The Overnight Report: Uncertainty Reigns

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This story features WESTGOLD RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: WGX
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Wipeout

The ASX200 threw one of its not infrequent hissy fits yesterday, which we’ve seen before shortly after hitting a new all-time high. The initial driver were interest rate fears, before momentum and algos did the rest.

Wall Street led the way, losing ground after strong economic data suggested the Fed will wait longer to cut, and the minutes of the March RBA meeting were far from dovish, adding to concerns.

Selling was also rife again in bonds, with the ten-year moving up another 7 points to 4.14% and the two-year spinning around as well. The hardest hit sectors yesterday were the most interest rate sensitive.

Technology fell -4.0%, following the Nasdaq. Real estate, which has been enjoying a comeback rally, fell -3.2%. Discretionary lost -2.1%.

The banks were another major driver (-1.3%), along with healthcare (-1.5%).

Energy managed to hang in with a less than 0.1% gain while utilities won the day in rising 0.2%.

Materials disappointed, falling 0.9% despite solid gains overnight in gold and base metals. Unfortunately, iron ore had a down-day, falling -2%.

Gold miners still dominated the winners’ list, although in the ASX300, Westgold Resources ((WGX)) downgraded production guidance due to weather issues and fell -14.8%.

Big falls for tech stocks Xero ((XRO)), down -5.7%, and WiseTech Global ((WTC)), down -5.0%, put them on the top five losers’ list.

The bulk of the fall occurred in the morning, before the pace of selling slowed through the afternoon. The index didn’t quite close on its low, but it was close. To put it in perspective, we’re back where we were a week ago.

We saw the same scenario in early March when the index hit a new high. We had to drop back before the rally could recommence. Stand down and stand by.

Wall Street was flat last night, as were US bonds, so we may see at least some bounce today. The futures are up 26 points this morning.

Confusing

Wall Street was hit with mixed economic data last night.

The ADP private sector jobs report for March showed 184,000 additions, up from 155,000 in February. That’s supportive of a strong economy, but what caught traders’ eyes was a 5.1% year on year increase for wages for workers who stayed in their jobs.

The March services PMI, on the other hand, showed a drop to 51.4 in March from 52.6 when economists had forecast an increase to 52.7. While the employment sub-index rose to 48.5 from 48.0 that still means contraction in payrolls.

Go figure.

Wall Street is worried inflation is once again rearing its ugly head – oil for example is again approaching US$90/bbl – but the prices paid sub-index fell to 53.4 from 58.6.

Energy is not included in the Fed’s preferred PCE measure but the cost of energy flows through to the cost of everything.

Clearly, Wall Street wasn’t quite sure what to do with the above information. Hence, the S&P500 rose a mere 0.1% and the US ten-year yield fell back one point to the pivot level of 4.35%.

Underperformance for the Dow was due to an -8.2% fall in Intel after posting losses in its foundry (contract chipmaking) business. Intel is about the only chipmaker to be down in 2024.

Dow component Ford nevertheless rose 2.8% after posting sales growth of 42% in the March quarter, with EV sales up 86%, in contrast to both Tesla’s and BYD’s falling sales. Ford is America’s number two EV seller, albeit still a long way behind Tesla.

The differentiating factor was sales growth in excess of 40% for Ford’s hybrid range.

Wall Street will now await the March non-farm payrolls number due tomorrow night, before fresh updates on CPI and PPI next week.

Commodities

The rocket under base metals continues to fire, although iron ore let the side down yesterday.

Gold is up yet again – more modestly this time, despite a solid -0.5% fall in the US dollar.

Brent crude is almost back at US$90/bbl.

The Aussie is up 0.7%, again, at US$0.6564.

Today

The SPI Overnight closed up 26 points or 0.3%.

We’ll see March building approvals today.

The rest of the world (us included) will release services PMIs.

ARB Corp ((ARB)) goes ex-dividend.

Scentre Group ((SCG)) holds its AGM.

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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