The Overnight Report: Tick One Box

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World Overnight
SPI Overnight	7384.00	+ 50.00	0.68%
S&P ASX 200	7356.90	+ 95.70	1.32%
S&P500	4287.50	+ 103.54	2.47%
Nasdaq Comp	12871.53	+ 382.59	3.06%
DJIA	33916.39	+ 614.46	1.85%
S&P500 VIX	29.99	– 1.61	– 5.09%
US 10-year yield	2.86	+ 0.05	1.60%
USD Index	103.66	+ 0.69	0.67%
FTSE100	7509.19	+ 83.58	1.13%
DAX30	13979.84	+ 185.90	1.35%

By Greg Peel

Miner Impact

Chinese lockdowns, with some help from a hawkish Fed, sent the ASX200 into a sharp plunge from last Friday as commodity prices reversed and the resource sectors plummeted. Wall Street volatility didn’t help, but that was all about tech, and on Wednesday it appeared the index was trying to establish a bottom.

It did.

It was on Tuesday Xi Jinping told a meeting of senior economic officials that "all-out efforts" must be made to boost construction to increase domestic demand and promote growth. Xi’s demands, bearing in mind no actual figure was provided, managed to stabilise commodity prices. While the resource sectors began to bounce on Wednesday, it wasn’t until yesterday the materials sector really fired up.

There was general buying across the board, but a 3.5% jump for materials was the stand-out index driver. Energy rose 1.0% and the banks helped out with a 0.7% gain after having been knocked down prior by this week’s hot inflation number, but rocks rocked the market.

The materials sector had a long way back after three sessions of destruction and indeed it’s still a long way back for the index to regain the lost ground from last Thursday, but Wall Street’s done its bit overnight and our futures are up 50 points this morning.

It was actually AMP ((AMP)) that topped the index yesterday, with a 13.2% gain on the divestment of the last of its asset management business, but nowadays AMP is a company so tiny it barely moves the index dial. Rather, an 11.9% jump for Sandfire Resources ((SFR)), 8.1% for Fortescue Metals ((FMG)), 6.9% for OZ Minerals ((OZL)) and 6.9% for Whitehaven Coal ((WHC)) summed up the session.

Not all miners were winners nevertheless, with Paladin Energy ((PDN)) topping the losers’ board with a -6.7% fall as uranium prices make see an overdue pullback, Silver Lake Resources ((SLR)) falling -6.3% and St Barbara ((SBM)) -2.6%.

Yesterday’s comeback, which included rebounds for the consumer sectors, suggests the market is unfazed by the “shock” inflation number and implications for RBA policy. The RBA was going to hike anyway – we’ve known that for some time – it was just a matter of the election being a temporary distraction.

The next significant economic release will be the March quarter GDP, but that’s a good month away. The Yanks have had a stab at theirs however, not that anyone noticed.

Rinse & Repeat

A solid rebound on Wall Street was always a very good chance heading into last night for no other reason than the pattern of 2022 has been one of big falls for a few sessions followed by a bottoming attempt, and then a sharp snap-back rally the next day. We saw a very similar sort of bottoming attempt back in March to Wednesday night, and sure enough, the pattern repeated.

It did somewhat help that having fallen -25% on its December quarter earnings result, Facebook rallied 17% on its March quarter earnings result, and had done so in Wednesday night’s aftermarket. But the night’s economic data gave Wall Street every excuse to go the other way.

All year the concern has been of heading into a recession, and an increasingly hawkish Fed has only fuelled those fears. But it was still expected the March quarter would see at least minor growth, in the face of omicron, after a 6.9% leap in the December quarter.

It didn’t.

The US GDP contracted by -1.4% in the March quarter when a 1.0% gain was forecast. Mind you, this is only a first estimate, based on extrapolating the month of January. There are revisions to follow. These are nonetheless unlikely to get better, as the month of March brought the invasion.

Wall Street had assumed if the US was to mark two quarters of negative growth, it would begin in the June quarter. But with March in the negative, June quarter contraction, and thus a recession, are now even more possible.

There is some relief in that the biggest hit to US GDP was a ballooning trade deficit, and not a plunge in consumer spending. The problems have been supply constraints and resultant inflation, not demand.

Either way, Wall Street seemed not to care less. As to whether this snap-back rally lasts any more than a couple of sessions is another matter. The Fed meeting is next week. But there are plenty more earnings results to come.

On Wednesday night Facebook reported after the bell. Last night it was the turn of Amazon and Apple.

Blaming inflation, Amazon provided a big miss on June quarter guidance, and is currently down -9% in the aftermarket having risen 4.6% during the day. Apple provided a stellar result, including a dividend increase and US$90bn buyback, but the stock is down -2.6%, having risen 4.5% during the day.

Intel (Dow) also reported after the bell and is down -4%, and for those interested, meme stock hero Robinhood rose 6% during the day and is now down -11%, cycling last year’s retail craze. The stock’s down -80% from its high.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1894.20	+ 8.20	0.43%
Silver (oz)	23.13	– 0.14	– 0.60%
Copper (lb)	4.43	– 0.05	– 1.11%
Aluminium (lb)	1.47	– 0.03	– 1.89%
Lead (lb)	1.04	– 0.01	– 1.42%
Nickel (lb)	15.04	– 0.20	– 1.34%
Zinc (lb)	1.92	– 0.03	– 1.48%
West Texas Crude	105.36	+ 3.34	3.27%
Brent Crude	107.42	+ 2.27	2.16%
Iron Ore (t)	150.61	+ 0.09	0.06%

It appears the US GDP result has overridden the benefits of promised Chinese stimulus.

The exception are the oils. To date Germany has continued to buy Russian gas, while desperately trying to line up alternatives. Last night Berlin said it was prepared to ban Russian imports, but conceded that Russia would probably get there first, having stopped exports to Poland and Bulgaria.

Berlin has warned Germans the gas could be cut off at any moment. As international gas prices are linked to oil prices, oil prices responded.

If foreigners were rushing in to buy Australian mining stocks yesterday, it is not reflected in another -0.4% drop in the Aussie to US$0.7098. This had a lot to do with another 0.6% gain in the US dollar index, as safe haven status overrode a weaker economy.

Today

The SPI Overnight closed up 50 points or 0.7%.

Hold on to your hats, Australia’s March quarter wholesale inflation (PPI) numbers are out today, along with month of March private sector credit.

China will report April PMIs.

The eurozone will report its first estimate of March quarter GDP.

The US will see March PCE inflation.

It’s all happening.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
29M	29metals	Downgrade to Equal-weight from Overweight	Morgan Stanley
ANZ	ANZ Bank	Downgrade to Hold from Add	Morgans
BPT	Beach Energy	Downgrade to Underweight from Equal-weight	Morgan Stanley
GWA	GWA Group	Downgrade to Hold from Add	Morgans
ILU	Iluka Resources	Upgrade to Outperform from Neutral	Credit Suisse
PRU	Perseus Mining	Upgrade to Outperform from Neutral	Macquarie
SIG	Sigma Healthcare	Downgrade to Underweight from Equal-weight	Morgan Stanley
UMG	United Malt	Upgrade to Outperform from Neutral	Credit Suisse
		Downgrade to Hold from Add	Morgans
WBC	Westpac	Downgrade to Hold from Add	Morgans

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

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