The Overnight Report: No Idea

This story features XERO LIMITED, and other companies. For more info SHARE ANALYSIS: XRO

By Greg Peel

Super Thursday

Following a weak close on Wall Street the ASX200 fell -46 points from the open yesterday, but in a scene very reminiscent of Wednesday, the index immediately began climbing back to ultimately regain the 7100 level. In the first of the two Super Thursdays of the season, earnings results dominated sector moves.

But first, the economic news.

Australia had appeared to have lost -41,000 jobs in July but in fact it was due to lower participation in job-seeking, hence the unemployment rate fell to 3.4% from 3.5% in June. The market wasn’t quite sure what to do with that information. It doesn’t much impact on RBA thinking.

With 104,000 jobs having been added over three months it is considered this print was just a bit of a blip. Participation is still at the high end, there are still plenty of job vacancies out there, and economists still feel the unemployment rate will ultimately fall into the high 2s.

So no change to expectations of another 50 point rate hike next month.

In the stock market, technology was the worst performing sector (-2.4%). Xero ((XRO)) fell -7.1% following its AGM update (weak UK) and Block ((SQ2)) fell -6.0% otherwise.

Next came utilities (-1.6%). Origin Energy ((ORG)) fell -2.7% on result. Consumer discretionary saw a -1.2% fall, with Blackmores ((BKL)) topping the losers’ board with a -10.1% plunge, but Super Retail ((SUL)) fell -5.9% having comprehensively beaten with its result on Wednesday.

Pact Group ((PGH)) similarly saw a rethink of its Wednesday result, down -8.5%, while Brambles ((BXB)) went the other way (+3.6%).

Industrials fell -0.7%, with Transurban ((TCL)) falling -3.4% on result (weak dividend outlook).

The day’s winner was IPH ((IPH)), up 16% on result and an announced takeover of a Canadian IP firm. NRW Holdings ((NWH)) rose 6.3% and Treasury Wine Estates ((TWE)) 4.0% on result.

All up, the day’s losers fell a lot more than the winners gained, hence a net down-day.

Winning sectors on the day were healthcare (+1.1%), after a rethink on CSL ((CSL)), up 2.3%, energy (+1.4%) on higher oil prices, and staples (just).

The earnings wagon rolls on today although with far fewer stocks than yesterday (TGIF). Next week is the biggest week of all, when more than half of all stocks reporting (covered by FNArena database brokers) report.

It was a wobbly old session on Wall Street last night but the S&P500 closed up 0.2% and our futures are showing up 23 points this morning.

Fed Angst

There are plenty of people on Wall Street who wish the various Fed presidents would just please shut up about a policy decision still a month away. 50 or 75? Why lose sleep? We still have PCE inflation next week, and August jobs and CPI/PPI next month.

They could swing sentiment in either direction. Next week also brings Jackson Hole.

The problem is, they keep being asked.

Last night the St Louis Fed president said “I would lean toward the 75 basis points at this point,” when asked by the WSJ. “Again, I think we’ve got relatively good reads on the economy, and we’ve got very high inflation, so I think it would make sense to continue to get the policy rate higher and into restrictive territory.”

James Bullard is known as a card-carrying hawk.

But the Kansas City Fed president said how fast rate hikes will happen is something policy makers “will continue to debate,” though the direction is pretty clear. Both Bullard and Esther George are voters this year on the Federal Open Market Committee. 

Then the San Francisco Fed president said the Fed is trying to achieve a balancing act, not raising its benchmark interest rates by such a small amount so that high inflation rates will persist, but also not pushing policy rates up too high and slowing the economy unnecessarily.

Mary Daly doesn’t have a vote.

Beyond the Fedheads, Wall Street is also struggling to come to grips with the flow of economic data. Last night showed existing home sales fell in July, new jobless claims fell last week, and the Philly Fed activity index came in well above expectation, just as earlier in the week the Empire State index had come in well below.

Suffice to say it was a session of ups and downs in stock markets last night, ultimately closing slightly up.

The fact Wall Street didn’t kick on with what looked like the beginnings of a pullback on Wednesday night is a positive, but it only highlights current uncertainty.

Or current “I have no idea”.

Commodities

The US dollar was back in solid rally mode last night, gaining 0.8%, and impacting on metals prices.

Not oil however, with prices kicking on following Wednesday night’s surprise US inventory data.

There may also be some concern regarding the current panic around the unspellable Ukrainian nuclear plant and Russia’s refusal to stop using it as a missile launching location, knowing no one would be stupid enough to fire back.

The Aussie is off -0.3% at US$0.6919.

Today

The SPI Overnight closed up 23 points or 0.3%.

AGL Energy ((AGL)), Cochlear ((COH)), Cleanaway Waste Management ((CWY)), Inghams Group ((ING)), Newcrest Mining ((NCM)) and Stockland ((SGP)) are among today’s earnings reporters.

FNArena’s Corporate Results Monitor provides both a calendar of upcoming result releases and a summary of all reports to date: https://www.fnarena.com/index.php/reporting_season/

The Australian share market over the past thirty days…

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.)

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