The Overnight Report: Rabbit In The Headlights

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            [6] => ((FPH))
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            [8] => ((NEM))
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This story features COLLINS FOODS LIMITED, and other companies.
For more info SHARE ANALYSIS: CKF
The company is included in ASX300 and ALL-ORDS

By Greg Peel

Strange Days Indeed

One can but wonder what was going on on Monday on the ASX. Had the buyers arranged a golf tournament? For having fallen -50 points on Monday, the ASX200 yesterday shot up 62 points from the open. In each case, Wall Street had been flat overnight.

But the fun ended at 11am on the release of October retail sales data. Sales fell -0.2% when a 0.1% gain was forecast, and compared to a 0.9% jump in September. Maybe September drew buying out of October.

When you take inflation into account, and population increase, that’s a weak result heading towards Christmas, suggesting rate hikes are starting to take their toll. We’ll see what Black Friday brings this month.

The good thing about bad retail sales is it will provide the RBA with pause for thought, having not guaranteed but certainly threatened a pre-Christmas rate hike. Today we’ll see the October CPI.

The counter to weak sales were bond yields, which fell -5-7 points yesterday following falls in the US. Hence, the consumer sectors still managed to gain 0.6% each, and real estate topped the boards with 1.5%.

From 11am to the close the ASX200 again tracked a very straight path downward, as had been the case from the open on Monday. Most sectors saw gains trimmed rather than losses.

The banks added 0.6% and healthcare 0.5%.

Materials managed 0.3% despite a fall in the iron ore price. Iron ore futures hit a one-week low, down -3.5%, as the Chinese government continued to monitor prices and intervene in the market to curb a price rally. Gold miners provided the balance, as lithium miners continue to suffer.

Gold jumped solidly again last night, and has now clearly broken out.

Energy (-1.0%) was the major weak spot on lower oil prices. Oil prices were up 2% last night.

Technology fell -0.4% despite despite lower yields.

Among individual stocks, Collins Foods ((CKF)) won the day with a 9.0% gain after posting a finger-lickin’ good earnings result.

In the ASX300, Select Harvests ((SHV)) has really been taken to the cleaners since its result on Friday, down -11.7% yesterday and -26% overall.

Wall Street has done it again overnight – gone nowhere. Our futures are up 15 points this morning.

Day Three

Wall Street closed flat again last night, for the third session in a row. With the S&P500 having rallied some 20% off its previous low, the market just can’t decide what to do next, and is looking to the next catalyst.

The flat close again followed another decent drop in US bond yields, with the tens falling -6 points to 4.34% and the twos -12 points to 4.74%. The twos are considered a proxy for the Fed funds rate, and now sit over -50 points below the low-end of the Fed’s range.

They say “don’t fight the Fed,” but that’s what Wall Street is doing right now. The two-year yield is pricing in two rate hikes expected early next year, with more to follow later in the year.

Last night Fed governor Michelle Bowman said the Fed “will need to increase the federal funds rate further” to contain inflation. Currently the market is pricing in a 96% chance the Fed will remain on hold at its December meeting.

Fed governor Chris Waller said he believes a sharp increase in interest rates orchestrated by the Fed over the past 18 months is “well positioned to slow the economy and get inflation back to 2%”.

It was this remark that raised eyebrows, given Waller has to date been one of the more hawkish of the FOMC members. While he did qualify in saying “I cannot say for sure whether the [Fed] has done enough to achieve price stability,” the bond market clearly took his remarks a lean towards dovishness.

There appears now a rush to lock in high risk-free yields into a portfolio before rates start falling.

Yet, while the stock indices did chop around last night, they still closed flat. A broker upgrade for Boeing provided the Dow with some support.

In economic news, the Case-Shiller 20-city house price index rose 0.2% in September to mark a seven-month increase. Prices are up 3.9% year on year, and in September hit a record high.

The Conference Board consumer confidence index rose to 102.0 from 99.1 in October.

The numbers are still being crunched to assess Cyber Monday sales.

Commodities

Beijing is driving the iron ore price down and lower bond yields are driving the gold price up.

The oils bounced 2% last night ahead of the OPEC-Plus meeting on Thursday night, which will feature some dissention in the ranks. A storm in Kazakhstan has also halved the country's production.

The Fed is assumed to be on hold, but the RBA has warned it may not be, so the Aussie continues to rally, up another 0.6% to US$0.6645.

Today

The SPI Overnight closed up 15 points or 0.2%, as it has basically done for the past three sessions.

The RBNZ meets this morning.

Along with October CPI, we’ll see September quarter construction work done, ahead of next week’s GDP result.

There’s another solid list of AGMs today including those of Harvey Norman ((HVN)), Lynas Rare Earths ((LYC)), Sandfire Resources ((SFR)) and Temple & Webster ((TPW)).

Fisher & Paykel Healthcare ((FPH)) reports earnings.

GrainCorp ((GNC)) and Newmont ((NEM)) go ex-div.

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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