The Overnight Report: Limbo

Release the Hounds

Would the last listed company in Australia please turn out the lights.

Lithium miners have been in either the top five index winners or losers lists more days this year than not, and more recently on the downside with lithium prices having rolled over. The rollover has sparked the interest of short sellers, which on yesterday’s action has proven a bad move.

Global lithium giant, US-based  Albemarle Corp (NYSE:ALB), made a takeover offer for Liontown Resources Ltd (ASX:LTR), quickly rejected by the board as being opportunistic given lower lithium prices. The stock jumped 68%, suggesting the bid can’t be that opportunistic.

Liontown was as of last week over 8% shorted. Over 9% shorted was Core Lithium Ltd (ASX:CXO), which jumped 15.4% in sympathy.

And the list goes on: Argosy Minerals Ltd (ASX:AGY) 16.3%, Allkem Ltd (ASX:AKE) 13.7%, Pilbara Minerals Ltd (ASX:PLS) 11.9%, Sayona Mining Ltd (ASX:SYA), also over 8% shorted, 10.8%…

Add in a bit of strength on the day for the big miners, offset by some profit-taking in gold, and materials rose 2.2%.

Having bailed out of energy on Monday on the back of Labor’s emissions cap policy, investors took on board a largely positive (or at least not overly negative) industry response and the fact oil prices rose 5%, overnight and drove energy back up 4.1%.

Investors also decided the global banking crisis is over, at least for now, and pushed financials up 1.1%. Materials, energy, financials – that’s your big three.

What to sell for funding? Healthcare fell -0.9%.

With the bid for Origin Energy Ltd (ASX:ORG) in the bag, utilities were quiet (+0.3%). Attention turned instead to a bid for craft beer & whiskey supplier United Malt Group Ltd (ASX:UMG). It jumped 31%.

With Invocare Ltd (ASX:IVC) having turned down a takeover bid this week, it’s all happening.

Not in the shops though. Retail sales rose 0.2% in February, as forecast, after rising 1.8% in January. It’s official, the post-covid summer binge is over. Adjusting for inflation implies sales volumes fell in February.

Consumer discretionary still managed to rise 0.5% yesterday, but we can put that down to improved overall market sentiment. Real estate also rose, by 0.4%, despite Aussie bonds following the US. The ten-year and two-year were both up 10 points.

Technology did, however, succumb (-0.6%).

Wall Street was slightly weaker overnight, as investors looked to take profits in the Big Tech names that have almost single-handedly held the indices within their range through the banking crisis. This week marks the end of the quarter.

Our futures are down -26 points.

Profit-Taking

The likes of Apple Inc (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) – both in all three indices – having proven safe havens during the turmoil of the last couple of weeks, but with US bond yields bouncing back, and the end of quarter approaching, the last two sessions have seen some give-back.

No one is much upset.

There is a concern these two companies, along with friends like Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG) and Amazon.com Inc (NASDAQ:AMZN), are just so, so big they distort the market and, in the past couple of weeks, obscure the fact most stocks are actually weaker.

The US ten-year rose 4 points to 3.57% last night and the two-year 12 points to 4.08%.

Despite the banking scare, US consumers remain for the most part optimistic, according to the Conference Board’s consumer confidence index. It has risen to 104.2 in March from 103.4 in February.

As to why the Conference Board’s measure and that of the Michigan Uni are completely at odds is unclear.

All talk last night was that of the SVB blame-game, following revelations the Fed had been aware of Silicon Valley Bank’s problems as early as 2021. How then, did it get to the point of a run on the bank?

There is a suggestion the San Francisco Fed was a little caught out by the swiftness with which companies communicated with each other to get your deposits out now.  For that we can thank, you guessed it, social media.

There have also been fingers pointed at Trump’s wind-back of bank regulations established post-GFC, but a poll conducted last night by CNBC suggested half the market simply blames mismanagement.

No doubt there’ll be further investigation, but for now Wall Street remains stuck in limbo, with the S&P500 entrenched in its range, and only Friday night’s PCE inflation read looming as a potential market-mover as the March quarter comes to a close.

Commodities

Nothing much to report.

With the US dollar index down -0.4%, the Aussie is up 0.9%. Why not? Clearly Australia’s for sale.

Today

The SPI Overnight closed down -26 points or -0.4%.

Australia’s February CPI result is out today.