The Overnight Report: Nothing To See

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            [3] => ((STO))
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This story features AGL ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: AGL
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Grinch or Not?

The ASX200 hit a high of up 31 points in the first forty minutes yesterday before squaring up ahead of the release of the RBA minutes. The release saw the index fall for another half hour, and then rebound.

“Members agreed that whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe would depend on how the incoming data alter the economic outlook and the evolving assessment of risks.”

It’s still a case of “whether”.

The board noted disinflation to date “had occurred largely because of fading supply shocks” and that “lowering inflation from its current level would require growth in aggregate demand to remain subdued”. The board again discussed the “stronger-than-expected inflation for a broad range of services” and noted that “domestic demand pressures had been a little stronger than previously thought”.

Still on the hawkish side.

“Furthermore, members noted growing signs of a mindset among businesses that any cost increases could be passed onto consumers. In this environment, members assessed that tightening monetary policy at this meeting would help to mitigate the risk of an unwelcome rise in inflation expectations.”

The concern is inflation can be self-fulfilling, which is why central banks so fear “inflation expectations”.

But another rate hike “would depend on the incoming data”. The most recent piece of critical data – the September quarter wage price index – screamed rate hike but only because of one-offs, such as the award wage increase, that the RBA can happily dismiss. The next major release is the December quarter CPI, due in January.

Hence economists believe it is unlikely the RBA will go again in December. Surely, Michelle would not want to kill Christmas dead. February, however, remains very much “live”.

Yesterday’s ultimate gain for the index was all about commodities, which was all about Chinese stimulus.

A front-page editorial in state-owned media yesterday that said funds from the one trillion yuan debt issuance announced by Beijing last month should be disbursed into construction projects and allocated in a timely manner. Fifty Chinese real estate developers may be eligible for financing.

The iron ore prices rose 2% for the second day in a row and the materials sector topped the board with a 1.4% gain. Energy rose 0.4%.

The banks (+0.2%) and communication services (+0.2%) helped somewhat, but every other sector closed in the red.

If rate-sensitive sectors were hit by further rate hike fear, they ignored the fact Aussie bond yields fell yesterday – the tens by -6 points and the twos by -3.

Yet the consumer sectors and real estate were all hit by -0.6%. Other sectors closed only slightly lower, except for utilities (-1.8%), with AGL Energy ((AGL)) falling -1.4% post AGM and Origin Energy ((ORG)) -2.9% as shareholders prepare to vote on the takeover tomorrow.

Hold Your Breath

As I write, Nvidia has just reported in the US aftermarket. True to form, the AI chipmaker beat on September quarter revenues and earnings, and on December quarter guidance.

The share price initially fell -4%, simply because it was up 20% in a month and 240% year to date. It is currently down -1%, but that could change by the time you read this.

Wall Street waited all day for the bell to ring and this earnings report – the last from the Magnificent Seven – to drop. Could Nvidia accelerate the Santa Rally?

Nup. But nor will it scupper it.

During the session, Wall Street pondered the minutes of the last Fed meeting and decided there was nothing much different in there to what is already known.

The FOMC remains concerned the strong US economy could cause inflation to reaccelerate, and “Most participants continued to see upside risks to inflation”.

All members agreed it was best to proceed carefully. Additional rate hikes would be appropriate “if incoming data indicated that progress toward the Fed’s inflation objective was insufficient.”

The Fed will remain on hold for now, is the view. And is probably done.

Otherwise, last night featured another round of earnings results among US retailers. Of five reporting, three either cut guidance or warned of tougher times ahead, and saw their share price fall.

Two raised guidance, and hence their share price rose. But we’re only talking 2-3% moves either way.

Wall Street will go quiet from tonight, is closed on Thursday and closes early on Friday. Next week brings PCE inflation data.

Commodities

Nice and green for a change. Thanks China.

The standout nonetheless is gold. Last night the US ten-year yield fell one point, and the US dollar ticked up just a tad, but out of the blue gold jumps twenty bucks.

The Aussie is off -0.1% at US$0.6557.

Today

The SPI Overnight closed down -6 points.

Michelle Bullock will speak today.

The US will see durable goods orders and consumer sentiment.

Webjet ((WEB)) reports earnings today, Santos ((STO)) hosts an investor day, and there’s another handful of 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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