The Overnight Report: Cautiously Positive

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Risk appetite was probably due for a bounce and last night equity markets duly responded.

US bond yields edged lower, with the yield on the US 10y bond down -1.6bp to 4.42%.

The Dow Jones still ended -0.13% lower, but the S&P500 added 0.4% and the Nasdaq gained 0.6%.

The US Dollar Index retreated by -0.3% to 106.30. Oil prices rose, with WTI up 2.9% to USD68.95/bbl. Gold lifted 0.6% to USD2,609/oz.

By Chris Weston, Head of Research, Pepperstone

Good morning.

The mood on the floors has lifted after Friday’s pullback in risk, and the equity bulls have defended Friday’s lows in S&P500 and NAS100 futures, with modest gains seen across the US equity space.

The Dow may have closed -0.1% lower, but we see the S&P500, NAS100, and Russell 2k have gained modestly on the day, and that should support the equity open in Asia.

The equity bulls will claim victory on the day, but the moves remain unconvincing, with the intraday tape seen in the US cash indices offering limited conviction, with the buyers lacking the impetus to chase this early session rally higher.

Equity breadth and participation were positive, with 64% of S&P500 companies closing higher on the day, with energy, communication services, and staples working.

Tech and financials closed +0.2% (as a sector) and without the leadership from these sectors, the S&P500 has been well anchored.

On a cross-asset basis, we see crude rallying firmly off recent range lows, with headlines from the Middle East and Ukraine prompting a concentrated short position to part cover.

Gold (+1.9%) has also found a better tone on these same headlines and offered an additional tailwind from a weaker USD and a decline in US real rates.

Certainly, the 3% rally in crude has been well traded, with a mix of organic longs worked off the range low of US$70.72/bbl (Brent futures), and shorts covering from an extended position.

Whether this move builds is debatable, as the demand/supply equation in the oil market is still shaky.

Gold worked into a high of US$2615/oz, before flatlining through most of US trade, and certainly many have been surprised by the range expansion on the day and the solid early intraday trend seen.

With price closing above the 5-day EMA, it seems as though the gold market may have put in a short-term low, and while the fate of the impending move sits with near-term USD flows, gold may be in for better days.

With limited US economic data to react to, bond traders have eased back on short exposures, with modest buying interest seen across the US Treasury curve, with yields across the different maturities some -2 to -3bp lower.

Turning to Asia, as the various equity markets absorb the leads from the S&P500, commodities, the USD, and rates, early signs show that the major bourses should open on the front foot.

By way of event risk for the session ahead, we get the RBA Nov meeting minutes.

On the calendar today:

-Nov RBA minutes

-Eurozone Oct CPI

-US Oct Housing starts & permits

-ALS Ltd ((ALQ)) earnings report

-BHP Group ((BHP)) investor briefing – site visits Escondida and Spence

-Biome Australia ((BIO)) AGM

-BlueScope Steel ((BSL)) AGM

-Capricorn Metals ((CMM)) AGM

-De Grey Mining ((DEG)) AGM

-Infomedia ((IFM)) AGM

-Monadelphous ((MND)) AGM

-Ridley Corp ((RIC)) AGM

-Seek ((SEK)) AGM

-Sonic Healthcare ((SHL)) AGM

-Santos ((STO)) investor briefings

-TechOne ((TNE)) earnings report

-Brisbane-based testing company ALS Ltd’s ((ALQ)) interim report showed a 14% increase in revenues at $1.46bn and a 3.9% increase to underlying net profit at $152.3m

-KMD Brands’ ((KMD)) Q1 showed total group sales dropped by -5.8%

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-Elders ((ELD)) is acquiring Delta Agribusiness for -$475m

-Web Travel Group ((WEB)) halts ASX trading over potential FY24 adjustments, with no impact on first-half results

-The ACCC questioned Woolworths Group’s ((WOW)) competitive practices and potential land banking at the regulator’s rare public inquiry scrutinising supermarket giants’ pricing and market power amid cost-of-living concerns

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.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

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