The Overnight Report: In Tech We Trust

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Portfolio rotation out of ‘value’ into technology characterised price action in the US overnight, with investors largely ignoring rising risks from the ongoing war in the Ukraine as well as soft economic data.

Amcor has announced a mega-acquisition (in a relative sense) as management aims for global domination (in packaging).

By Chris Weston, Head of Research, Pepperstone

Good morning.

We’ve seen quite the turnaround in US equity futures, with geopolitical headlines involving Russia, Ukraine, and the US, pushing a risk-off tone in markets through European trade.

However, the flows shifted as we approached US cash equity trading and the buyers stepped up with vigour, reversing NAS100 and S&P500 futures hard off the lows, with the buyers dominating all through US trade.

Tech has dominated, with the S&P500 tech sector +1.2%, driven predominantly by a near 5% gain in Nvidia, with the market seemingly happy to run long exposures into the upcoming Q325 earnings.

Whether these buying flows and increasingly bullish pre-positioning sufficiently raise the risk of disappointment is now a clear consideration, with expectations from the buy-side firms (hedge funds) for Q425 sales guidance now above US$40bn, higher than where the sell-side (investment banks) see revenue Q425 guidance at US$37-$38bn.

S&P500 Communication Services plays also add points with Alphabet, Netflix, and Meta working.

Energy and financials underperform, with value areas of the US equity market shunned on the day once again we see rotation playing out, where the frequency of the rotational flows from money managers should be taken as a sign of a bullish market, and today all the action has been in momentum and growth plays.

Gold also gets good attention from traders. Having recently found strong support at the 100-day moving average (MA), gold pushed through Monday’s high of US$2615/oz and while the headlines from Russia/Ukraine offer a compelling tactical reason to own gold, in the absence of any real movement in the USD, and with US 10yr real rates falling -3bp, gold pushed into a session high of US$2639 although after hitting the highs, the price action through US trade has been whippy and any intraday session trend broke down.

Turning to Asia our calls for the various Asia equity bourses suggest modest weakness for the respective opens.

The positive net change in the S&P500 is a psychological tailwind, but S&P500 futures are largely unchanged from the levels seen in late Asian trade yesterday.

Aus SPI futures had some ride from the overnight session, trading lower into 8313 before following S&P500 futures higher, and currently sit -0.1% on the session.

After the ASX200 cash (XJO) hit a new all-time high yesterday, the index tailed off into the close, so we’ll see if market players support the early modest dip or continue to take length off the table with a lacklustre lead from US banks, energy and materials plays, we’ll need to see something emphatic from ASX tech to support.

On the calendar today:

-Japan Oct machine tool orders

-Japan Oct trade balance

-UK Oct CPI & PPI

-3P Learning ((3PL)) AGM

-Abacus Group ((ABG)) AGM

-Amcor ((AMC)) ex-div 19.19c

-Abacus Storage King ((ASK)) AGM

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

-Boss Energy ((BOE)) AGM

-Charter Hall ((CHC)) AGM

-Clarity Pharmaceuticals ((CU6)) AGM

-Downer EDI ((DOW)) AGM

-Global Lithium Resources ((GL1)) AGM

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

Corporate news in Australia:

-Amcor ((AMC)) in largest acquisition in its history offering US$8.4bn in scrip for Berry Global

-Furniture retailer Nick Scali ((NCK)) has said its ability to achieve its prior guidance is at risk, after one of the freight forwarders it uses fell into liquidation

-Charter Hall ((CHC)) and Hostplus have extended their takeover bid for Hotel Property Investments ((HPI)) and are calling for an independent valuation to sway more investors

-Australian lithium miners Sayona Mining ((SYA)) and Piedmont Lithium ((PLL)) have agreed to merge

-Bigtincan ((BTH)) is considering a merger with Investcorp AI Acquisition Corp to list on the Nasdaq

-Pexa Group ((PXA)) is considering acquiring Canadian financial software company Dye & Durham for approximately -$1.2bn to expand its operations into the UK market

-Newmont Corp ((NEM)) has sold its Musselwhite operation in Canada to Orla Mining

-Adamantem Capital is in exclusive talks to acquire Close the Loop ((CLG))

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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