The Overnight Report: Are We There Yet?

Daily Market Reports | May 11 2022

This story features POLYNOVO LIMITED, and other companies. For more info SHARE ANALYSIS: PNV

World Overnight
SPI Overnight 7014.00 – 8.00 – 0.11%
S&P ASX 200 7051.20 – 69.50 – 0.98%
S&P500 4001.05 + 9.81 0.25%
Nasdaq Comp 11737.67 + 114.42 0.98%
DJIA 32160.74 – 84.96 – 0.26%
S&P500 VIX 32.99 – 1.76 – 5.06%
US 10-year yield 2.99 – 0.09 – 2.79%
USD Index 103.93 + 0.21 0.20%
FTSE100 7243.22 + 26.64 0.37%
DAX30 13534.74 + 154.07 1.15%

By Greg Peel

Lazarus Rises

The bad news is the ASX200 closed down a full percent yesterday. The good news is it was down -2.6% in the opening half hour. As Day Three of the Fed-and-China led sell-off began, there was not a buyer in sight, It was less a capitulation, as the index crashed straight through psychological support at 7000, than it was a stunned rabbit opening.

But the buyers were ready, deciding enough was enough. From 10.30am to 4pm the index rose steadily back. When the dust settled, only two sector moves stood out among all bar one sector closing in the red. Energy fell -2.1% and materials -2.4%, following China-driven commodity price plunges.

The other standout move, aside from communication services gaining 0.4%, was technology, which fell only -0.6% when the Nasdaq had fallen -4.3% overnight. Even in tech the buyers decided enough was enough.

Outside of utilities (-1.0%), which is closely linked to energy, one of the worst performing sectors was the bastion of defence that is consumer staples (-0.9%), probably because it had outperformed all through the sell-off, and investors wanted to find some funds somewhere to put back into risk stocks.

Falls elsewhere were around the -0.5% level, which looked a lot better than the situation at 10.30.

Among individual stocks, Polynovo ((PNV)) topped the charts with a 15.6% jump following an update, being one of the most volatile stocks in the index.

Pendal Group ((PDL)) posted a strong earnings report and rose 8.1%, while there were 4-5% comebacks for the beaten-up names REA Group ((REA)), IDP Education ((IEL)) and Inghams Group ((ING)).

The losers’ board featured all miners, except for the biggest loser, AUB Group ((AUB)). The insurance broker announced a significant acquisition, and will raise new capital to fund it, and that was worth -11.8%.

Commodity prices were again lower last night, but not to the same extent they were on Monday night. With Wall Street showing at least some positive signs, our futures are down -8 points this morning, which in the context of the past few sessions is neither here nor there.

Angst & Indecision

The Dow opened up 500 points last night, then fell to be down -350, then went back into the green, then went down, and up, and finally down -84 at the bell.

The S&P500 and Nasdaq tracked similar paths, but were mostly positive throughout the session.

For the ASX200 the technical level was 7000. For the S&P500 it was 4000, which was breached on Monday night but last night recovered. The best performing sectors were technology and communication services, having been severely beaten down.

The US ten-year yield slipped back under 3% last night.

Is this the bottom? Only a brave man would say, as we’ve been here before at higher levels. But there is a growing swell of believers in the market being oversold, and due at least a short term bounce. Consensus in this cohort is nevertheless to nibble at de-rated stocks, not go all-in just yet.

And there is still the cold heart light of day.

A US AI-based consumer lending company with the apt name of Upstart Holdings reported earnings last night and fell -56%.

It don’t know whether it’s the case, but this is the sort of stock Kathy Woods might have in her famed ARK Innovation ETF. That ETF rose 200% from March 2020 to January 2021, and is since down -70%, which takes the price to lower than March 2020.

Tech-wreck writ large.

The feature of 2022 to date has been a major sell-off in both US stocks and bonds. If you’re in a so-called “balanced fund” – 60% equities to 40% fixed income – you’ve been creamed, and most pension funds are just that.

