Daily Market Reports | Oct 04 2022
This story features BHP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BHP
| World Overnight | |||
| SPI Overnight | 6554.00 | + 102.00 | 1.58% |
| S&P ASX 200 | 6456.90 | – 17.30 | – 0.27% |
| S&P500 | 3678.43 | + 92.81 | 2.59% |
| Nasdaq Comp | 10815.44 | + 239.82 | 2.27% |
| DJIA | 29490.89 | + 765.38 | 2.66% |
| S&P500 VIX | 30.10 | – 1.52 | – 4.81% |
| US 10-year yield | 3.65 | – 0.15 | – 4.02% |
| USD Index | 111.67 | – 0.51 | – 0.45% |
| FTSE100 | 6908.76 | + 14.95 | 0.22% |
| DAX30 | 12209.48 | + 95.12 | 0.79% |
By Greg Peel
Not Relevant
Yesterday morning local futures traders had presumably decided that we had our end-of-quarter sell-off on Friday and Wall Street did the same on Friday night so we didn’t have to go again, and the new quarter meant a reset. But up 5 points when the S&P500 was down -1.5% did look ambitious.
It looked more ambitious late morning when the ASX200 was down -60. With a lot of the country on holiday, trading was thin and an hour later the index was back to square again, before dipping at the close.
Yet again we find going into detail a bit pointless given Wall Street has bounced and our futures are up 102 points this morning, but for the record:
Only three sectors closed in the green. Energy (+1.0%) and utilities (+1.6%) anticipated what is expected to be a -1m barrel per day production cut from OPEC-Plus when it meets on Wednesday night.
Real estate rose 0.8%, likely because it has been so trashed.
Technology was otherwise the worst performer (-1.3%) but often is, while a -1.1% fall for staples suggests some offloading of defensive positions. In anticipation of a rally?
The banks eased -0.3% ahead of today’s RBA rate hike while materials lost -0.2% despite a 0.2% rally for BHP Group ((BHP)). The top five index losers on the day were all miners.
But as I say, not much point in banging on. We’re back to full trade today with a hundred point rally to look forward to, unless the RBA finds a way to upset the apple cart. A 50 point hike is fully expected so the devil will be in the statement detail, with the market looking for any sign the next one will only be 25.
About Face
I don’t know why people insist on calling a policy reversal a “backflip”. If you backflip you end up facing the same way. But either way the UK government’s embarrassing about-face on its tax-cuts-for-the-rich policy has destroyed any credibility even before the seats are warm, but allowed the pound to shoot back up and UK yields to come down.
This had already occurred to some extent when the Bank of England was forced to intervene with long-dated QE in concert with short-end rate hikes. As to whether the BoE can now withdraw is not clear, given the new policy is still high-spending and deficit-increasing.
But it has meant the US ten-year yield fell back -15 points to 3.65% and the two-year -9 points to 4.12%, and the US dollar fell -0.5%. At the domestic level, traders are also beginning to again question Fed aggression.
Having risen as high as 4.75% to 5.00%, the Fed funds futures have now pulled back to 4.25% to 4.75% by year end, implying 125 points more of Fed hikes, and then a pause into 2023. The last time this assumption was made (July) Jerome Powell let rip at Jackson Hole to destroy any such notion.
Commentators point to the fact that while lagging inflation data (CPI, PCE) remain stubbornly high, real-time data show inflation backing off. House prices, rents and used car prices are now on the way down alongside falling freight costs and lower gasoline prices.
Last night the US manufacturing PMI for September showed a fall to a 28-month low 50.9 from 52.8 in August, when 52.0 was expected. When it comes to Fed aggression, bad news is such sweet sorrow.
A rally to begin the new quarter was always on the cards after Friday night’s final sell-off, and the -9.3% the S&P500 lost in September, and the -24.8% fall year to date. All of the above meant last night’s rally was jet-fuelled. The Dow at one point was up 900 points.
Unfortunately the biggest sector gain was reserved for energy, thanks to 4% jumps in oil prices, thanks to OPEC. There is a risk oil prices head back up again to underpin headline inflation.
As I noted last week, because OPEC-Plus has been unable to even reach the production quotas currently in place, a formal -1mbpd cut should not be as impactful as its size otherwise implies. Then there’s the matter of a recession-driven demand decrease.
Everything rallied nonetheless, mostly the Big Tech names that have led the most recent leg down, thanks to high bond yields and a strong US dollar. Apple has had its own woes lately, but it jumped 3%.
The only stick in the mud was Tesla, which fell -8.6% after revealing its September quarter delivery numbers did not quite match up to its production numbers. Tesla cited logistic issues, but Wall Street is wondering if demand might be easing.
There was also concern that Credit Suisse might be in trouble, leading to fears of a Lehman-type meltdown, but those fears have been called overblown and in fact the Swiss bank’s shares rose 2.3% in New York trading.
Is this the start of yet another sentiment only-driven, bear market rally, a la July? The jury is still out. We have to wait till November for the next Fed meeting. And what’s going to happen in Ukraine is anyone’s guess.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1700.60 | + 39.50 | 2.38% |
| Silver (oz) | 20.71 | + 1.68 | 8.83% |
| Copper (lb) | 3.43 | – 0.00 | – 0.11% |
| Aluminium (lb) | 1.06 | – 0.00 | – 0.02% |
| Lead (lb) | 0.84 | + 0.01 | 1.25% |
| Nickel (lb) | 9.78 | + 0.29 | 3.05% |
| Zinc (lb) | 1.33 | – 0.02 | – 1.22% |
| West Texas Crude | 83.15 | + 3.66 | 4.60% |
| Brent Crude | 88.57 | + 3.43 | 4.03% |
| Iron Ore (t) | 94.22 | – 1.08 | – 1.13% |
Outside of oil, the most notable moves last night were in the precious metals, on lower US bond yields and dollar.
Nickel is as volatile as always.
Reprieve for the Aussie, it’s bounced 1.7% to US$0.6515.
Today
The SPI Overnight closed up 102 points or 1.6%.
Along with the RBA meeting today we’ll see data for job ads, building approvals and housing finance.
The US will see factory orders.
Sims ((SGM)) goes ex today.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AGL | AGL Energy | Upgrade to Outperform from Neutral | Credit Suisse |
| CLW | Charter Hall Long WALE REIT | Upgrade to Buy from Neutral | Citi |
| CMM | Capricorn Metals | Upgrade to Outperform from Neutral | Macquarie |
| PMV | Premier Investments | Downgrade to Neutral from Buy | Citi |
| RMS | Ramelius Resources | Upgrade to Accumulate from Hold | Ord Minnett |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED
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