The Overnight Report: In The Dark

This story features BEACH ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: BPT

World Overnight
SPI Overnight	7866.00	+ 36.00	0.46%
S&P ASX 200	7789.10	+ 15.80	0.20%
S&P500	5202.39	– 1.95	– 0.04%
Nasdaq Comp	16253.96	+ 5.43	0.03%
DJIA	38892.80	– 11.24	– 0.03%
S&P500 VIX	15.19	– 0.84	– 5.24%
US 10-year yield	4.38	+ 0.07	1.60%
USD Index	104.13	– 0.17	– 0.16%
FTSE100	7943.47	+ 32.31	0.41%
DAX30	18318.97	+ 143.93	0.79%

By Greg Peel

Failure to Launch

After selling on Friday, strength on Wall Street had the futures suggesting up 38 points for the ASX200 yesterday morning but the best the index achieved was up 28, before slipping back again.

Yet having all closed in the red on Friday, all sectors bar only two closed in the green yesterday.

Energy fell -1.2% despite steady oil prices. Beach Energy ((BPT)) disclosed a cost blowout at its Waitsia project and its shares fell -15.0%.

Staples fell -1.0%. Curbs on the big two supermarkets are beginning to reach a reality, with large fines considered for pressuring farmers. A trading update from Elders ((ELD)) didn’t help. Its shares fell -24.4%, despite rumours of another El Nino pattern appearing rather exaggerated.

Otherwise holding the market back was a full 10 point jump in the Aussie ten-year yield to 4.19%. This was a bigger move than that seen in the US on Friday, where yields are rising on diminishing expectations regarding Fed rate cuts.

If the Fed doesn’t cut, there’s no way the RBA will.

Yet technology still managed to top the boards (+1.2%) on Nasdaq strength.

Utilities continue to be in favour as a defensive play (+0.9%), as is the case in the US, despite rising yields. Industrials rose 0.7%, led by a 4.8% gain for Qantas Airways ((QAN)) after it upgraded its frequent flyer program and announced a share buyback.

Healthcare was solid (+0.7%) and materials gained 0.4% largely thanks to gold miners. Newmont Corp ((NEM)) shares rose 6.6%. Iron ore was strong yesterday, but this did not excite the big miners.

In the ASX300, APM Human Services ((APM)) came back on the boards after a takeover bid fell over and plunged -29.5%. Another bid has emerged, but at a lower price.

In economic news, housing lending (ex-refinancing) grew 1.5% in February after falling in January and December. Owner-occupier lending increased by 1.6% to be up 9.1% year on year, while investor lending increased by 1.2% to be up 21.5%. Sales volumes have picked up since January suggesting lending should continue to grow in coming months.

So much for higher rates.

Building approvals fell -1.9% in February following a -2.5% drop in January so the squeeze is on.

With inflation data looming, Wall Street closed flat last night, but this didn’t deter local futures traders. Having not achieved the 38 point gain for the index they wanted yesterday, this morning traders have pushed the futures up 36 points.

Stalled

Another 4 point rise in the US ten-year yield to 4.42% last night kept Wall Street on the sidelines ahead of Wednesday night’s CPI release. There was more interest in the sky going dark.

It is now widely assumed the ten-year will hit 4.50% at least as rate cut hopes fade, but this week’s CPI and PPI data will provide impetus for yields one way or the other.

The hotter January and February numbers have been largely dismissed as seasonal noise, so economists are calling the March data the true picture.

There is no truer picture for the stock market, nonetheless, than actual corporate earnings, along with earnings guidance. At the beginning of the year, the consensus forecast for March quarter S&P500 earnings growth was 10% year on year. That is now down to under 4%.

Forecasts always recede as the quarter proceeds, which is why average earnings always beat expectations. Despite having stalled on seemingly stretched valuations, the Mag7 are forecast to between them post 40% year on year growth.

That puts the pressure on the 493 to justify gains this year, particularly in financials, industrials and energy.

On the subject of the Mag7, Tesla had an increasingly rare up-day last night, rising 4.9% after announcing it will unveil its robotaxi in August.

It’s never easy to figure out exactly what is going on at Tesla. Last week reports emerged the company had ditched its plans to build a small, affordable EV, around the US$25,000 mark, to instead concentrate on its robotaxis.

Musk then jumped on X to rebuff this. He has said Tesla can produce one million robotaxis this year – which is also what he said five years ago.

What happens when you throw up in a robotaxi?

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	2337.40	+ 8.20	0.35%
Silver (oz)	27.82	+ 0.38	1.38%
Copper (lb)	4.25	+ 0.04	1.00%
Aluminium (lb)	1.11	+ 0.00	0.28%
Nickel (lb)	8.01	+ 0.02	0.28%
Zinc (lb)	1.20	+ 0.02	1.52%
West Texas Crude	86.43	– 0.48	– 0.55%
Brent Crude	90.63	– 0.54	– 0.59%
Iron Ore (t)	102.68	+ 2.71	2.71%

The slide in the iron ore price appears to have ended for now.

Gold continues to defy bond yields, supported by central bank buying which is unrelated to interest rates, rather hedging against geopolitical risk and a weak Chinese economy that has put the idea of a competing reserve currency on the backburner.

The Aussie continues up in leaps and bounds, up another 0.5% to US$0.6605.

Today

The SPI Overnight closed up 36 points or 0.5%.

We’ll see the NAB business confidence and Westpac consumer confidence survey results today.

Brickworks ((BKW)) goes ex.

The Australian share market over the past thirty days…

Index	08 Apr 2024	Week To Date	Month To Date (Apr)	Quarter To Date (Apr-Jun)	Year To Date (2024)
S&P ASX 200 (ex-div)	7789.10	0.20%	-1.37%	-1.37%	2.61%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BOQ	Bank of Queensland	Downgrade to Reduce from Hold	Morgans
CMM	Capricorn Metals	Downgrade to Underperform from Neutral	Macquarie
ELD	Elders	Upgrade to Outperform from Neutral	Macquarie
MQG	Macquarie Group	Downgrade to Sell from Neutral	Citi
QBE	QBE Insurance	Downgrade to Neutral from Outperform	Macquarie

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.)

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