The Overnight Report: Broadening Out

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            [2] => ((ORG))
            [3] => ((WOR))
            [4] => ((GMG))
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This story features COLES GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: COL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Fatigue

The ASX200 took a while to get going yesterday but was up 24 points late morning to a new intraday high before giving it all back thereafter. It appears a bit of post-result season fatigue has set in.

Wall Street did not much last night and our futures are down -3 points this morning, so today will not look much different one assumes. The session will also need to overcome some big ex-divs from the open, including those of Coles Group ((COL)), Endeavour Group ((EDV)), Origin Energy ((ORG)) and Worley ((WOR)), just to name a few.

Gold is up solidly once again, adding another thirty-odd bucks to a similar move to yesterday morning. Gold miners led the way to the upside yesterday, with all top five spots for the index taken by gold names.

This did not stop materials falling -0.7% nonetheless, on weaker iron ore prices, but they have swung around in the interim. Lithium miners were the big winners on Friday, with short-covering apparent, but they gave some back yesterday.

Real estate was the winner yesterday (+1.3%), with Aussie bond yields falling -3-4 points. Yields aside, REITs today are not trading so much on the fortunes of office blocks or retail malls but on the AI story driving data centres. Top 20 member Goodman Group ((GMG)) dominates the space in Australia.

The banks keep on keeping on for now, up 0.3%, while technology (+0.9%) has also been back in favour since result season.

It was a flat day for communication services but every other sector closed in the red, led by healthcare (-0.8%), for which the comeback rally appears now to have fizzled out, and utilities (-0.8%), which has been the standout underperformer of recent sessions.

Economic data yesterday showed building approvals fell -1.0% in January when a 4.0% rise was forecast, following December’s -10.1% drop. House approvals fell -9.6%. This does not bode well for solving Australia’s housing crisis.

Westpac economists nevertheless warn the December-January period is not a good indicator, as one might imagine, and note that sharp drops for house approvals in all of Januarys 2023, 2022 and 2021 were followed by solid rebounds in February.

Not So Magnificent

The title Mag7 is now all but defunct as the magnificence filters out, leaving what may now be called the Fantastic Four. We recall that back in the day, the Big Tech rally began with the FANGs.

That group excluded Apple and Microsoft at the time, which went on to become the first companies ever to hit US$3trn in value. The N was for Netflix, which has now settled back to become just one of too many streaming services.

Facebook (Meta) and Amazon have survived, both now considered Fantastic, but in the Mag7, Apple has slipped, Google has faltered and Tesla has just plain lost its mojo.

Last night Apple fell -2.5%, having been hit with a -US$2bn antitrust fine in Europe, Google fell -2.8%, and has been out of fashion since bungling its GenAI launch, and Tesla fell -7.2% in an ongoing slide as EV demand growth wanes, Musk is forced to cut prices, and US auto critics admit Chinese EV brands are superior to US offerings.

Coming out of left field since FANG has been Nivida, which is now Fantastic, and just keeps ticking up every day at the moment. It was up 3.6% last night.

For those keeping score, the Fantastic Four is Meta, Amazon, Microsoft and Nvidia. What was notable last night is despite the rump of the Mag7 posting falls, the S&P500 closed only modestly flat, and with half an hour to go, was positive.

The US market has been clearly broadening out from February, with a long, long list of companies large and not so large hitting new 52-week highs.

Which is why commentators are confident the sharp run-up from the October low, even as hopes of early and multiple Fed rate cuts have faded, is not representative of irrational exuberance. Exuberance, yes, but not irrational. Not yet.

It is also agreed the current pace of the rally cannot last. There may need to be a pullback at some stage, or if not, Wall Street will remain positive but post a more muted 2024.

A lot could happen in that time.

When it comes to irrational exuberance, we won’t mention bitcoin.

On the subject of rate cuts, last night the Atlanta Fed president said he doesn’t see any in 2024. At all. In fact, he expects the next move is more likely to be up, than down.

As I said, a lot could happen.

Commodities

On Friday night, the gold price jumped around US$30 as the US ten-year yield fell -7 points, which made sense. Last night the ten-year bounced back 4 points, and gold has rallied another US$30 to pass the US$2100/oz mark. That doesn’t make sense.

Is gold simply feeling left out as bitcoin approaches a new all-time high?

Oil prices fell last night after OPEC-Plus agreed to extend production cuts out to June. This should be bullish for prices, but as the move was highly anticipated, it was a case of sell-the-fact.

The Aussie is slightly lower at US$0.6512.

Today

The SPI Overnight closed down -3 points.

The most notable thing about today is that it’s the first Tuesday in the month, and no RBA meeting! It will be later in March on the new timetable.

We’ll see December quarter current account data today ahead of tomorrow’s GDP result.

Services PMIs will be released across the globe.

I have noted today’s major ex-divs, but there’s plenty more.

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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