The Monday Report – 15 April 2024

This story features DOMINO'S PIZZA ENTERPRISES LIMITED, and other companies. For more info SHARE ANALYSIS: DMP

The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Calm Before the Storm

Having staged a solid comeback on Thursday following a CPI-related fall on Wall Street, on Friday the ASX200 ignored a PPI-driven rally on Wall Street and fell -25 points. The futures had said -29. That rally was all about US Mega Caps.

For the week, the ASX200 closed up 15 points.

That will change today given developments over the weekend, which were portended on Friday night, sending Wall Street tumbling. Our futures were down -50 points on Saturday morning.

In contrast to playing defensive all week, staples was the worst sector performer on Friday (-0.9%). Utilities has been playing a more definitive defensive role, and that sector proved the best performer (+1.2%).

Technology rose 0.5% and healthcare just squeaked into the positive, leaving every other sector down on the day.

Discretionary fell -0.8%. Domino’s Pizza ((DMP)) hosted an investor day and its shares fell -7.5% to top the index losers’ table.

Star Entertainment ((SGR)) revealed high rollers had rolled on elsewhere, and its shares fell -7.2%.

There was no saving the day from the resource sectors, with energy down -0.5% on lower oil prices and materials down -0.4% on a mixed bag of metal price movements.

Bond yields ticked up only a tad but the banks fell -0.2% and real estate -0.7%.

In another case of there’s not much point in dwelling further, today geopolitics will take centre stage, ahead of tomorrow’s Chinese GDP release.

When Drones Attack

“Sooner rather than later,” said Biden on Friday night, when asked when he thought Iran might retaliate against Israel. And so it came to pass on Saturday night, more extensively than was expected.

That warning was enough for Wall Street to put up the defences, and sell.

Before the drones and missiles launched from Iran had even reached Israel, Tehran declared the retaliation had “concluded”. As to whether that ends proceedings for now is up to Israel, which had vowed to respond to any attack, which would suggest another all-out war ahead.

No doubt Biden is telling Netanyahu to sit on his hands.

What transpires will nevertheless inform global markets.

For a Wall Street already jittery over high valuations in the face of last week’s inflation data, and debate over whether the Fed will cut at all this year, the scene was set for a risk-off session.

Not helping was guidance from JPMorgan to likely lower net interest margins than currently forecast for 2024, and a warning from Jamie Dimon about persistent inflationary pressures weighing on the economy. JPMorgan shares fell -6.5%.

Also reporting earnings on the day were Citigroup (-1.7%) and Wells Fargo (-0.4%).

Earnings season has begun with a risk-off backdrop.

The US ten-year yield fell -6 points, playing the safety trade. Gold and the oils did initially rise on the day, but slipped back to the close.

Gold has traded in the wrong direction all the way up, as central banks buy on geopolitical risk, and with bond yields down and geopolitical risk transpiring, gold went the wrong way again and closed lower. Sell the fact.

The S&P500 did manage to close slightly off its lows, and it was interesting to see once again the Mega Cap winners in 2024 were all sold off (Nvidia fell -2.7%) but Apple managed a 0.9% gain.

Focus will now turn to further earnings reports this week, with more big banks in the frame. The season really begins to hot up in the following week.

Judging responses to results may be difficult if the geopolitical situation overshadows.

Commodities

As noted.

The Aussie has seen a traditional “up by the stairs and down by the elevator” move in recent sessions, and is down -1.1% at US$0.6469 as the US dollar rises as a safe haven of its own.

The SPI Overnight closed down -50 points or -0.6%.

The Week Ahead

Alongside earnings, the US will see March retail sales and industrial production numbers this week, as well as housing market sentiment and housing starts.

China reports its March quarter GDP tomorrow, along with month of March retail sales, industrial production and fixed asset investment.

New Zealand reports March quarter CPI on Wednesday.

Locally, we’ll see March jobs numbers on Thursday.

Bank of Queensland ((BOQ)) reports earnings on Wednesday.

The week brings a ramp-up of the March quarter update season, with production reports due from Evolution Mining ((EVN)), Rio Tinto ((RIO)), BHP Group ((BHP)) and Santos ((STO)).

Quarterly updates are expected from Hub24 ((HUB)), Challenger ((CGF)) and Endeavour Group ((EDV)).

Auckland International Airport ((AIA)) reports quarterly numbers today.

New Hope Corp ((NHC)) goes ex.

The Australian share market over the past thirty days…

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