The Overnight Report: Rotation Colours The Day

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World Overnight
SPI Overnight	7768.00	– 8.00	– 0.10%
S&P ASX 200	7769.40	– 0.30	– 0.00%
S&P500	5473.17	– 13.86	– 0.25%
Nasdaq Comp	17721.59	– 140.64	– 0.79%
DJIA	39134.76	+ 299.90	0.77%
S&P500 VIX	13.28	+ 0.80	6.41%
US 10-year yield	4.25	+ 0.04	0.88%
USD Index	105.65	+ 0.40	0.38%
FTSE100	8272.46	+ 67.35	0.82%
DAX30	18254.18	+ 186.27	1.03%

The Swiss cut, the Brits didn’t and US equities couldn’t hold new record highs, and rotated into ‘value’ instead.

By Chris Weston, Head of Research, Pepperstone

Good morning,

-European equity indices close higher but can we trust the move?
-Reversals in tech names as optionality and rich positioning take hold
-Gold finds form
-Asia equity opening calls

It’s been an eventful session for traders and plenty of moves are being made that have kicked up onto the radar. Our flow has been heavy in NAS100, gold, EUR, GBP, and USDJPY, with the JPY firmly out of favour from the market and getting a working over by the shorts.

EU equity markets closed higher in respective cash trade (the CAC40 closed +1.3%). Perhaps some repositioning from the shorts and taking inspiration from a Harris Poll that showed Le Pen’s RN party ahead, potentially gaining 220-250 seats, while the possible new PM Jordan Bardella offered somewhat reassuring words around future spending plans.

EU PMIs in the session ahead (18:00 AEST).

NAS100 and SPX500 futures both took inspiration from Europe but fell away as we approach the US cash equity open. We’ve seen solid cash equity volumes play out, but the price action in cash equity trade proved to be choppy and maybe this is pre-positioning ahead of today’s monster options expiry, but the market did not want to hold 5550 (SPX), and we can see in the options chain that there is a wall of call gamma at 5500, which someone has defended.

Given most of this optionality is related to Nvidia and big tech, and as we detailed in yesterday’s note, positioning in these stocks is incredibly rich, with the benefit of hindsight, it may be no surprise that we’re seeing Nvidia -3.5%, Broadcom -3.8%, Apple -2.2% and Semi’s more broadly lower. This has weighed on the broader index, but on a more supportive view, there have been signs of rotation into energy, utilities, and financials.

On the daily we see bearish reversals playing out and a potential change in the bull trend in play to confirm, we would need to see a lower low in the session ahead, and that itself (if it were to happen) doesn’t imply a collapse, but it could mean consolidation, the start of distribution and chop, but for those index traders, a potential change in their trading environment could be there.

US Treasury yields are modestly 3-4bp higher across the curve, and perhaps this has supported the USD.

In commodity markets, crude trades firmer by 0.7%. Copper is +1.6%, while iron ore futures are +0.9%.

Asian equity indices will feed off the leads with the ASX200 eyed +0.1%, HK50 -0.7% and NKY225 -0.1%. The ASX200 is choppy on the daily and holds a 7680 to 7800 short-term range, so we’ll see if that holds through trade today BHP’s ADR sits up 0.2%, so that seems indicative of how material names may fare on the open, and one suspects energy will take us higher.

Corporate news in Australia:

-According to the AFR, Cooper Investors, Hyperion Asset Management, Firetrail Investments, QVG Capital and Aware Super all made a hefty profit on their part ownership of Guzman y Gomez ((GYG)) yesterday. Meanwhile, the public debate about accountancy accuracy, real track record and ‘valuation’ rages on

-Yet another profit warning has come from Kathmandu, erm… KMD Brands ((KMD))

On the calendar today:

-James Hardie ((JHX)) investor briefing
-CSR ((CSR)) goes ex-div
-Judo Bank purchasing managers’ indexes (PMIs)

In the US:
-S&P Global PMIs
-the Conference Board leading index
-existing home sales data
-CarMax earnings
-FactSet earnings

Spot Metals,Minerals & Energy Futures
Gold (oz)	2373.60	+ 30.90	1.32%
Silver (oz)	30.78	+ 0.95	3.18%
Copper (lb)	4.56	+ 0.06	1.24%
Aluminium (lb)	1.14	+ 0.02	1.36%
Nickel (lb)	7.83	+ 0.02	0.31%
Zinc (lb)	1.29	+ 0.00	0.28%
West Texas Crude	81.25	+ 0.61	0.76%
Brent Crude	85.83	+ 0.56	0.66%
Iron Ore (t)	107.11	0.00	0.00%

Joseph Dahrieh, Managing Principal at Tickmill:

 Gold inched up after trading within a narrow range. The yellow metal’s price action reflected ongoing uncertainty regarding the Federal Reserve’s timeline for interest rate cuts, leaving traders cautious.

However, today’s US data supported the anticipated number of rate cuts for the remainder of the year. While Federal Reserve officials lean towards a single cut, market speculation suggests there could be two, driven by slowing inflation and cooling economic conditions.

These factors keep traders vigilant, waiting for more definitive cues that may emerge from upcoming economic reports.

The long-term outlook for gold remains bullish. Continuous demand from central banks, potential renewed purchases by the Chinese central bank, and upcoming political elections in major economies are expected to support gold’s appeal as a safe-haven asset.

Additionally, the initiation of easing cycles by several central banks further supports a positive trajectory for gold prices going forward.

The Australian share market over the past thirty days

Index	20 Jun 2024	Week To Date	Month To Date (Jun)	Quarter To Date (Apr-Jun)	Year To Date (2024)
S&P ASX 200 (ex-div)	7769.40	0.58%	0.88%	-1.61%	2.35%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BPT	Beach Energy	Downgrade to Sell from Neutral	Citi
		Downgrade to Neutral from Outperform	Macquarie
BTH	Bigtincan Holdings	Downgrade to Equal-weight from Overweight	Morgan Stanley
HLI	Helia Group	Upgrade to Outperform from Neutral	Macquarie
ILU	Iluka Resources	Upgrade to Buy from Neutral	Citi
NEM	Newmont Corp	Upgrade to Buy from Neutral	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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