The Overnight Report: Fingers Crossed

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

By Greg Peel

Déjà vu

Yesterday’s trade on the ASX looked very much like Monday’s trade on the ASX – ignoring Wall Street and concentrating on local earnings results and other corporate news. Once again, from an ASX200 perspective, the ups and downs balanced out.

There was a bit of a scare when the RBA minutes were released, sending the index down -32 points rather quickly, as they revealed the board had actually discussed hiking rates again before deciding not to.

The board is still data-dependent, and to that end it was pointed out data since the early February meeting included a bigger fall in December quarter inflation than forecast and an increase in the unemployment rate in January to 4.1% from 3.7%.

The market recovered. The Aussie ten-year bond yield rose one point.

There was also good news coming from China, where the mortgage benchmark rate was cut by -25 basis points. It didn’t seem to resonate where it mattered.

Under the bonnet, materials was the worst performer yesterday in falling -1.1%. BHP Group’s ((BHP)) result did not excite, but a fall in the iron ore price had all the majors down on the day, so the true response is unclear. Lithium stocks also tumbled back again, as they are often inclined to do.

Sims ((SGM)) fell -9.7% on its result.

Energy (-0.9%) is struggling to find friends at the moment despite generally higher oil prices. After drilling found a well full of water, Strike Energy ((STX)) has been falling sharply and fell another -25.8% yesterday to now be down over -50%.

Utilities fell -0.5%.

Discretionary fell -0.4%, but that was largely due to Wesfarmers ((WES)) going ex-div, and Star Entertainment ((SGR)) coming back on the boards post second inquiry announcement and falling -19.6%.

It was a trade off with a 10.2% pop for ARB Corp ((ARB)) on result, after car parts distributors had been to some extent written off lately.

Financials rose 0.4%, with the news there being the ACCC’s blocking of the ANZ Bank ((ANZ)) takeover of Suncorp’s ((SUN)) bank had been overturned. ANZ Bank shares fell -2.2% and Suncorp's rose 6.0%.

The comeback for Telstra ((TLS)) continued, and communication services topped the board with a 1.5% gain, while real estate rose 0.7%, led by property fund manager HMC Capital ((HMC)) which jumped 9.6% on result.

Yesterday’s follow-on stock was Reliance Worldwide ((RWC)) which, having reported on Monday, gained another 8.7% yesterday.

And so the earnings season rolls on. I have been noting how our market has been ignoring Wall Street of late, given Wall Street is all about the Mega Techs, but with the S&P500 down -0.6% last night, our futures are down -21 points this morning.

That could be because tomorrow morning our time will bring arguably the biggest global event this year that doesn’t involve Taylor Swift, and markets are nervous. Read on.

Take the Money and Run

Shortly after 8am Sydney time tomorrow Nvidia will report in the US aftermarket. While Nvidia is not the largest of the Mag7 by market cap, it has been by far the strongest performer of the group recently, up 244% year on year.

Driven, one might argue, purely on AI hype. Nvidia makes the chips that make the whole world sing. However, for the past few quarters, Nvidia’s earnings have knocked forecasts out of the park. The last quarter was little different, but what was different is traders had come to expect blow-away results. The response was therefore much more muted.

Which begs the question: what does Nvidia have to do tomorrow to keep the momentum going? One presumes a simple meeting of forecasts might be treated as a shocking miss. To that end, investors became a little nervous last night and locked in profits.

Nvidia shares fell -4.4%. Doesn’t seem like much, particularly when it’s been up 244%, but as I often point out, small moves in the biggest caps have quite the impact on indices.

Moreover, as a poster child for AI, Nvidia’s performance will reflect on the other big movers in the space. Relevant Mag7 stocks were also trimmed last night.

And that’s all you need to know about what happened on Wall Street last night.

Commodities

There was a little bit of strength among metals last night but not for iron ore. As I suggested, the PBoC’s -25 point cut to China’s five-year mortgage benchmark rate has not excited, and understandably so.

The biggest drag on China’s economy over the past few years has been the highly indebted property sector, which is (or was) the biggest sector in the economy. Aspiring Chinese homebuyers have run scared of property developers, and thus of buying an apartment, so what is -25 points going to achieve?

Oil prices pulled back last supposedly because they hit a three-month high last week.

The Aussie is up 0.2% at US$0.6553.

Today

The SPI Overnight closed down -21 points or -0.3%.

The RBA wants to see the data, and today it will see the December quarter wage price index.

The minutes of the February Fed meeting are out tonight.

Today’s list of local reporting stocks is bigger than yesterday’s, which was bigger than Monday’s, and will be bigger again tomorrow.

Rio Tinto ((RIO)), Santos ((STO) and Woolworths ((WOW)) are just three among a flood.

Commonwealth Bank ((CBA)) goes ex-div today, as do AGL Energy ((AGL)) and Insurance Australia Group ((IAG)).

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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