The Monday Report (On Tuesday) – 02 April 2024

This story features BHP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BHP

World Overnight
SPI Overnight	7951.00	0.00	0.00%
S&P ASX 200	7896.90	+ 77.30	0.99%
S&P500	5243.77	– 10.58	– 0.20%
Nasdaq Comp	16396.83	+ 17.37	0.11%
DJIA	39566.85	– 240.52	– 0.60%
S&P500 VIX	13.65	+ 0.64	4.92%
US 10-year yield	4.33	+ 0.12	2.92%
USD Index	104.97	+ 0.68	0.65%
FTSE100	7952.62	+ 20.64	0.26%
DAX30	18492.49	+ 15.40	0.08%

By Greg Peel

Thursday

The ASX200 had already blasted through the prior all-time from the open on Thursday, up 62 points, before gradually adding 15 more points across the session. It was end-of-month and end-of-quarter and a pre-long weekend bonanza.

Adding to the excitement, on the assumption bad news is good for the Australian economy at present, as it suggests sooner rather than later RBA cuts, were February retail sales data.

Sales rose 0.3% in the month when when 0.4% was expected. Sales had risen 1.1% in January but fallen -2.1% in December. Each month has its own tale to tell.

Sales were weak in December because we now all do our Christmas shopping in November to give thanks to America. Seasonal adjustment has yet to catch up to that trend. Sales growth in January was attributed to the summer holidays, the tennis, and the cricket.

Sales in February were a miss, but actually a much bigger miss than they appear. Growth would not have been as swift as 0.3% had it not been for certain seven sold-out concerts. Take her out of the equation and sales grew only 0.1%.

Annual growth was 1.6%. Annual inflation in February was 3.4%, so clearly volumes continue to go backwards.

Yet consumer discretionary rose 1.0% on Thursday. Bad news good (and everything went up anyway). The ten-year yield fell -4 points.

Helping to fuel the bonanza were dividends paid by BHP Group ((BHP)), Commonwealth Bank ((CBA)), Newmont Corp ((NEM)), Origin Energy ((ORG)) and Telstra ((TLS)), just to name five of sixteen ASX200 stocks that paid out on the day.

Materials was the best performer (+1.8%), as all of iron ore, gold and lithium chipped in. Energy (+1.1%) was helped by higher coal prices.

Real estate (1.7%) and utilities (+1.3%) eyed off rate cuts.

The worst performer on the day was financials 0.4%, but the banks had had a pretty good run in the quarter. Technology also lagged (+0.4%), because the Nasdaq has stalled.

Overall, there was a lot of window-dressing.

Thursday Night

Window-dressing had already begun in the US market during the week, and Thursday night continued the recent rotational theme, but trading was more lacklustre as Wall Street emptied.

The Dow and S&P500 each rose 0.1%, the Nasdaq fell -0.1%, and the Russell small cap rose 0.5%.

The S&P500 hit its 22^nd record high for the year. It was up 10.2% for the March quarter – the best in five years. The index is up 27% from its October low. All three major indices posted a fifth straight month of gains.

Nvidia rose 82.5% in the quarter.

It is likely Wall Street did not want to get too carried away on Thursday night with the February PCE due on Friday morning.

Oil prices rose another 2% on Thursday night as weekly US inventories came in lower than expected. WTI crude was up 6.3% for the quarter.

There has been a lot of M&A activity in the oil space recently. Cash-rich companies have been buying production rather than opening new wells, meaning US supply is capped.

It is not unusual for the S&P500 to rally 27% over five months. In fact it has happened 130 times. As commentators begin to fret over an overdue correction, it is noted only once in 130 occasions has the index been lower 12 months later.

Monday Night

The US headline PCE rose 0.3% in February to an annual rate of 2.5%, up from 2.4% in January. The core PCE – the Fed’s preferred inflation measure – rose 0.3% to an annual rate of 2.8%, down from 2.9%. The results were as expected.

