The Overnight Report: Breather

Array
(
    [0] => Array
        (
            [0] => ((ANZ))
            [1] => ((AMP))
            [2] => ((LLC))
            [3] => ((RMD))
            [4] => ((SOL))
        )

    [1] => Array
        (
            [0] => ANZ
            [1] => AMP
            [2] => LLC
            [3] => RMD
            [4] => SOL
        )

)

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

Bad Job

The ASX200 opened lower yesterday – not unsurprisingly given Wednesday’s surge and a bounce-back in US bond yields overnight. It was the October jobs report that sent the index on a steady downward path to the close, taking back half of Wednesday’s gains.

Australia added 55,000 jobs in the month, up from 7,800 in September, and more than double economist expectations. The unemployment rate rose to 3.7% from 3.6% as expected, but only because the participation rate increased.

This looks like a strong jobs result, and the sort of numbers that would force the RBA to consider another hike for Christmas.

But it isn’t, ANZ Bank economists suggest. Not as solid as it appears.

The larger than forecast jobs number included temporary workers hired during the Voice referendum, which have caused a distortion. This would explain the jobs number, increase in participation and an increase in hours worked, following two months of falls.

The youth unemployment rate, which the RBA pays close attention to, rose to 9.2% – its highest level since December 2021.

And despite the “strong” numbers, and a rebound in US yields overnight, our ten-year yield rose only 2 points and the two-year was unmoved.

That didn’t stop the winning sectors from Wednesday, as bond yields fell, becoming the losing sectors yesterday. Technology (-1.0%), healthcare (-1.0%), real estate (-0.8%), industrials (-0.6%) and most importantly, the banks (-0.8%) all fell back, although the banks included ANZ Bank ((ANZ)) going ex.

Materials fell -0.8% after Beijing interfered in the iron ore market, calling current prices “unreasonably high”. Energy fell -1.2% on lower oil prices which are a lot lower again overnight.

Consumer discretionary hung in there (-0.1%), while utilities (+0.6%), staples (+0.4%) and communication services (+0.2%) resumed their defensive roles.

Train crash of the day was AMP ((AMP)), which fell -15.8% after sneaking in an admission net interest margins remain under pressure while trumpeting plans to open a digital bank.

Wall Street managed to swing from small losses to small gains by the close last night as US bond yields once again fell back. Oil prices are down over -4%, while gold has jumped US$20/oz.

Somewhere in the middle, our futures are down -1 point this morning.

Steady

Walmart beat on the top and bottom lines of its result last night but warned of signs of a slowing consumer heading into “the holidays”, and of price deflation creeping into some lines. The stock fell -8.1%.

Cisco Systems slashed its revenue guidance, and fell -9.8%. Both stocks weighed on the Dow, although early losses were largely recouped by the close.

US industrial production fell by a greater than expected -0.6% in October, but that was attributed to the impact of the autoworkers strike.

Weekly new jobless claims rose to a three-month high. Continuing claims rose to a two-year high.

More evidence the Fed will remain on hold. The US ten-year yield, after rebounding on Wednesday night, fell back -9 points to 4.45%.

Wall Street was due a breather following a comeback rally that now has the S&P500 back over 4500 and has swung sentiment sharply to the positive thanks to the big fall in yields from their peaks, with this week’s inflation data providing a boost.

As to how long it will last is a matter of conjecture, with most commentators seeing a Santa Rally to year-end but a different story in 2024, as the US falls into recession, which may not even be until mid-year.

A lot can happen between now and then. Commentators have been predicting a recession for two years – first in 2023, now in 2024.

Tomorrow never comes.

Last night, the US Senate passed the bill agreed upon between House Democrats and the new Republican Speaker, which was voted against by a substantial number of House Republicans, to avoid a government shutdown from tonight.

They’ve done it again. It was dealing with the Democrats that got McCarthy ousted.

Commodities

While last night’s big fall in oil prices is attributed to a jump in weekly US crude inventories, the recent downward trend is evidence of a slowing global economy, particularly in Europe and China.

After working through the noise, the gold price did what it's meant to do last night – rise on falling bond yields.

The US dollar index is little moved but the Aussie has lost -0.6% to US$0.6464. It surged on Wednesday night, as the US dollar fell, but if the jobs numbers were “strong”, why is it down?

Today

The SPI Overnight closed down -1 point. Could be a quiet one today.

Another handful of AGMs today, including those of Lendlease ((LLC)) and ResMed ((RMD)).

Soul Pattinson ((SOL)) goes ex.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms