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The Overnight Report: The Name Is Bond

Daily Market Reports | Jan 19 2022

World Overnight
SPI Overnight 7249.00 – 66.00 – 0.90%
S&P ASX 200 7408.80 – 8.50 – 0.11%
S&P500 4577.11 – 85.74 – 1.84%
Nasdaq Comp 14506.90 – 386.86 – 2.60%
DJIA 35368.47 – 543.34 – 1.51%
S&P500 VIX 23.09 + 3.90 20.32%
US 10-year yield 1.87 + 0.09 5.25%
USD Index 95.76 + 0.50 0.52%
FTSE100 7563.55 – 47.68 – 0.63%
DAX30 15772.56 – 161.16 – 1.01%

Greg Peel is scheduled to return after Australia Day.

Price action on the local market yesterday suggested Wall Street was not in a mood to return with renewed optimism as far as the outlook for inflation and interest rates goes, and overnight's price action has duly delivered in line with anticipation.

US bonds keep selling off, pushing the yield on the 10-year ever so closer to 2%, and equities are being de-rated in the process. US stocks fell across the board with the Dow Jones Industrial Average (30 large caps) suffering its biggest daily decline since November.

As is the new trend in 2022, bond yields up means technology and high-PE stocks come down and last night the Nasdaq sank more than -2.5%. It's a lot more challenging to be a growth investor these days, and when are bargains truly a bargain?

Microsoft is willing to spend US$69bn to acquire Activision Blizzard and solidify itself as a major power in the gaming world, while Goldman Sachs's Q4 performance missed market expectations.

The lack of positive impetus led all but one sector down overnight, all with exception of the energy sector.

Traders seem hellbent on pushing bond yields higher this month. Yesterday benchmark yields in Germany almost -almost!- turned positive. If it happens tonight, it will be a first since May 2019.

As far as bonds are concerned, the Federal Reserve can possibly start its tightening cycle with more than just an initial 25bp. This, of course, raises the question: traders once again getting ahead of themselves? Or are the decision makers inside the FOMC truly on the verge of panicking?

If you haven't sold the shares you wanted yet, and they are not energy producers, it might be wise not to look at your portfolio today. It aint gonna be pretty, except maybe for companies linked to iron ore?

The Microsoft announcement did reinvigorate general interest in gaming stocks around the globe.

Spot Metals,Minerals & Energy Futures
Gold (oz) 1814.40 – 4.80 – 0.26%
Silver (oz) 23.47 + 0.49 2.13%
Copper (lb) 4.40 – 0.03 – 0.66%
Aluminium (lb) 1.37 + 0.01 0.73%
Lead (lb) 1.06 – 0.01 – 1.14%
Nickel (lb) 10.26 + 0.14 1.41%
Zinc (lb) 1.62 + 0.01 0.91%
West Texas Crude 85.89 + 1.59 1.89%
Brent Crude 87.95 + 1.42 1.64%
Iron Ore (t) 127.30 + 3.30 2.66%

The Australian share market over the past thirty days…

AGL AGL Energy Upgrade to Outperform from Neutral Credit Suisse
AKE Allkem Upgrade to Outperform from Neutral Credit Suisse
ARB ARB Corp Upgrade to Neutral from Underperform Macquarie
AWC Alumina Ltd Upgrade to Outperform from Neutral Credit Suisse
BGA Bega Cheese Downgrade to Hold from Add Morgans
CCX City Chic Collective Upgrade to Buy from Accumulate Ord Minnett
CWY Cleanaway Waste Management Upgrade to Overweight from Equal-weight Morgan Stanley
IMD Imdex Downgrade to Neutral from Buy UBS
JBH JB Hi-Fi Upgrade to Add from Hold Morgans
PAN Panoramic Resources Downgrade to Hold from Add Morgans
PAR Paradigm Biopharmaceuticals Upgrade to Hold from Reduce Morgans
PLS Pilbara Minerals Upgrade to Neutral from Underperform Credit Suisse
WES Wesfarmers Upgrade to Add from Hold Morgans

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

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