The Overnight Report: Sell Tech, Again

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By Greg Peel

Thin Air

With half the country on a public holiday yesterday, I did warn trade could be thin and volatile. And so it was we saw the ASX200 close up 93 points, having been up 120 points in the first half hour, on little volume.

Bummer. The futures are down -68 points this morning.

The reality, nevertheless, was that while six sectors posted gains in excess of 1% yesterday, only one – the banks – stood out, with a 2.6% surge.

Interesting that this should come at a time talk around APRA moving in to tighten credit controls to cool the housing market has, after months of speculation, become now particularly elevated. Talking to Fairfax yesterday, ANZ Bank ((ANZ)) CEO Shane Elliot suggested some restrictions were a good idea, given strong growth in house prices.

Which should not be good news for bank loan growth, but Elliot also pointed out, despite APRA’s concern over too-high debt-to-income ratios, the percentage of household income being used to pay interest on home loans is at a 20-year low, and the percentage of household income being used to pay interest on all debt is at a 35-year low.

Which we can put down to historically low rates.

So bank investors certainly seemed none too concerned yesterday, preferring to ride Commonwealth Bank’s ((CBA)) share buyback (CBA up 5.1%), and it’s likely few were actually human.

Consumer discretionary was next best performer with 1.7%, as talk of the international border reopening before Christmas spurred on relevant stocks once again, with heavily-shorted Flight Centre ((FLT)) topping the table on 9.6% and internationally dependent IDP Education ((IEL)) posting 8.6%.

The same influence was seen on industrials (+1.2%), and property (+1.6%) while oil prices continue to push up energy (+1.3%) and utilities (+1.6%).

Healthcare was the outsider (-0.5%), with the government placing an order for Merck’s as yet unapproved anti-viral drug, which CSL ((CSL)) does not make.

Tech was quiet (-0.2%) but will be in focus today, with the Nasdaq tanking and Square down -5.5%.

Offsetting weakness in technology will be energy once again, with oil prices up in excess of 2% once more.

Faceplant

As days go, Facebook did not have a good one.

The company suffered outages across its Facebook, Instagram and WhatsApp platforms that as of this morning had not been rectified. More damningly, the “toxic for teens” whistle-blower outed herself on US 60 Minutes to formerly accuse the company of putting profits before user safety.

That’s a hard one to prove in court, but less so is an additional accusation that Facebook has been inflating its user numbers to attract more advertising, and thus make more revenue. If true, that’s fraud by any other name.

But while Facebook’s -4.9% drop was influential on the Nasdaq and S&P500, all of the FAAMG’s saw falls last night, noting Apple and Microsoft are in all three indices, and the wider tech universe saw even steeper falls, as did stay-at-home tech names such as Zoom (which is now down -50% from its high).

The US ten-year yield ticked up only two points to 1.48%, but commentators are blaming yields for the renewed tech sell-off nonetheless.

Despite the Brent crude price now comfortably above US$80/bbl, OPEC-Plus decided at its meeting last night not to increase production beyond the gradual steps outlined a few months ago. That’s why oil prices were up yet again.

This implies little relief in headline inflation, and while central banks do not typically focus on “volatile” energy prices in their core inflation measures, it doesn’t mean bond yields can’t continue to rise.

While last night was all about tech, there were other issues for Wall Street to consider.

Firstly there was the failure on Friday night (after the close) for Biden to broker any sort of agreement among Democrat members regarding his infrastructure package, notwithstanding the looming debt ceiling issue which the Republicans will block because they can (despite being serial ceiling raisers in their own administrations).

Then there was Beijing’s decision to celebrate National Day by sending a record number of fighter jets and nuclear-armed bombers into Taiwanese airspace, prompting a cease & desist call from Washington, and a desperate plea from Taipei for Australia’s help when needed.

Canberra will do its best, as soon as those subs get here in 2040.

Commodities

Another fall in the US dollar helped prop up commodity prices, and OPEC helped prop up the oils.

The Aussie is up 0.5% at US$0.7293, with US71c now looking distant.

Today

The SPI Overnight closed down -68 points or -0.9%. Unfortunately our market rarely acknowledges that outside of BNPL, we are not a tech-driven economy.

We do rocks.

The RBA meets today but will likely just put up last month’s statement.

We’ll also see ANZ Bank’s job ads series and final numbers for retail sales and trade.

The US will see trade numbers, and services PMIs will be reported across the globe.

Baby Bunting ((BBN)), Beacon Lighting ((BLX)) and PointsBet Holdings ((PBH)) will hold AGMs today.

Sims ((SGM)) goes ex-dividend.

The Australian share market over the past thirty days…

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