The Overnight Report: Dead Cat

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

World Overnight
SPI Overnight	7612.00	– 23.00	– 0.30%
S&P ASX 200	7612.50	– 140.00	– 1.81%
S&P500	5051.41	– 10.41	– 0.21%
Nasdaq Comp	15865.25	– 19.77	– 0.12%
DJIA	37798.97	+ 63.86	0.17%
S&P500 VIX	18.40	– 0.83	– 4.32%
US 10-year yield	4.66	+ 0.04	0.86%
USD Index	106.35	+ 0.14	0.13%
FTSE100	7820.36	– 145.17	– 1.82%
DAX30	17766.23	– 260.35	– 1.44%

By Greg Peel

Sell Everything

There was nothing discriminant about yesterday’s selling on the ASX. Every sector was trashed, justifiably or not. On Monday the ASX200 held up fairly well in the face of selling on Wall Street, supported by commodity prices, but yesterday commodity prices meant nothing.

Indeed, the materials sector was one of the hardest hit (-2.0%), despite another pop in the gold price and strength in other metals overnight. The top five ASX200 losers were almost all resource companies, representing gold, lithium uranium and gas, and all falling -6-6.5%.

The outlier was Star Entertainment ((SGR)), which fell -14.4% for its own reasons.

Utilities has been a well-sought after defensive sector of late. It fell -2.2%.

Market-wide selling suggests the dumping of index portfolios – just sell Australia – and another -0.6% drop in the Aussie suggests the orders were coming from offshore.

Bonds were also sold – the ten-year yield rose 7 points to 4.33% — which only added to the pain. Consumer discretionary was the worst performer with -2.4%.

The banks lost -1.9%, which says it all.

The best performers were communication services (-1.0%) and staples (-1.2%), despite the outgoing Woolworths Group ((WOW)) CEO yet again making a tool of himself in implying he didn’t know what return on equity was.

There was a technical element as well. The index dropped through 7700 in the first ten minutes and then it was on for young and old. The only saving grace is the index bottomed out down -167 at 2.30pm, before finding some brave souls.

China’s economy did nothing to help.

China’s GDP grew 5.3% year on year in the March quarter when economists had forecast 4.6%, and up from 5.2% in the December quarter. Can you believe it?

In the month of March, Chinese retail sales growth slowed to 3.1% year on year when 4.6% was forecast, down from 5.5% in January-February. Industrial production rose 4.5% when 6.0% was forecast, down from 7.0%.

Must have been a cracker Jan-Feb to provide the big GDP beat.

Fixed asset investment nevertheless rose 4.5% year to date versus 4.1% expectation and up from 4.2%.

The Hang Seng index fell -2.1%.

Back in the local market, it was not a good day to provide a quarterly update. In the ASX300, Zip Co ((ZIP)) fell -10.9%. This in contrast to initial appraisals by analysts which were universally positive. Hub24 ((HUB)) released its quarterly update and those shares weakened too.

It does not look like the cavalry will arrive today. Wall Street tried to bounce slightly last night but failed at the death. Our futures are down -23 points this morning.

Backtrack

Wall Street opened lower last night but eventually struggled its way to a small gain heading into the last hour, despite talk from the Fed chair.

Jerome Powell was supposed to have a chat with the Bank of Canada governor on the topic of the Canadian economy, but, of course, the only subject on anyone’s minds was the prospect of Fed rate cuts.

Having stuck to his guns as recently as early April, that it would be appropriate to begin cutting rates sometime this year, Powell clearly backtracked last night.

“More recent data shows solid growth and continued strength in the labour market, but also a lack of further progress so far this year on returning to our 2% inflation goal.”

In other words, the surprising strength of the US economy, coupled with a still-strong labour market and rising real wages, suggest there is no need to shift from a restrictive stance at this point.

The odds of a June rate cut have now slipped to 18%, July to 43% and September to 74%.

The US ten-year ticked up another 3 points.

Yet most (but not all) agree it likely doesn’t matter if the Fed doesn’t cut this year because the economy is strong. A strong economy leads to solid earnings, and that’s what really matters to stock valuations (ultimately).

To that end, Bank of America reported last night and despite a sound beat, its shares fell -3.5%. It’s not a buoyant mood on Wall Street at present.

However, UnitedHealth shares rose 5.2% on its result, leading the Dow to outperformance, despite a -2.1% fall for component Johson & Johnson on its numbers.

What could have been a modest bounce for Wall Street gave way in the dying minutes.

For those following the fortunes of Trump Media, the stock fell -18% on Monday night after the company announced plans to sell more shares. That would be to stem the haemorrhaging, it was presumed.

No. Trump Media plans to launch a streaming TV service, which is a rather capital-intensive pursuit. Last night the shares fell -14%, and are now down -71% from their day one high.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	2382.20	+ 0.20	0.01%
Silver (oz)	28.05	– 0.76	– 2.64%
Copper (lb)	4.26	– 0.04	– 1.02%
Aluminium (lb)	1.15	+ 0.00	0.39%
Nickel (lb)	8.02	– 0.08	– 0.94%
Zinc (lb)	1.24	– 0.01	– 0.54%
West Texas Crude	85.36	– 0.05	– 0.06%
Brent Crude	90.16	– 0.19	– 0.21%
Iron Ore (t)	106.07	+ 0.02	0.02%

China’s GDP result did not exactly inspire, with those month of March numbers weighing.

The Aussie is down -0.6% at US$0.6404.

Today

The SPI Overnight closed down -23 points or -0.3%.

New Zealand, the UK and eurozone report inflation data today/night.

The Fed publishes its Beige Book.

Bank of Queensland ((BOQ)) reports earnings.

Evolution Mining ((EVN)) and Viva Energy ((VEA)) provide quarterlies.

Novonix ((NVX)) holds its AGM.

Soul Pattinson ((SOL)) goes ex.

The Australian share market over the past thirty days…

Index	16 Apr 2024	Week To Date	Month To Date (Apr)	Quarter To Date (Apr-Jun)	Year To Date (2024)
S&P ASX 200 (ex-div)	7612.50	-2.25%	-3.60%	-3.60%	0.29%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AVH	Avita Medical	Upgrade to Accumulate from Hold	Ord Minnett
		Downgrade to Speculative Hold from Speculative Buy	Bell Potter
CTT	Cettire	Upgrade to Buy from Hold	Bell Potter
DRO	DroneShield	Downgrade to Hold from Buy	Bell Potter
EDV	Endeavour Group	Upgrade to Overweight from Equal-weight	Morgan Stanley
JHX	James Hardie Industries	Downgrade to Neutral from Outperform	Macquarie
UNI	Universal Store	Downgrade to Neutral from Buy	UBS

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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