The Overnight Report: Sunny Side Up

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            [1] => ((PTM))
            [2] => ((WA1))
            [3] => ((IPL))
            [4] => ((TCO))
            [5] => ((WGX))
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            [1] => PTM
            [2] => WA1
            [3] => IPL
            [4] => TCO
            [5] => WGX
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This story features ANZ GROUP HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: ANZ
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Weston, Head of Research, Pepperstone

Good morning.

-US equity rallies for a seventh straight day
-Tech leads the charge, with all sectors working
-Asia equity opening calls the NKY225 on a tear
-US CPI ahead an event risk that needs focus

There’s a lot of green on screen and the market goes into US CPI in the session ahead with the bulls firmly bossing proceedings.

It’s hard to pinpoint a reason for the rally, so we’ll just go with the fact that the market was open flow and momentum work to its own rhythm, and as many of the day trading community will attest to, if the market goes on a run, you just must align with the moves being made on the dancefloor.

Price action in the S&P500 was suggestive that the buyers were exhausted yesterday, but they’ve been thoroughly reinvigorated, and we see an absolute textbook intraday trend day, with the index setting off higher after an hour of cash trade, with the buyers showing absolutely no regard for the 5600-round number, or any of the raft of technical indicators which suggest grossly overbought conditions.

Seven consecutive days of gains in the S&P500 are rare, and we haven’t seen this run of form since August 2023, and only nine occurrences of such form since 2020. In 66% of those occurrences (when the S&P500 gained for 7 days), the S&P500 ultimately fell the following session, but ultimately in most cases, it was just profits being banked and shortly after the index pushed higher momentum favours the brave.

Tech has once again been at the heart of the move, with Apple (+1.9%) pushing to new highs and into US$232.98 guiding to 10% more iPhone shipments will keep the dream alive, but it’s truly hard to chase this name up at these levels. Similar for Nvidia which closed at US$134.91, and eyes a re-test of the ATHs of US$140.76, but it takes a brave soul to bet against any of these plays at present. All S&P500 sectors closed higher, although it was the banks that came in at the bottom of the pack.

The goodwill from US and EU equity markets will spill over into a solid open for Asian equity. The ASX200 has been coiled in a tight range of late, but the open should see the buyers making a statement, with the index eyed to test the 7900 level and an assault on the 16 May highs is on the cards.

The question will be whether the bulls can keep the index supported once cash equity trade gets underway, or whether traders use the opening strength to offload longs as we roll on through the day – understanding that the US CPI print could promote gapping risk for individual equities for Fridays open. The challenge for the bulls then is to see a session close above 7900.

While bond traders saw a solid US 10-year Treasury auction, there’s been very little move across all parts of the Treasury curve, and this has resulted in a flat close in the USD index (DXY).

Commodity markets have taken somewhat of a backseat, although we see modest gains in crude, copper, and gold, with iron ore futures and Natgas down smalls.

By way of event risk, it’s really all about US CPI (due at 22:30 AEST / 13:00 UK) the consensus is for US core CPI to round to 0.2% m/m (3.4% y/y) which would reinforce the -18bp of cuts priced into US swaps markets for the September FOMC meeting (or a 72% probability implied).

We’d need a core CPI print above 0.3% m/m, driven by higher core services to see better USD buying and equity sellers, but we could just as easily see a print below 0.2% m/m a fate which would likely keep the risk on rally pumping.

Recall, that Jay Powell has shifted some of the weight of Fed thinking away from a heavy concentration of their thought process on inflation towards the labour market but while we could get a number today that’s in line with the consensus, an outlier print could set the markets off it is a risk we need to consider and potentially manage.

Corporate news in Australia:

-ANZ Bank ((ANZ)) overstated the value of government bonds it traded by over $50bn in a year in what the AFR describes as possibly a “bank-defining scandal”

-Asset manager Platinum Asset Management ((PTM)) experienced net outflows of -$234m in June to finish the month with total funds under management of $13.1bn, versus $13.5bn as at May 31

-WA1 Resources ((WA1)) $50m placement at $17 per share, a -9.8% discount

-Yesterday, Incitec Pivot ((IPL)) announced negotiations for the sale of its struggling fertilisers business have come to naught

On the calendar today:

In Australia:

-Transmetro Corp ((TCO)) ex-div 5c (100%)

-Westgold Resources ((WGX)) ex-div 1.25c (100%)

Elsewhere:

-Japan May machine orders

-German CPI

-US Jobless claims

-US June CPI

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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