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The Overnight Report: Hope Springs Eternal

By Greg PeelMarket OverviewOct 19, 2022 10:40
au.investing.com/analysis/the-overnight-report-hope-springs-eternal-200530584
The Overnight Report: Hope Springs Eternal
By Greg Peel   |  Oct 19, 2022 10:40
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Yields Ease

The ceremonial burning of the Truss mini-budget by the new Chancellor on Monday night saw UK bond yields plunge. US yields were little moved but yesterday the Aussie ten-year fell -11 points to 3.91% and the two-year -6 points to 3.31%.

This lit a fire under affected sectors.

Most notable was battered and bruised real estate, which jumped 3.2%. Not surprising was technology, which rose 4.2%.

The top ten ASX300 gainers were all of the technological variety, if not all actually in the tech sector. Gains ranged from Pointsbet Holdings Ltd (ASX:PBH), up 9.9%, to Novonix Ltd (ASX:NVX), up 19.0%. There were big moves in that range for heavily shorted stocks like Betmakers Technology Group Ltd (ASX:BET), Zip Co Ltd (ASX:ZIP) and Block Inc (ASX:SQ2).

Another notable gainer was Hub24 Ltd (ASX:HUB), which rallied 14.2% on a trading update.

Consumer discretionary (+2.2%) and communication Services (+2.3%) also cheered lower yields, bearing in mind Wall Street’s rally on Monday night had already offered up positive momentum from the open.

The heavyweight movers were the banks, up 2.0%. Macquarie Group Ltd (ASX:MQG) jumped 5.3%, attributed to a big jump overnight for Bank of America Corp (NYSE:BAC) on earnings, despite there being little connection. Goldman Sachs Group Inc (NYSE:GS) reported and rose 2.3% last night – that would be more relevant.

Energy was the only sector to close in the red (-0.6%), on lower oil and coal prices. Defensives utilities (+0.9%), healthcare (+0.7%) and staples (+1.3%) saw more modest gains.

Materials sat in the middle with a 1.7% increase, balancing out weaker gold miners, including a -20.9% fall for St Barbara Ltd (ASX:SBM) on a production guidance cut, and a new record price for lithium in China. Rio Tinto Ltd (ASX:RIO) warned full-year iron ore shipments would be at the low end of guidance, but still snuck up 0.1%.

The news from abroad did not deter the local market yesterday.

“The economy rebounded significantly in the third quarter,” said a senior Chinese official on Monday. The country’s performance was “outstanding”. But yesterday the government announced it had delayed the release of China’s September quarter GDP result.

Maybe Xi was not at all pleased with the result. Not when he’s basking in his own glory at the CCP summit. Amid covid lockdowns and a property market collapse, forecasts for growth are at a mere 3.3%, compared to a government target of 5.5% set at the beginning of the year.

Anyway, we had a 114 point rally on Friday, lost -94 on Monday and rallied 114 again yesterday. So we’re back to where we were on Friday basically, and where we were on September 20, and where we were on July 20, and at the beginning of 2021.

Wall Street has shocked overnight by managing to put two sessions together in the same direction, and thankfully up, so we should be set for the same today.

Except that the futures are down -29 points this morning, suggesting yesterday might have been a bit overdone.

Metal and oil prices were all lower overnight.

Two Days!

Netflix Inc (NASDAQ:NFLX) reported earnings this morning in the Wall Street aftermarket. Following two quarters of lost subscribers, analysts had suggested Netflix will need to add back at least one million subscribers or it's lights out. It added 2.4m, and is currently up 14%. Next month Netflix launches its cheaper, ad-interrupted service.

Is it a sign?

There was little faith in Goldman Sachs’ (Dow) result ahead of its release last night, given a plunge in corporate finance activity in the quarter, and following rival Morgan Stanley’s reported miss last week. But volatility is manna for trading desks, and Goldman’s 41% increase in trading profits had the stock up 2.3%.

If anything can take attention away from the Fed, particularly in a market that was considered oversold, it's earnings results. There are plenty this week, and lots more next week when Big Tech enters the frame.

And lo and behold, Wall Street managed to put together two days of rallies. Mind you, the Dow shot up 650 points from the open, driven by momo and FOMO no doubt, before US bond yields began to rise. That took some wind out of the sails.

Yields then fell back again, and the ten-year andtwo-year both closed down -2 points. Then just when things were picking up again, Apple announced a cut in iPhone production.

Apple Inc (NASDAQ:AAPL) managed to close higher on the day but lost early gains. Still, the Dow closed up 337 points and that’s nothing to be sniffed at on top of Monday night’s surge. The Nasdaq underperformed with 0.9%, on bond yield wobbles, but that’s on top of a 3.4% gain on Monday night.

In economic news, after falling -0.1% in August, US industrial production rose 0.4% in September, beating forecasts of 0.1%. This was released early on, and didn’t stop the early rally, despite it clearly being bad news on the Fed front.

Homebuilder confidence has fallen for the tenth month in row, down -8 points to 38. That’s a score of 3.8 out of 10 for confidence. They should come over here – plenty of rebuilding ahead.

In other news, Microsoft (NASDAQ:MSFT) announced it was laying off -1000 employees.

Commodities

The delayed Chinese GDP has no doubt made metal traders nervous, although iron ore’s hung in there.

Another addition to global recession expectations impacting the oils.

Despite the big fall in yields, the Aussie is up 0.3% at US$0.6310.

Today

The SPI Overnight closed down -29 points or -0.4%.

The UK and eurozone report CPI numbers tonight.

The Fed releases its Beige Book.

There are a lot of quarterly reports out today and AGMs being held. BHP Group Ltd (ASX:BHP), Northern Star Resources Ltd (ASX:NST) and Whitehaven Coal Ltd (ASX:WHC) are among the reporters, while Origin Energy Ltd (ASX:ORG) is one company holding its AGM.

"The Overnight Report: Hope Springs Eternal" was originally published on FNarena.com and was republished with permission.

The Overnight Report: Hope Springs Eternal
 

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The Overnight Report: Hope Springs Eternal

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