The Overnight Report: AI Back In The Spotlight

Array
(
    [0] => Array
        (
            [0] => ((AGL))
            [1] => ((SIG))
            [2] => ((PPT))
            [3] => ((SOL))
            [4] => ((SGR))
            [5] => ((ZIP))
        )

    [1] => Array
        (
            [0] => AGL
            [1] => SIG
            [2] => PPT
            [3] => SOL
            [4] => SGR
            [5] => ZIP
        )

)

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

Holding Fast

Following Wednesday’s stellar run for the ASX200, yesterday the futures suggested a reality-check -34 point fall but this did not transpire during the morning, rather the index returned to square. Then came Australian and Chinese trade data and the index fell -28 points.

Still, that was all but recovered by the close, with a 14 point boost from market-on-close orders.

Australian export earnings rose 0.4% in October, which was disappointing considering a 3.6% increase in commodity prices, meaning volumes were lower. Imports fell -1.9% and the trade surplus rose slightly.

Chinese imports fell -0.6% in November when a 3.9% gain was forecast, which would help explain why our exports disappointed. Exports rose 0.5%.

Despite the numbers, materials was still the second best performing sector on the day, rising 0.6%, pipped only by utilities (+0.8%), thanks to a gain for AGL Energy ((AGL)).

Surprisingly, energy was one of only four positive sectors, rising 0.3% despite oil prices falling -4% overnight.

The other was technology (+0.1%), which did not follow down other rate-sensitive sectors on a bounce-back in Aussie bond yields following Wednesday’s steep falls. The tens rose 6 points.

Still, the damage was generally modest, with discretionary the worst hit (-0.5%).

It was a busy day at the micro level, with Sigma Health Care ((SIG)) going into a trading halt as it tries to engineer a reverse-takeover of the much larger Chemist Warehouse (unlisted).

After announcing a strategic review, wealth manager Perpetual ((PPT)) received and quickly knocked back a takeover offer from Soul Pattinson ((SOL)) that brokers suggested undervalued the company. Perpetual shares rose 6.7% to top the index winners.

Topping the losers was Star Entertainment ((SGR)), which has been threatened once more with losing its casino licence if it doesn’t satisfactorily clean up its act beyond that which the appointed caretaker CEO has achieved alone. Star fell -4.5%.

Standing out among the ASX300 names was Zip Co ((ZIP)), which jumped 25% after Citi upgraded its earnings forecasts and lifted its price target. Zip has been on the comeback trail since falling from over $10 in 2021 to 25c recently, with BNPL picking up heading into Christmas as the cost of living bites. Citi still only rates Zip Neutral.

Wall Street has had a solid session last night ahead of the jobs report but its all to do with tech, and specifically AI. Hence the S&P500 was up 0.8% but our futures are down -15 points this morning.

Remember AI?

The initial excitement earlier in the year when Microsoft launched ChatGPT had died down in recent months, with a focus more on concerns around the ban on US chipmakers selling high-end AI chips to China. But last night, AI was back on the front page.

Google has launched its new AI chatbot, Gemini, which is supposed to make ChatGPT look like a pre-schooler. That said, Google admits not everything Gemini will tell you is guaranteed to be accurate.

Google shares rose 5%.

At the same time, chipmaker Advanced Micro Devices announced the rollout of its new AI chips, and it rose 10%.

The end result was a rekindling of AI excitement, and of buying in the tech space. With bond yields steady on the day, the Nasdaq rose 1.4% and dragged to S&P500 up 0.8%, while the Dow watched on.

But it was not a reverse rotation. The Russel small cap index still rose 0.9%.

It was a bold move ahead of tonight’s November jobs report, but Wall Street is licking its lips in anticipation of a weak number, following weaker than expected results for job openings and private sector jobs this week. That would imply a number less than the 190,000 forecast.

A weak number would enhance expectation the Fed will begin cutting rates next year.

Wall Street will also be hoping next Tuesday night’s CPI data will provide further confirmation the Fed can cut because it wants to (lower inflation) and not because it has to (recession).

Commodities

Nothing to write home about last night.

Despite US bond yields being steady, the US dollar fell -0.6%. The Aussie is up 0.9% at US$0.6607.

Today

The SPI Overnight closed down -15 points or -0.2%.

US jobs tonight, along with consumer sentiment.

China will report its November PMIs tomorrow.

Soul Pattinson holds what no doubt will be an interesting AGM today.

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