first cut as early as March.

But be careful what you wish for. The Fed has insisted rates will remain higher for longer so to cut five times would suggest a panic, brought on by a hard landing recession. Wall Street still favours a soft landing as being the case.

The Fed could nonetheless cut if inflation continues to fall, which the market would see as an “insurance” cut. The Fed does not want to stay too high for too long and increase the odds of a recession.

Commodities

Gold is back on track in the right direction, rising on falling yields.

Depending on which side of the export/import equation one looks, a 2.1% surge in the Aussie to US$0.6514 (skipping over 64 altogether), is either remarkable or frightening.

The US dollar index fell -1.5%. You don’t see that every day.

Today

The SPI Overnight closed up 91 points or 1.3%.

The US will see the October PPI tonight, and October retail sales, so don’t decorate your tree just yet.

Locally, we’ll see the September quarter wage price index. We do not want that to be hot.

China reports October retail sales, industrial production and fixed asset investment numbers today as well, so a rally might have to deal with more possible land mines than an Ukrainian wheat field.

Aristocrat Leisure ((ALL)), Nufarm ((NUF)) and Serko ((SKO)) report earnings today.

It’s also a very big day for AGMs, ahead of another Super Thursday tomorrow.

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.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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