The Overnight Report: Bottom In?

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World Overnight
SPI Overnight	7261.00	+ 33.00	0.46%
S&P ASX 200	7256.70	+ 50.20	0.70%
S&P500	4399.76	+ 36.21	0.83%
Nasdaq Comp	14654.02	+ 152.10	1.05%
DJIA	34754.94	+ 337.95	0.98%
S&P500 VIX	19.54	– 1.46	– 6.95%
US 10-year yield	1.57	+ 0.05	3.08%
USD Index	94.20	– 0.02	– 0.02%
FTSE100	7078.04	+ 82.17	1.17%
DAX30	15250.86	+ 277.53	1.85%

By Greg Peel

Plenty of Green

The futures said up 33 points but in the first ten minutes yesterday the ASX200 was up 50 points before stumbling for a while. The buyers then moved in in earnest, but it was a choppy ride to the close.

By day’s end all sectors bar one closed in the green. Energy succumbed (-0.8%) to a long-awaited dip in oil prices but in the scheme of things this is barely a blip, and prices were back up again overnight.

The banks and healthcare provided most of the clout (each up 1.0%) while technology topped the percentage gains on a comeback for the Nasdaq overnight and more action in the BNPL space.

Overnight US-based BNPL leader Affirm announced a new deal with Target (US) in which Sezzle ((SZL)) is also involved. Affirm rose 20% overnight and Sezzle 14.6% yesterday. The latter is not in the index.

One could argue this would be bad news for competitors, or one could argue the BNPL space is still in a strong growth phase. Investors chose the latter, sending Afterpay ((APT)) up 3.1% and Zip Co ((Z1P)) 5.1%.

Broker upgrades were very much in the spotlight yesterday. UBS upgraded Super Retail ((SUL)) to Buy on an expected post-lockdown surge and that stock topped the index winners with 7.7%.

Following AGL Energy’s ((AGL)) near death experience, Morgan Stanley called time on Wednesday and UBS on Tuesday, both upgrading to Hold from Sell. Ord Minnett upgraded to Buy last month and the AGL share price has found some support recently, up 5.7% yesterday.

The stock is still down -77% since 2017.

Meanwhile, Collins Foods ((CKF)) will take over the KFC franchise in The Netherlands and plans to roll out a lot more stores over the next decade, which was worth 6.9%.

Whitehaven Coal ((WHC)) finally saw some profit-taking (-7.0%), as the thermal coal price finally took a breather along with oil prices. The materials sector managed only a 0.3% gain. China is back today.

The new NSW premier has clearly reversed government sentiment away from a health first, economy second stance to the other way around, expanding on Gladys’ easing of restrictions next week and ditching the chief health officer. What would she know?

This is clearly good news for the market, unless Perrottet unleashes delta wave 2.

The mood remains positive nonetheless and the futures are up 33 points again this morning.

Thank God that’s over

It was a bit of a no-brainer that Wall Street would kick on last night after Wednesday night’s big turnaround, barring anything from left field, as this is often the case. This has led investors to deign to suggest the bottom is now in, and scary October is behind us.

One week in? It’s true that November and December are seasonally the strongest months of the year, but I think bad things usually happen on the 29^th.

It was also not so convincing that Wednesday night’s turnaround was led by the defensive sectors. That did flip over last night, such that consumer discretionary, technology, materials and healthcare were leaders – no real value/growth split there – but it should also be noted that the Dow was up 560 points early in the session, and lost over -200 points to the close.

This morning our time the US Senate will vote on extending the debt ceiling decision out to December and it is unlikely the Democrats will knock back this Republican proposal. Both parties assure an agreement can be reached by then but we’ve heard that line before.

Afternoon selling on Wall Street could probably be attributed to wariness ahead of tonight’s September jobs number. Economists are forecasting 500,000 but many believe this may be conservative, following August’s weak 235,000 and the roll-off of additional unemployment benefits mid-September.

Before now, a big “beat” on a jobs number would have Wall Street running scared in the expectation the Fed would have to start tapering, but the Fed is going to start tapering before year-end and Jay Powell indicated at the last press conference that another weak jobs number for September would not derail that intention.

So it is more likely Wall Street will see a beat as good news, as it reinforces an economic recovery story that has been sorely tested over the last couple of months.

But CEOs across a range of industries will still tell you supply/labour shortages remain crippling and there seems no end in sight. Retailers are constantly warning shoppers that if they don’t buy now, it may not be a happy Christmas.

Could be a quiet Black Friday this year then.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1754.60	– 9.50	– 0.54%
Silver (oz)	22.57	– 0.09	– 0.40%
Copper (lb)	4.16	+ 0.05	1.34%
Aluminium (lb)	1.33	+ 0.02	1.63%
Lead (lb)	1.00	+ 0.01	0.60%
Nickel (lb)	8.19	– 0.03	– 0.37%
Zinc (lb)	1.37	+ 0.01	0.88%
West Texas Crude	78.87	+ 1.82	2.36%
Brent Crude	82.47	+ 1.66	2.05%
Iron Ore (t)	117.80	0.00	0.00%

Another solid session all-round for commodities (ex gold) with the exception of iron ore, which will move one way or the other today with China back.

Profit-taking in the oils, on the back of Russia’s pledge to increase gas supplies to Europe, lasted five minutes.

The Aussie is subsequently up 0.5%, back into the 73s at US$0.7315, with the greenback flat.

Today

The SPI Overnight closed up 33 points or 0.5%.

US jobs tonight.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AGL	AGL Energy	Upgrade to Equal-weight from Underweight	Morgan Stanley
		Upgrade to Neutral from Sell	UBS
BBN	Baby Bunting	Upgrade to Add from Hold	Morgans
BXB	Brambles	Upgrade to Buy from Neutral	UBS
HMC	HomeCo	Downgrade to Lighten from Hold	Ord Minnett
MFG	Magellan Financial	Upgrade to Outperform from Neutral	Macquarie
SGM	Sims	Upgrade to Buy from Neutral	Citi
SUL	Super Retail	Upgrade to Buy from Neutral	UBS

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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