The Overnight Report: Weak Consumer, Happy Investor

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This story features GOODMAN GROUP, and other companies.
For more info SHARE ANALYSIS: GMG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Moving Parts

There were a lot of moving parts to yesterday’s action on the ASX – a Wall Street rebound, net solid earnings results, a takeover offer, and weak economic data, all of which, data included, added up to the ASX200 wiping out the folly of Wednesday’s sell-off in rising 58 points.

The mood has changed. Wall Street did not suffer a blow-off from its highs and a cooling of exuberance that may have led to a lengthier pullback, post the CPI numbers. The dip lasted all but one session.

Earnings results are looking solid, season-to-date. The FNArena Corporate Results Monitor had beats to misses, prior to yesterday, running at 43-21%. Yesterday saw some big moves upward in big names post-result, and not much the other way.

The unemployment rate rose to 4.1% in January from 3.9% – just what the RBA wanted to see. While there are some questions over the seasonal adjustment element being behind the times, the point is economists have stuck to rate cuts coming later in the year despite a tinge of hawkishness from the last RBA meeting.

The Aussie ten-year yield fell -13 points to 4.13%, which alone would have been enough to charge up the market yesterday.

Yesterday’s sector movements were nothing less than extraordinary.

Altium ((ALU)), which develops software for the design of electronic products, received a no-strings-attached takeover offer from a Japanese firm and jumped 28.8%. This puts a spotlight on Australia’s tech sector, then throw in lower yields and the technology sector jumped 6.8%.

Lower yields are good for REITs, but Goodman Group’s ((GMG)) result was worth 7.0% for the can-do-no-wrong sector heavyweight. Real estate rose 3.4%.

Wesfarmers ((WES)) is a heavyweight in the discretionary sector, and its result was worth 5.0%, and 2.8% for the sector.

Not all big name results were crackers. Telstra's ((TLS)) guidance disappointed and the shares fell -2.3%. Communication services was one of only three sectors falling on the day, down -0.5%.

The other two were the resource sectors. Energy fell -2.1% on lower oil prices, asset impairments announced by Woodside Energy ((WDS)), and a weak result from Whitehaven Coal ((WHC)), which fell -5.7%. Materials lost -0.7%, including impairments announced by BHP Group ((BHP)) and a weak result from South32 ((S32)).

Yesterday’s earnings follow-on stock was Downer EDI ((DOW)), up another 5.8%. Industrials rose 1.2%.

Not having much to say yesterday but enjoying lower yields were the banks, up 1.0%.

In the naughty chair yesterday on results were Data#3 ((DTL)), down -13.1%, and Pro Medicus ((PME)), down -13.0%.

Fridays are the quieter days in any results season, but the spotlight will be on insurers today. It’s all looking very bright so far, but as we move towards the halfway mark in the season time-wise, the real avalanche of results starts next week.

Did I say the mood has changed? The S&P500 has closed up 0.6% overnight and our futures have closed up 0.9%.

Wallets Shut

US retail sales fell -0.8% in January, when economists had forecast -0.2%, following a 0.4% rise in December.

The result put a bit of a dent in the strong US economy story, and Goldman Sachs revised down its 2024 GDP growth forecast to 2.5% from 2.8%.

For Wall Street, it was a bit of a dilemma. The soft landing theme has been driving the S&P500 to new highs, even as bond yields have been rising once more. Good news has been good. Thus bad news should be bad.

But, looking through the bad-news-is-good lens, a weaker consumer brings Fed rates, and their timing, back into the spotlight again.

Ah shucks, just buy it anyway. After last night the S&P500 was close to regaining the all-time high it lost on this week’s hot CPI numbers, following a late-session rally.

The US ten-year yield fell -4 points to 4.24%.

The US earnings season rolls on, and has been declared a positive one now the bulk of S&P500 stocks have reported, with still some big names to go. Retailers are always last to report.

Commodities

It appears China’s absence has left a thin market for base metal prices to bounce around in, while iron ore remains unmoved.

China is back on Monday.

Gold once again looks to move Beyond 2000.

A -0.4% fall in the US dollar last night, responding to the weak retail sales data, has been blamed for the oils rising once more.

The Aussie is up 0.5% at US$0.6524.

Today

The SPI Overnight closed up 72 points or 0.9%. The high for the ASX200 was 98 points away on yesterday’s close.

Tonight’s US PPI will now be anxiously awaited.

Today’s list of reporters includes ASX ((ASX)), Inghams Group ((ING)), Insurance Australia Group ((IAG)) and QBE Insurance ((QBE)).

FNArena's Corporate Results Monitor: https://fnarena.com/index.php/reporting_season/ (with calendar).

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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