The Overnight Report: No News Is Good News Too

Array
(
    [0] => Array
        (
            [0] => ((TWE))
            [1] => ((MFG))
            [2] => ((CTT))
            [3] => ((BHP))
            [4] => ((RIO))
            [5] => ((S32))
            [6] => ((WDS))
        )

    [1] => Array
        (
            [0] => TWE
            [1] => MFG
            [2] => CTT
            [3] => BHP
            [4] => RIO
            [5] => S32
            [6] => WDS
        )

)

This story features TREASURY WINE ESTATES LIMITED, and other companies.
For more info SHARE ANALYSIS: TWE
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Greg Peel

Bad News!

The ASX200 drifted lower from the open yesterday – not showing any panic over the sell-off on Wall Street overnight, which was mostly to do with Big Tech, but likely due to a lack of buying interest ahead of the GDP release.

The index was down -29 points at its low, when the numbers dropped, then after a little bit of thought, the buyers barrelled back in again, for a 38 point turnaround.

The December quarter GDP came in at an annualised rate of 1.5%, just as economists, and the RBA, had forecast. So what’s the problem?

Quarter on quarter growth was only 0.2% when 0.3% was forecast. The reason we still hit 1.5% was because the September quarter was revised up to 0.3% from 0.2%. So rather than the pace of growth improving to 0.3% from 0.2%, it slowed to 0.2% from 0.3%. And 1.5% is the slowest growth since covid.

Per capita GDP fell an annual -1.0% due to population growth. On a per capita basis, we’ve been in recession for a while now.

Since the last RBA meeting, which still carried a hawkish tone, and a threat that another rate hike may yet be needed, we’ve seen weaker than expected inflation and jobs numbers, and now the GDP. Surely this month’s meeting will see an easing in that hawkish tone, at the very least? Economists are still not expecting a cut until later in the year, but maybe not too late?

That appears to be the thinking. Leading the market back up yesterday were the banks, up 0.8%. The ten-year bond yield dropped -8 points to 4.00%.

Technology was the worst performer (-1.4%), but the Nasdaq had a bad night. Staples was next on -0.6%; Treasury Wine Estate ((TWE)) went ex.

Materials (-0.6%) could not find further buyers for gold stocks, despite a breakout run for the gold price which has continued overnight. Iron ore was a drag, as was lithium, with US leader Albemarle plunging overnight on its earnings result and guidance.

On the upside, lower bond rates, and more confidence on the rate cut front, had all of discretionary, industrials, real estate and utilities higher by 0.2-0.5%. Energy rose 0.5% on better oil prices.

Magellan Financial ((MFG)) topped the board with a 7.8% gain, after surprising with some better funds under management numbers.

Outside the index, luxury goods retailer Cettire ((CTT)) at one stage had plunged -27% after the AFR reported the duty it had paid on $1300 of imported goods was not passed on to customs. After some explanation from management, the stock closed down -14.4%.

Prior to yesterday Cettire shares had rallied 60% in a couple of months.

Good Enough

“We believe that our policy rate is likely at its peak for this tightening cycle,” Powell said. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year,” Fed chair Jerome Powell told the House Financial Services Committee last night.

He said the FOMC would like to see more data.

Which is nothing new, nor anything bad. Powell did not say anything along the lines of “there’s no way we’re going to rush in to rate cuts”. The feeling on Wall Street is a couple more months of inflation and jobs data should be enough, and that January’s CPI blip will prove just that given seasonal anomalies.

There’s also an assumption the Fed will not want to leave it too late, ahead of the November election, lest it be seen to be benefiting the Biden campaign. The Fed is supposed to be apolitical, but you can imagine how you-know-who might respond.

Wall Street decided there was nothing Powell said to be afraid of, and staged a bit of a rally back after two days of selling. The US ten-year yield fell another -3 points to 4.10%.

There has also been a bit of consternation lately over another small US bank that’s now in trouble. Shares in New York Community Bancorp have fallen from over US$10 in January to a low of US$1.70 last night, rekindling fears of another SVB disaster.

The bank’s problems are seen to be of its own making, and not systemic, and last night a consortium of hedge funds, led by that of former treasury secretary Steve Mnuchin, came to the rescue and the stock closed at US$3.46.

Watch this space.

Commodities

Nothing much to note other than gold is continuing its breakout run.

The Aussie is up 0.9% at US$0.6564. The US dollar is down -0.4%, so that’s part of it, but it would appear otherwise traders may have been short ahead of the GDP.

Today

The SPI Overnight closed up 37 points or 0.5%. Rather enthusiastic but matching the S&P500.

Today we’ll see numbers for housing finance and January trade. China will release February trade numbers.

The ECB meets tonight.

Today marks the peak of the ex-dividend season, with the longest list of stocks by a margin. Among those are all of BHP Group ((BHP)), Rio Tinto ((RIO)), South32 ((S32)) and Woodside Energy ((WDS)).

If we are to go up 37 points it won’t be from the open.

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