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The Overnight Report: Off The Rails

By Greg PeelMarket OverviewNov 22, 2022 10:55
au.investing.com/analysis/the-overnight-report-off-the-rails-200536670
The Overnight Report: Off The Rails
By Greg Peel   |  Nov 22, 2022 10:55
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Death in China

On a comeback close for Wall Street on Friday night, the ASX200 jumped over 20 points from the open yesterday, but thereafter no one was interested. The index sank quietly all day to a lacklustre close.

News over the weekend was that Chinese covid cases had increased sevenfold in just two weeks and that three deaths had been reported – the first in six months. The manufacturing city of Guangzhou has been locked down and Shijiazhuang is under stay-at-home orders.

Going well, this zero-covid policy.

The materials sector subsequently closed down -1.5% and energy -0.9% to provide the greatest drag.

Utilities bucked the trend (+1.8%) to be the best performing sector by percentage. AGL Energy Ltd (ASX:AGL) led the index yesterday with a 4.2% gain. There was no particular news, but one assumes the bid for Origin Energy Ltd (ASX:ORG), leaving AGL at the altar, and the new-look AGL board, all add up to a possible bid for AGL from elsewhere.

Technology was down -1.5%, led by a -4.3% fall in Block Inc (ASX:SQ2) after the government revealed it is considering applying credit card company regulations to BNPL.

Like that was never coming.

The banks provided the main counter to resources (+0.5%), with some help from staples (+0.9%) and healthcare (+0.5%).

There is little point in me needlessly waffling on any further. It was a quiet day, and this week will likely bring more of the same with Wall Street not much interested.

That said, I note the S&P500 has closed down -0.4% and metal prices tanked overnight on China woes, yet our futures are up 32 points this morning.

Seems ambitious. And you’ll need to find some willing players.

Not Much Difference

Wall Street wasn’t exactly lit with excitement last night either.

Fresh restrictions in China also weighed but in a nod to the seventies and wage-price spirals, one of the two largest US railway unions rejected a White House-brokered labour agreement, raising the possibility of a potential strike by early December, which would suggest further supply-chain issues that would continue to drive inflation.

The good news for Christmas shoppers is that retailers will already be well and truly stocked and ready to go, with this week’s Thanksgiving sales the kick-off, so there should be no impact on supply were there to be a rail strike.

The bad news is that if a deal is not reached, a strike could cost the US economy -US$2bn a day.

Who’s next? The teamsters?

If we really are going to get a seventies Christmas this year, then in Australia we should be expecting strikes from postal workers, airport baggage handlers and brewery workers. Ah those were the days.

The Cleveland Fed president and FOMC voting member Loretta Mester appeared on CNBC last night and all but confirmed the Fed will only go 50 next month, while emphasising that was only her personal opinion. When pushed as to whether a slowing in pace would then lead to 25 point hikes in 2023, Mester refused to be drawn other than to insist the latest data would inform that decision.

The minutes of the November Fed meeting will be released tomorrow night.

There was absolutely no response from Wall Street to Mester’s musings. The market locked in 50 points long ago.

The mood was nonetheless dour on Wall Street last night and the indices slipped towards the close.

The Dow was supported by a 6% gain for Disney (NYSE:DIS), after it was announced the current CEO would be replaced by a new CEO who was actually the previous CEO.

Commodities

The WSJ reported last night that OPEC was prepared to increase production in order to help ease tensions with the Biden administration and provide a cushion as new efforts aimed at curbing Russia’s energy industry kick in on December 6.

Oil prices fell -6%.

The Saudi energy minister then responded with, and I paraphrase, don’t be bloody ridiculous. If anything we will cut production to maintain a stable demand/supply balance.

Oil prices bounced 6%.

Falls in metal prices were all about China but also a resurgent US dollar, which jumped 0.9% overnight. This is mainly due to renewed weakness in the euro, which is 57% of the trade-weighted dollar index.

The Aussie is thus down -0.9% at US$0.6603. Here we go again.

Today

The SPI Overnight closed up 32 points or 0.5%.

The RBA governor will speak today. He’s been in hiding since the release of the RBA’s own review which decided the “no hike before 2024” call was a complete [insert word here]-up.

The US will see house prices.

Technology One Ltd (ASX:TNE) will report earnings, while today’s long list of AGMs includes those of Bluescope Steel Ltd (ASX:BSL), Fortescue Metals Group Ltd (ASX:FMG) and Star Entertainment Group Ltd (ASX:SGR).

Amcor PLC (ASX:AMC) goes ex (quarterly dividend).

"The Overnight Report: Off The Rails" was originally published on FNArena.com and was republished with permission.

The Overnight Report: Off The Rails
 

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The Overnight Report: Off The Rails

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