Analysts are still placing great faith in the US consumer, who is the powerhouse behind the US economy. Whether or not the Fed can bring the economy back to a “soft” or “hard” landing is the standout topic du jour, and the rate rises have only just begun. Much will depend on that consumer.

Tonight brings a critical input to consumer sentiment, in the form of the US April CPI numbers. If ever there was a base from which to build a rally, it would be a result notably lower than March’s headline 8.5%.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1838.00 – 16.10 – 0.87%
Silver (oz) 21.22 – 0.54 – 2.48%
Copper (lb) 4.16 – 0.02 – 0.50%
Aluminium (lb) 1.34 – 0.00 – 0.26%
Lead (lb) 0.96 – 0.02 – 1.97%
Nickel (lb) 12.58 – 0.13 – 1.04%
Zinc (lb) 1.65 – 0.02 – 1.25%
West Texas Crude 99.76 – 3.33 – 3.23%
Brent Crude 101.81 – 3.29 – 3.13%
Iron Ore (t) 130.27 – 1.72 – 1.30%

No escaping more sunburn, but at least the falls, as noted, were not as significant as they were on Monday night.

When will this market find a bottom? China could be locked down for months.

The Aussie is down another -0.2% at US$0.6941.

Today

The SPI Overnight closed down -8 points.

Yesterday NAB released its April business confidence survey, which was conducted pre the RBA rate hike. Led by a rebound in the recreation & personal sector, business conditions rose 5 points to +20. Business confidence fell -6 points to +10, but a plus still means optimism.

Today brings Westpac’s consumer confidence survey for May.

China releases its April inflation data today, ahead of the US tonight.

CSR ((CSR)) and GrainCorp ((GNC)) release earnings results today.

GPT Group ((GPT)), Smartgroup Corp ((SIQ)) and UR Westfield ((URW)) hold AGMs.

National Bank ((NAB)) and ResMed ((RMD) go ex-div.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AGL AGL Energy Downgrade to Hold from Accumulate Ord Minnett
COF Centuria Office REIT Downgrade to Equal-weight from Overweight Morgan Stanley
CTD Corporate Travel Management Downgrade to Accumulate from Buy Ord Minnett
GPT GPT Group Downgrade to Lighten from Hold Ord Minnett
HPI Hotel Property Investments Downgrade to Hold from Buy Ord Minnett
MQG Macquarie Group Upgrade to Add from Hold Morgans
Downgrade to Neutral from Buy Citi
Downgrade to Underperform from Neutral Credit Suisse
NAB National Australia Bank Downgrade to Neutral from Buy UBS
REA REA Group Upgrade to Outperform from Neutral Credit Suisse
Upgrade to Add from Hold Morgans
Upgrade to Buy from Accumulate Ord Minnett
Downgrade to Equal-weight from Overweight Morgan Stanley
SHL Sonic Healthcare Downgrade to Accumulate from Buy Ord Minnett
SUN Suncorp Group Upgrade to Buy from Hold Ord Minnett
WBC Westpac Upgrade to Overweight from Equal-weight Morgan Stanley

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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

AUB CSR GNC GPT IEL ING NAB PDL PNV REA SIQ URW

For more info SHARE ANALYSIS: AUB - AUB GROUP LIMITED

For more info SHARE ANALYSIS: CSR - CSR LIMITED

For more info SHARE ANALYSIS: GNC - GRAINCORP LIMITED

For more info SHARE ANALYSIS: GPT - GPT GROUP

For more info SHARE ANALYSIS: IEL - IDP EDUCATION LIMITED

For more info SHARE ANALYSIS: ING - INGHAMS GROUP LIMITED

For more info SHARE ANALYSIS: NAB - NATIONAL AUSTRALIA BANK LIMITED

For more info SHARE ANALYSIS: PDL - PENDAL GROUP LIMITED

For more info SHARE ANALYSIS: PNV - POLYNOVO LIMITED

For more info SHARE ANALYSIS: REA - REA GROUP LIMITED

For more info SHARE ANALYSIS: SIQ - SMARTGROUP CORPORATION LIMITED

For more info SHARE ANALYSIS: URW - UNIBAIL-RODAMCO-WESTFIELD SE