The Overnight Report: Sunshine Friyay

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A positive performance of equity markets globally is expected to boost the Aussie sharemarket today.

The Nasdaq has been lagging the S&P500 and Dow Jones Industrial Average, while over in Europe, the Euro Stoxx 50 and the FTSE100 closed up respectively 0.6% and 0.8%.

The yield on the US 10y bond rose 3bp to 4.43%. Oil prices rose, on geopolitical concerns after reports that Russia launched missiles at Ukraine. WTI futures rose 1.8%, trading at USD70.1/bbl. Gold rose 0.5% to USD2,669.5/oz.

The Federal Reserve is expected to move into the next policy phase in which rate cuts will no longer be announced after every meeting.

Another -25bp reduction in December is currently seen as “balanced” by economists at ANZ Bank.

By Chris Weston, Head of Research, Pepperstone

Good morning.

What worked on the day were S&P500 financials, utilities, industrials, and energy. US large-cap banks are well-owned, but the XLF ETF has printed a new all-time high, with the smaller/regional banks also finding some form.

Comms services and consumer discretionary plays take a back seat on a day where 87% of S&P500 companies closed higher.

S&P500 futures have responded to the broad-based participation and printed a third daily higher high, suggesting the chances of new all-time highs coming into play have increased and the stage is setting up nicely for a strong seasonal rally into year-end.

The prospects of a seasonal “Santa Claus” rally in US equity do the rounds again, and statistically this phenomenon is given real credence by how the S&P500 has performed going into December.

Using 20 years of monthly S&P500 returns, in the years that the S&P500 was up by 10% or more between Jan-Nov, the S&P500 saw an average monthly gain in December of 2.2%, with the S&P500 closing higher in December in 90% of occurrences.

The fact the S&P500 has gained 24.7% YTD, subsequently increases the prospect of a chase by active managers into year-end and raises the prospects of seeing “Santa” used more liberally in market commentary.

It also suggests a need for pension funds, mutual funds, and sovereign wealth funds to rebalance, and that may be countering force to those chasing performance into year-end.

Turning to Asia, the ASX200 is positioned for an 0.9% opening gain at 8400.

The lead from the US banks should see ASX200 banks find form, with industrial plays also working.

BHP Group’s ((BHP)) ADR suggests a flat open, indicating materials should open on a sanguine note.

By way of event risk, we see Japan’s Oct CPI, then into EU/UK/US trade we get UK retail sales, EU, UK and US PMIs and the US University of Michigan sentiment survey.

On the calendar today:

-Australia Nov PMI

-Japan Oct CPI & PMI

-UK Oct Retail sales

-US Nov Uni of Mich

-Global PMIs

-Adore Beauty ((ABY)) AGM

-Arena REIT ((ARF)) AGM

-Iperionix ((IPX)) AGM

-Lovisa Holdings ((LOV)) AGM

-Megaport ((MP1)) AGM

-NextDC ((NXT)) AGM

-Orica ((OR)) ex-div 28.00c

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

Corporate news in Australia:

-The a2 Milk Company ((A2M)) has lifted revenue guidance and will start paying dividends following stronger-than-expected sales and higher dairy prices globally

-British sports streaming multinational DAZN reportedly interested in acquiring Foxtel ((NWS))

-AFR reports WiseTech  Global ((WTC)) is investigating contracts worth over $100,000 awarded to founder Richard White’s ex-lover, raising fresh scrutiny of his personal-business entanglements

-US bribery charges to Adani hits the share price of Adani shareholder GQG Partners ((GQG))

-HMC Capital ((HMC)) upsizes DigiCo REIT IPO to $2.75bn

-Several senior leaders of Close the Loop ((CLG)) are leaving the company following a takeover bid by Adamantem Capital

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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