The Overnight Report: And Again

Array
(
    [0] => Array
        (
            [0] => ((IEL))
            [1] => ((JDO))
            [2] => ((RMD))
            [3] => ((CSL))
            [4] => ((PNV))
            [5] => ((WDS))
        )

    [1] => Array
        (
            [0] => IEL
            [1] => JDO
            [2] => RMD
            [3] => CSL
            [4] => PNV
            [5] => WDS
        )

)

This story features IDP EDUCATION LIMITED, and other companies.
For more info SHARE ANALYSIS: IEL
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Shot in the Arm

The ASX200 posted a third straight day of meaningful gains yesterday, passing the 7500 mark but fading somewhat to the close. The index is now up 2.6% since last Thursday’s low.

Sentiment was boosted by news Beijing plans to inject US$278bn to “stabilise” the Chinese stock market, which has lost -US$6trn in value since its 2021 peak. What that actually means is unclear, as in the past Beijing has simply insisted it’s a great time to buy stocks and loyal subjects do the rest.

How it then translates into commodity prices is also unclear, but yesterday the iron ore price rose close to 3% and base metal prices were all boosted in London last night.

The iron ore miners were subsequently the driver of a 0.6% gain for the materials sector yesterday, with lithium stocks continuing to drag.

Aussie bond yields continued to fall, down another -4 points for the tens, but consumer discretionary fell -0.4% after a solid gain on Monday, with IDP Education ((IEL)) the worst index performer after Canada moved to further limit student numbers.

Staples nevertheless powered on with a 0.7% gain while the banks again provided support with a gain of 0.8%. Judo Bank ((JDO)) posted a positive update and jumped 16.6%.

Healthcare topped the board with 1.0%. Buying was seen in ResMed ((RMD)) ahead of its result on Thursday night, and CSL ((CSL)) chimed in, both rising around 1%. PolyNovo ((PNV)) topped the index with a 6.3% gain on a positive update.

Energy (-0.2%) can’t gain any traction despite higher oil prices, while real estate was also weak yesterday (-0.2%) despite lower bond yields.

Yesterday’s NAB's business confidence survey for December showed confidence rising 7 points to a still below-average -1. Business conditions index fell -2 to +7. This included a further and material weakening of trading conditions, down -3 to +9.

That has trading conditions at a below average level (+12 on the monthly series). It is not since September 2020 that trading conditions have been weaker (outside a one-off in January 2022).

The numbers underscore the Westpac economists’ view the RBA will pivot in 2024, delivering the first rate cut in September.

We’ll see consumer confidence today.

Sticky Business

The Dow fell back from the 38,000 level last night, mostly due to an -11% fall for component 3M – best known for post-it notes but otherwise a large, diversified conglomerate. The fall followed 3M’s earnings guidance downgrade.

Johnson & Johnson also disappointed but solid gains were posted by Verizon and Proctor & Gamble – the latter leading the S&P500 consumer staples sector to a standout 1.0% gain on the day. Staples had lagged all through 2023 on cost of living fears.

The S&P otherwise pressed on to another new high and the Nasdaq continues to drive the ship, following a rebound for Apple this year, Nvidia just heading higher and higher, and Microsoft approaching US$3trn in market cap.

Nvidia is up 20% in January alone, while the Russell small cap index is down -2%. Nvidia was boosted by a large order for AI chips placed by Meta, and is up 200% year on year.

As I write, Netflix has reported after the bell and is up 7% in the aftermarket. Tonight sees reports from IBM and Tesla, with Intel on Thursday, while next week will be the moment of truth as all the mega-names roll out their reports. These are the stocks that many consider to be overvalued.

Nvidia does not report until quite late in the season.

Meanwhile, former St Louis Fed president James Bullard said last night he sees core inflation reaching the Fed’s 2% target by October, but that the Fed will start cutting rates before that target is reached. Bullard can see a first rate cut coming as soon as March.

This is in contrast to recent Fedspeak, which has tried to douse expectations of such an early cut. After the Fed pivoted in December, the futures lifted the chance of a March cut from under 50% to almost 80%, but Fedspeak has since brought that back down to under 50% again.

Expectations for May or June are currently the highest.

Commodities

Thank you China. Although the news didn’t do much for oil prices.

The Aussie is steady at US$0.6574.

Today

The SPI Overnight closed up 13 points.

Westpac’s consumer confidence survey for January is out today.

New Zealand will report its December quarter CPI.

Flash estimates of global PMIs are due today/night.

Several more resources companies provide quarterlies today, including Woodside Energy ((WDS)).

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