The Overnight Report: No Need To Risk It

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

By Greg Peel

Nowhere To Go

It was a case of wake me up when the bell goes yesterday on the ASX, as the ASX200 tracked largely sideways throughout the session before eventually losing interest. It is an accepted fact that markets that cannot find a reason to go up can only go down.

Wall Street has provided that impetus overnight, having a bit of a pullback which has surprised no one, and while our futures are showing only down -10 points this morning to the S&P500’s -1.0%, that would take us back towards the previous all-time high and breakout level of 7703.

Most sectors exhibited general weakness yesterday as the post result season vacuum continued, but there were exceptions.

Healthcare won the day with a 1.0% gain, having been the underperformer in the past few sessions. The health insurers did well out of the government’s decision to allow 3% premium increases – just what we need right now, more inflation – and Healius ((HLS)) jumped 14.7% after the CEO stepped down.

On your bike son.

Materials was next best (+0.6%) driven by a new all-time high in the gold price, and a bounce in the iron ore price, countered by a dip in Chinese lithium prices that had traders once again running for the exits. Funny how lithium is the most volatile of metals on both the stock market and the periodic table.

Sayona Mining ((SYA)) was the worst performer with an -11.1% drop, but all battery mineral miners had shot up recently on a turn in prices and a subsequent short squeeze.

On the downside, consumer staples (-1.1%) copped ex-divs for Coles Group ((COL)) and Endeavour Group ((EDV)), while discretionary (-1.2%) included Lovisa Holdings ((LOV)) going ex.

In energy (-0.6%) it was Worley ((WOR)) and in utilities (-0.9%), Origin Energy ((ORG)).

In economic news, the current account returned to surplus in the December quarter, beating forecasts. The terms of trade increased 2.2% on positive net exports, while the balance of payments surplus increased to $11.8bn from only $1.3bn in September.

The most recent RBA Statement on Monetary Policy forecast 0.3% quarter on quarter GDP growth in December to a 1.5% annual rate, and ANZ Bank economists suggest the lead-in data ahead of today’s release are consistent with that forecast.

More recent inflation and jobs data have nevertheless come in weaker than expected, increasing the risk the RBA may cut rates earlier than ANZ Bank’s November expectation. Other economists have the first cut as early as August.

Squaring Up

Fed chair Jerome Powell will provide a regular testimony in front of a House committee tonight and a Senate committee tomorrow night. With all three major indices having pushed through to fresh blue sky, it’s good enough a reason to take some profits.

Most of the selling was evident in Big Tech, hence underperformance for the Nasdaq.

There were nevertheless some extenuating circumstances.

A report revealed Apple iPhone sales fell -24% in China in the first six weeks of 2024. Apple shares fell -2.8%.

Selling in Tesla continued (-3.9%), and Elon Musk is now no longer the richest man in the US. Jeff Bezos has that back. With the Nasdaq having hit a new high, Telsa is down -27% year to date.

The US February services PMI came in at 52.6, down from 53.4, when 53.0 was forecast. Bad news or good? Depends which way you look at it.

It has been the service industry that has provided the bulk of “sticky” inflation, both here and in the US, so signs of cooling should be positive for rate cut expectations. The US ten-year yield fell -8 points to 4.14%.

But it also suggests a slower economy, and reflects on the American consumer.

That said, Target (US) reported earnings last night and its shares jumped 12%.

US factory orders also fell -3.6% in January when -2.9% was expected.

So it was a bit of a mixed bag, but as suggested, an excuse to square up ahead of Powell’s testimony. We’ll see what he has to say.

In other news, bitcoin hit a new all-time high last night at US$69,209 before promptly falling -5.5%.

Commodities

China has declared a GDP target in 2024 of “around” 5%, following 2023’s 5.3%. But 5% is seen as pretty ambitious, while 2023’s result reflected a recovery from covid lockdowns.

Still, China hitting its targets is usually as good a bet as Putin winning an election. But there was no announcement to suggest further economic stimulus to help get there, just a bunch of motherhood statements.

Suffice to say, commodity markets were disappointed.

Except gold. Take that bitcoin.

The Aussie is a tad lower at US$0.6503.

Today

The SPI Overnight closed down -10 points.

We’ll see the December quarter GDP result today.

The US will focus on not only Powell’s testimony but also the Fed Beige Book, private sector jobs and job openings.

Another long list of ex-divs today includes QBE Insurance ((QBE)), Super Retail ((SUL)) and Treasury Wine Estates ((TWE)).

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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