Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

The Overnight Report: Weak Demand

Published 20/10/2022, 10:37 am
Updated 09/07/2023, 08:32 pm

Blame the Little Girl

You may have noticed it’s been a bit wet about the place lately. Yesterday we learned the weather has impacted production from all of BHP Group Ltd (ASX:BHP), Beach Energy Ltd (ASX:BPT) and Whitehaven Coal Ltd (ASX:WHC) – being three resource companies to report quarterlies on the day.

We’d early learned of significant weather impacts on building material demand for Adbri Ltd (ASX:ABC), and Costa Group's (ASX:CGC) lemons.

As I look out the window, here’s a tip: it ain’t letting up.

Yet the local market proved resilient yesterday. The futures had suggested down -29 following Tuesday’s rally, despite another rally on Wall Street, possibly due to lower commodity prices. But by lunchtime the ASX200 was up over 40 points, before settling back to close smack on 6800.

No particular sector stood out yesterday. Energy fell -0.8% on lower oil prices. The only other sector to close in the red was technology (-0.1%). Megaport Ltd (ASX:MP1) updated and fell -22.1%.

No sector moved by a percent or more, but utilities went close with a 0.95% gain. APA Group (ASX:APA) rose 3.6% after confirming the acquisition of Basslink, which connects power from Victoria to Tasmania.

Industrials (+0.9%) and discretionary (+0.8%) also did well despite bond yields ticking back up a bit. Yields have taken off again in the US overnight so watch that space, and real estate, today.

Ditto financials, which rose 0.4% yesterday despite including insurers, who must be having sleepless nights.

The tick up in yields came even as ANZ Bank’s job ads series showed a -5.9% fall – the biggest in 13 months – which as far as bad news goes, is great news for the RBA and local rate trajectory.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Oil prices were up last night so energy should do well today, but metal prices are down again, and so is Wall Street, as yields are up. Our futures closed down -47 points this morning.

Growing But Slowing

Growing but slowing. This was the assessment of the US economy within the Fed’s latest Beige Book, released last night. Six regional Fed banks reported growth, four were flat and two saw declines — “with slowing or weak demand attributed to higher interest rates, inflation and supply disruptions”

“Price growth remained elevated, though some easing was noted across several districts”.

Retail spending was flat, auto sales were sluggish and the housing market was slammed by surging mortgage rates, the survey found, while travel and tourism improved and manufacturers held steady.

This assessment would not have much surprised Wall Street. The session started well, with sentiment driven by the strong earnings result from Netflix (NASDAQ:NFLX) in the prior aftermarket. It closed up 13%.

But the mood changed when the Treasury held an auction of 20-year bonds, and didn’t get much interest (pardon the pun). Subsequently the US ten-year yield rose 13 points to 4.13% and the two-year rose 11 points to 4.55%.

Where goes the two-year yield goes Wall Street, in the opposite direction.

While the Dow did recover somewhat to the close from a -200 point drop, all S&P500 sectors closed in the red bar energy.

Biden’s slightly desperate move to head off losses at the midterms, by announcing a further release of oil from the Strategic Reserve, has backfired. Not only have analysts pointed out that SPR releases might be short term bearish for oil but long term bullish, as they have to be replenished, Biden actually said he’d rebuild when prices were lower.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

So it’s a bit zero-sum, and the real mover last night was a decrease in US weekly inventories.

Meanwhile, the macro of bond yields is overriding the micro of earnings reports, which to date have been not-as-bad-as-feared. The run-rate to date is 69% beats, but only 10% of the S&P500 has reported so far.

In this morning’s aftermarket, earnings results had Tesla (NASDAQ:TSLA) down -3%, having fallen -30% in a month, and IBM (NYSE:IBM) (Dow) up 4%.

The Minneapolis Fed President said last night that the Fed could potentially pause its rate hikes at some point next year if central bankers see clear evidence that core inflation is slowing. However, he also said that the Fed may need to push its benchmark policy rate above 4.75% if underlying inflation does not stop rising.

It would be better to overshoot than to undershoot, he said.


On stronger US bond yields, the US dollar is up 0.8%, again weighing on commodities.

The so-called inflation hedge, ie gold, is not coping.

Nor is bitcoin for that matter, which has been flat for five months.

The Aussie is down -0.6% at US$0.6272.


The SPI Overnight closed down -47 points or -0.7%.

We’ll see September jobs numbers today.

There’s a long list of AGMs and quarterly reports today. AGMs include those of fund managers Magellan Financial Group Ltd (ASX:MFG) and Perpetual Ltd (ASX:PPT), along with Transurban Group (ASX:TCL).

Quarterly reporters include Santos Ltd (ASX:STO) and Woodside Energy Ltd (ASX:WDS).

"The Overnight Report: Weak Demand" was originally published on and was republished with permission.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.