That result in isolation would have pleased Wall Street, offering no concerns for the Fed. But that was before Monday night saw the release of the US March manufacturing PMI.

After sixteen straight months of contraction, the PMI moved into expansion territory in March with a reading of 50.3, up from 47.8 in February.

New orders moved to 51.4 from 49.2, and production moved to 54.6 from 48.4. All around a solid swing, indicative of a strong(er) economy.

The US ten-year yield subsequently jumped 12 points to 4.33%. The level of 4.35% is considered a potential pivot point, over which a stock market correction may occur.

Last week the Dow Industrials and Russell small cap index had been outperforming the Nasdaq, and subsequently the S&P500. That jump in yields nevertheless reversed the trend, with the Dow underperforming the major indices and the Russell falling -1.0%.

That the Nasdaq should rally in the face of a solid move up in yields underscores the fact that it is driven by the Mega Caps, and the Mega Caps have enough cash coming in that borrowing rates are irrelevant. There were still some mixed moves among them nonetheless.

More data on the inflation front on Monday night included a 0.6% rise on national rents in March, reversing a six-month run of declines. Rents are a big factor in the CPI measurement (slightly less so in the PCE), and the cost of “shelter” has been the stickiest of components.

Over twelve months, however, rents have fallen -0.8% and are set to fall further. A rush to build new apartment blocks led to new apartments completions hitting a record in 2023, and that record is on track to be broken in 2024.

Tesla was one of the underperformers among Big Tech on Monday night after announcing price rises for its SUVs in the US and China, just as Chinese EV manufacturers announce cuts, and record sales.

A regulatory filing from Trump Media confirmed on Monday night the company had booked US$4m in sales and over -US$60m in losses in 2023. The filing suggested Trump Media is facing "greater risks" associated with the former president's ties to the platform.

"[The company] expects to continue to incur operating losses and negative cash flows from operating activities for the foreseeable future, as it works to expand its user base, attracting more platform partners and advertisers."

The stock fell -22% on Monday night.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	2248.00	+ 53.90	2.46%
Silver (oz)	25.00	+ 0.42	1.71%
Copper (lb)	3.99	+ 0.00	0.02%
Aluminium (lb)	1.05	+ 0.01	1.34%
Nickel (lb)	7.51	+ 0.02	0.23%
Zinc (lb)	1.10	– 0.00	– 0.28%
West Texas Crude	83.89	+ 2.17	2.66%
Brent Crude	87.60	+ 1.25	1.45%
Iron Ore (t)	102.33	+ 0.72	0.71%

Note: Moves in iron ore, precious metals, oils and currencies are over two sessions.

The standout move here is that of gold, over two sessions, in the face of Monday night’s pop in US yields and the US dollar. The move is technically driven, given a long-term breakout in price.

Hopes for increased demand from China more generally, and Israel’s bombing of the Iranian consulate in Damascus are attributed to further strength in oil prices.

China’s March manufacturing PMI also flipped into expansion in March, up to 50.8 from 49.1.

With the US dollar up 0.7% over two sessions, the Aussie is down -0.7% at US$0.6489.

The SPI Overnight closed unchanged on Friday morning, and was not open last night.

The Week Ahead

Attention in the US now turns to jobs, with the private sector number due on Wednesday night and non-farm payrolls on Friday.

Locally we’ll see house prices, job ads, building approvals and trade data this week. The minutes of the March RBA meeting are out today.

The ex-dividend season will slow to a trickle and we’ll now see a hiatus in out-of-cycle earnings reports in April before hotting up again in May.

The Australian share market over the past thirty days…

Index	28 Mar 2024	Week To Date	Month To Date (Mar)	Quarter To Date (Jan-Mar)	Year To Date (2024)
S&P ASX 200 (ex-div)	7896.90	1.63%	2.57%	4.03%	4.03%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
IFM	Infomedia	Downgrade to Hold from Buy	Bell Potter
PTM	Platinum Asset Management	Upgrade to Buy from Hold	Bell Potter

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