The Overnight Report: Back To Business

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By Greg Peel

Grafting

Yesterday the ASX200 opened up 45 points, drifted lower, and then held gains through the afternoon ahead of today's CPI data. We did not need to rally as strongly as Wall Street had on Monday night, as we had already staged that rebound on Monday, feeling more relaxed over Middle East tensions.

Despite howls of protest from bank analysts, the banks were the man driver yesterday with a 1.1% gain. Bank analysts are in (near) concert in suggesting valuations are too high and the near term pathway is fraught, to the point Citi now has a Sell on all four majors.

The Aussie ten-year yield fell -5 points, which helped the banks and other rate-sensitive sectors with the exception of industrials (-0.3%). Brambles ((BXB)) fell -6.3% on its quarterly update.

The other losing sectors were energy (-0.8%), which continues to remove a Middle East risk premium even though oil prices are relatively steady, and materials (-0.3%) thanks to the big plunge in the gold price overnight.

Materials was the only sector to close in the red on Wall Street last night. Base metal prices have pulled back sharply due to a lack of fresh Chinese monetary stimulus. Not good for our sector today.

Technology posted the biggest gain yesterday (+1.7%), following the Nasdaq, while healthcare had a strong session (+1.2%) as the biggies once again rallied and rumours arose of Wesfarmers ((WES)) being interested in Ramsay Health Care ((RHC)), which gained 2.9%.

Only consumer discretionary failed to enjoy lower rates (+0.1%), likely cautious ahead of the CPI.

ANZ Bank economists are forecasting an increase in monthly inflation growth to 0.8% for the March quarter compared to 0.6% in the December quarter, but a fall to an annual rate of 3.5% from 4.1% in December.

Interestingly, yesterday's round of flash estimates for global PMIs had Australia's services PMI dropping to a two-month low of 54.2 in April still expanding, but at a slower pace. The RBA has oft highlighted the "stickiness" of services inflation, which relates largely to insurance premiums along with anything else.

I think we're all well aware.

Electrifying

Tesla has reported this morning in the US aftermarket and its shares are currently up 11%.

The stock had been down over -40% year to date and as early as Monday Musk was cutting EV prices yet again in an increasingly competitive market suffering from easing EV demand.

The International Energy Agency nonetheless believes one in every five cars sold globally in 2024 will be an EV; half of all cars in China and a quarter in Europe.

Expectations heading into Tesla's result were very low, so a bounce will not have surprised.

Visa has also reported and its shares are up 2.6%.

Otherwise, Wall Street has its mojo back and is gradually recovering its run of losses. The S&P500 fell around -300 points from its high but has regained around 100.

Earnings results are helping, with 76% of the 20% of S&P500 companies reporting to date exceeding expectations.

Spotify was another winner last night, the stock rising 11% despite a dip in subscribers, attributing its success to efficiencies, which is code for layoffs.

Meta reports tonight.

A rosy results season could all become undone on Friday night nonetheless when March PCE inflation data are revealed. Still, economists do not expect the PCE to be as "hot" as the CPI, given different basket weightings among price segments.

The May Fed meeting then follows next week. The statement will be released on May Day.

Oh dear.

Commodities

If commodity markets were buoyed by a better than expected 5.3% GDP result from China, it tuns out every silver ling has a cloud. As a result of the stronger number, the PBoC has decided not to lower interest rates when the assumption was that it would.

Hence, the falls in base metal prices, which have been running on increased Russian sanctions.

With US bond yields now stabilising, the US dollar index ceased its run up last night and fell -0.4%, which was enough to have the Aussie up 0.6% at US$0.6490 ahead of the CPI.

Today

The SPI Overnight closed up 27 points or 0.4%, cheering Wall Street strength.

The US will see durable goods orders tonight.

Aside from the CPI, locally we'll see a swathe of quarterly reports being crammed in ahead of tomorrow's holiday (and the cheeky extra day on Friday).

Beach Energy ((BPT)), Fortescue ((FMG)), Lynas Rare Earths ((LYC)), Mineral Resources ((MIN)) and Regis Resources ((RRL)) are just some of the production reports due.

Atlas Arteria ((ALX)) and Insignia Financial ((IFL)) provide quarterly updates, and Woodside Energy ((WDS)) holds its AGM.

Australian and New Zealand markets are closed tomorrow.

The Australian share market over the past thirty days

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