The Overnight Report: Sigh Of Relief

This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies. For more info SHARE ANALYSIS: NAB

By Greg Peel

Two Steps Back, One Step Forward

Following another US inflation-driven wipeout on Wednesday, yesterday the ASX200 attempted to rally back, taking greater heart in Jerome Powell’s rhetoric on Wednesday night than Wall Street did, and was up almost 50 points at midday.

It wasn’t to be. The index faded away in the afternoon. We’ll have another go today – Wall Street has decided it liked the Fed statement and press conference – and our futures are up 35 points this morning.

The banks led the way yesterday following a well-received earnings result from National Bank ((NAB)), which included more capital allocated to the buyback. NAB shares rose 1.5% and as first cab off the earnings rank, led the sector up 0.7%, net of Bank of Queensland ((BOQ)) going ex.

Technology posted the biggest gain, despite Block ((SQ2)) falling -5.6% on rumours US regulators are looking at the books. Block has reported earnings this morning on Wall Street and is currently up 7.8% in the aftermarket.

A -6 point fall in the ten-year yield, post-Fed, provided some heart, but not for the consumer sectors.

Staples fell -2.5% on a -4.1% fall for Woolworths Group ((WOW)) following its quarterly update. Coles Group ((COL)) had updated more positively earlier in the week, but its shares still fell -1.9%.

Discretionary dropped -0.3% after Bapcor ((BAP)) provided a profit warning and was slammed -23.9%.

Real estate rose 0.4% with Pexa Group ((PXA)) topping the boards, up 10.9% as it pursues a deal with NatWest in the UK.

Energy fell -0.5% and utilities -0.7% on a sizeable fall in the oil price overnight on weekly US inventory data.

After a tough day on Wednesday, materials rose 0.4% on a bounce-back for gold.

The biggest fall was in communication services, down -0.8%. Telstra ((TLS)) has been lagging of late (Optus-TPG) and its shares fell -1.4% yesterday, potentially on some concern what the government’s efforts to sure up the 000 service will cost.

It’s been a choppy ride since the peak in late March, from which we’re down around -300 points. With the Fed out of the way, we can now look forward to next week’s RBA meeting.

Unlikely

Apple has reported this morning, and its shares are up 6% in the aftermarket, following a 2% gain during the session.

On Wednesday night, Wall Street was bracing itself for a more hawkish tone from the Fed chair following three consecutive months of hotter than expected inflation. But Powell did not change his tone, rather he maintained his more dovish stance. Another rate hike, he said, was “unlikely”.

The S&P500 shot up 1%.

Powell is still confident inflation will be lower by the end of the year, and that the next move will be a cut, but he is not quite as confident as he was, and the timing of a cut will still depend on the data.

The S&P closed down -0.3%. It is not likely this represented a quick about-face in sentiment, rather a chance for the bears to sell into the spike, as having given it some thought overnight, Wall Street was again positive last night.

There was no doubt in the bond market. The US ten-year fell -9 points on Wednesday night post-Fed and has fallen another -2 points last night to 4.57%.

The two-year yield has fallen from 5.02% pre-Fed – implying no more than one rate cut – to 4.87%, which is more of a each-way bet on one or two.

Wall Street will now look ahead to tonight’s jobs report, for which economists are expecting 240,000 additions, down from 303,000 in March. Wednesday night’s private sector report showed 192,000.

Commodities

Base metal prices are sliding away once more, as once more Chinese stimulus fails to excite. China is now closed until Tuesday.

With the US dollar falling on lower yields, the Aussie is up 0.7% at US$0.6568.

Today

The SPI Overnight closed up 35 points or 0.5%.

Markets are closed in all of China, Japan and Germany tonight.

Elsewhere, April services PMIs will be reported.

Macquarie Group ((MQG)) reports earnings today. Block, as noted, has already reported.

TPG Telecom ((TPG)) and Computershare ((CPU)) hold AGMs.

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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