The Overnight Report: Old News

This story features IRESS LIMITED, and other companies. For more info SHARE ANALYSIS: IRE

By Greg Peel

Just a Flesh Wound

Clearly investors stood aside on Wednesday as the ASX200 suffered a rolling sell-down on lockdown worries, in which sector falls were largely uniform. With nothing untoward coming out from the Fed overnight, the way was clear to buy the dip from the open yesterday.

It was nonetheless blink-and-you’ll-miss-it, with the index gaining 37 points in the first twenty minutes of opening rotation and closing up 38.

Unlike Wednesday’s fall, yesterday’s rally did not include all sectors.

With the Nasdaq bouncing back on Wednesday night following Tuesday night’s plunge, technology rose 2.6%. A 5.8% rebound for Zip Co ((Z1P)) suggests maybe the BNPL stocks had been sold down enough.

But financial market software company Iress ((IRE)) announced yesterday a guidance upgrade and share buyback, oh and a takeover offer, subsequently rejected. It rose 13.9%.

Materials was otherwise the biggest index contributor in rising 1.5%. Metals prices were mostly higher overnight but it seems Rio Tinto’s ((RIO)) dividend largesse boosted sector sentiment.

Iron ore is down -3% to under US$200/t subsequently.

We then drop down to healthcare’s 0.8% gain. A point to note today: CSL’s ((CSL)) US remdesivir distributor Gilead reported this morning in the US aftermarket. Within the numbers, the standout was a huge beat on remdesivir sales.

But the Aussie has jumped 0.4% back to US74c.

Telcos also rose 0.8% but there was otherwise an apparent rotation out of defensives, given staples fell -0.3%, utilities -0.5% and property was the big loser on -1.3%, having been the only sector on Wednesday to post a gain.

Stockland ((SGP)) was the second worst performer in the index with a -2.5% fall, as the CFO announced he would step down, but falls of around -2% were posted by all of BWP Trust ((BWP)), GPT Group ((GPT)) and Abacus Property ((ABP)), to make up the rest of the top five losers’ board.

The banks closed flat as everyone tries to work out exactly what government subsidy Sydney workers and businesses are eligible for within the maze of support.

In other news, the PBoC injected 30bn RMB in seven-day liquidity into the system yesterday to halt the rush out of stocks and bonds sparked by Beijing’s crackdown on US-listed stocks. Rumour had the government in buying stocks, and state-owned media announced the sell-off had gone too far.

The Hang Seng rose 3.3%. China’s free markets will bloody well do what the government tells them.

Some relief for a2 Milk ((A2M)). It rose 3%.

Harking back to yesterday’s tech sector rebound, Amazon has reported this morning in the US aftermarket and is currently down -7%. Nasdaq look out tonight.

Missed it by that much

Amazon beat on earnings but it was guidance that spooked investors. As was the case with Facebook the day before regarding advertising, in simple terms Amazon’s surge in online sales last September quarter is going to be tough to repeat, if ever.

Facebook fell -4% last night.

Millennial hero Robinhood IPO’d last night and not only failed to split the arrow, it missed the target altogether, dropping -8%. There was a lot of schadenfreude being expressed on social media by those still upset by the men in tights shutting down trading in GameStop in January.

The big news of the day was the release of the first estimate of US June quarter GDP. Forecasts were for 9.1% annualised growth. The result was…drumroll…6.5%.

The miss has been blamed on the government spending segment, with the government winding down stimulus payments in the quarter. But consumer spending jumped 11.8% — four times the average quarterly rate.

The response? The Dow and S&P500 closed at new all-time highs. The ten-year bond rate rose one point to 1.27%. The only weakness was evident in a -0.4% drop for the US dollar index.

The Fed is not about to leap into action on that number.

The rotation game continued. The Nasdaq underperformed on Tuesday night, outperformed on Wednesday night and underperformed last night. The Dow underperformed on Wednesday night and outperformed last night. While earnings results remain the focus, all the in-out, in-out suggests investors are really not sure whether to back growth or cyclicals from here.

Did the June quarter represent “peak growth” (bearing in mind there are GDP revisions yet to follow)? Even if it did, the expectation is for slower economic growth from here but still strong numbers for a good while yet.

Commodities

The US dollar drop helped base metals, and there was probably some flow-through in sentiment from Beijing’s liquidity injection.

Dollar movements rarely impact on iron ore.

Gold re-awoke, on the dollar’s drop and assumptions of “QE forever”, while the oils fared well too.

The Aussie matched the greenback’s fall with a 0.4% rise to US$0.7397.

Today

The SPI Overnight closed up 7 points. The ASX200 is -30 points shy of its all-time high.

The eurozone releases its June quarter GDP tonight.

The US will see June PCE inflation.

China releases July PMIs.

Australia will see the June quarter PPI, and month of June private sector credit.

Origin Energy ((ORG)) and Mineral Resources ((MIN)) provide production reports today.

The Australian share market over the past thirty days…

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