The Overnight Report: Hard To Kick On

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The company is included in ASX200, ASX300 and ALL-ORDS

World Overnight
SPI Overnight	7422.00	+ 4.00	0.05%
S&P ASX 200	7443.40	+ 2.40	0.03%
S&P500	4574.79	+ 8.31	0.18%
Nasdaq Comp	15235.72	+ 9.01	0.06%
DJIA	35756.88	+ 15.73	0.04%
S&P500 VIX	15.98	+ 0.74	4.86%
US 10-year yield	1.62	– 0.02	– 0.98%
USD Index	93.93	+ 0.10	0.11%
FTSE100	7277.62	+ 54.80	0.76%
DAX30	15757.06	+ 157.83	1.01%

By Greg Peel

Breather I

You know it’s a quiet day when financials close up 0.07%, materials 0.02% and healthcare 0.12%. Yet the ASX200 was up 30 points late morning.

Yesterday marked the fifth day in a row the index has closed off its highs. Morning exuberance – afternoon hesitance. The trend since the September 27 low has been unerringly positive and the index is up 4% from that point, but it’s been a grind recently, and there’s still another couple of hundred points to go before we get back to the all-time high.

Wall Street is back at all-time highs, but then six stocks on the S&P500 are worth a quarter of the index. One of those is Tesla.

As I predicted yesterday morning, technology was the best performing sector on the ASX yesterday in rising 1.3%, with next best discretionary on 0.6%. News from Tesla had driven the Nasdaq higher, so we had to follow, as all of Australia’s listed EV manufacturers rallied hard.

To be fair, Afterpay ((APT)) did rise 3.3%, following Square. The tech sector will look a lot different when that stock finally disappears. Nanosonics ((NAN)) was the best performing index stock yesterday (+9.4%) for no reason, other than it is a dedicated and often volatile Nasdaq follower. Morgans did upgrade the stock to Add, but that was a week ago.

The “It’s a beautiful world we live” story of the day was that of Crown Resorts ((CWN)), which jumped 8.7% after the Royal Commission found the company to be what any reasonable person would consider a criminal operation, but did not revoke the casino’s Melbourne licence due to the number of people Crown employs and the amount of pokie tax it generates.

Star Entertainment ((SGR)) controls the Sydney turf, and it rose 4.3%.

Energy fell -0.5% with Whitehaven Coal ((WHC)) down -4.2% as Beijing announces plans to control coal prices. Utilities fell -1.3% as AGL Energy ((AGL)) fell -3.1%.

Mineral Resources ((MIN)) was the worst index performer in falling -7.0% on its quarterly report. Indeed, the materials sector did well to close flat given even the gold miners were also weak despite a pop up in the gold price.

And given another big Chinese property developer, Modern Land China, failed to repay either the principal or interest on a US$250m bond due on Monday. Evergrande managed to make good on one bond payment due last week, but has another due on Friday and Chinese authorities are pressuring Evergrande’s founder and billionaire to use his personal wealth to prop up the company.

Look out today on FNArena for a feature story on Evergrande’s demise and (potential) ramifications for the Australian economy (and thus share market).

Wall Street also suffered late selling last night, and also closed flat. To that end, our futures are up 4 points this morning.

Breather II

The Dow was up over a hundred points last night but lost it all in the last half hour. Wall Street, too, has seen a lot of intraday highs turn into late sell-offs recently.

There might be a clue to this in this morning’s aftermarket earnings results.

Microsoft (Dow), Google and Twitter all reported after the bell, all beat, and all share prices have done nothing in the aftermarket. There have been some big moves on results, but mostly down (ie Snap), with the rally back to new highs setting the bar high for positive results to generate strong reactions.

I noted yesterday that the reason Facebook’s weaker guidance still led to a 3% share price gain on the day was because the company’s various travails were already priced in. Facebook fell -4% last night.

By contrast, Nvidia, maker of chips for the “metaverse”, jumped 6.7% — not on earnings, but on Facebook’s plan to spend big in the virtual world.

A flattish close for Wall Street may also suggest hesitance ahead of next week’s Fed meeting, at which a tapering timeline is expected to be announced, although that’s still a week away.

To that point, Case-Shiller’s 20-city US house price index showed an annual increase of 19.8% in August, about the same as it did in July, and new home sales jumped 14% year on year in September. When house prices go up, rents go up, and when rents go up, the CPI goes up.

In other news, the Democrats believe they can get some sort of infrastructure package sorted soon, but on the other side of the coin they are still trying to settle on a proposed “billionaires’ tax”, which would see those worth over a bill paying capital gains tax on unrealised annual profits from listed securities.

To put that into perspective, America’s latest richest man – Elon Musk – would at this point, be up for some US$20bn in tax this year, implying he would need to sell quite of few of his Tesla shares to raise the cash. The same can no doubt be said for the likes of Bezos, Zuckerberg, Buffett and others

What would this do to the market? Then if said billionaires make a capital loss in the year, they just get a tax credit, to offset when they next make a capital gain.

One might suggest it would be a lot simpler just to hit them with a higher income tax rate, but the problem is they don’t earn any. Musk is but one who lives off loans against his Tesla shares, for which the interest is tax deductible.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1794.50	– 12.20	– 0.68%
Silver (oz)	24.16	– 0.38	– 1.55%
Copper (lb)	4.52	– 0.00	– 0.08%
Aluminium (lb)	1.31	– 0.03	– 2.07%
Lead (lb)	1.11	– 0.00	– 0.28%
Nickel (lb)	9.20	– 0.14	– 1.46%
Zinc (lb)	1.57	– 0.03	– 2.03%
West Texas Crude	84.65	+ 1.11	1.33%
Brent Crude	86.38	+ 0.56	0.65%
Iron Ore (t)	122.75	+ 3.00	2.51%

A bit of give-back in base metals last night and also for gold, despite the US ten-year yield falling another -2 points.

Iron ore is trying to hang in there around US$120/t.

The oils, well, what can one say?

The Aussie is up a tad to US$0.7506.

Today

The SPI Overnight closed up 4 points.

Speaking of oil, it’s CPI day today in Australia. Forecast are for an 0.8% gain in the September quarter which, in contrast to the rest of the globe, would see the annual headline rate fall to 3.1% from 3.8% in June.

The RBA’s preferred core rate (ex of the biggest chunks in an average household weekly budget) is expected to rise to 1.8% from 1.6%, still below the board’s 2% target.

Maybe we’ll have to wait until Friday’s PPI to see the real story. Mind you, September was the lockdown quarter.

Another big round of AGMs/quarterly reports today, including those of Whitehaven Coal and Woolworths ((WOW)), while a2 milk ((A2M)) holds an investor day.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BSL	BlueScope Steel	Upgrade to Outperform from Neutral	Credit Suisse
CHL	Camplify	Downgrade to Hold from Add	Morgans
CRW	Cashrewards	Downgrade to Accumulate from Buy	Ord Minnett
MQG	Macquarie Group	Upgrade to Neutral from Sell	Citi
ORA	Orora	Upgrade to Outperform from Neutral	Macquarie
SIQ	Smartgroup Corp	Upgrade to Outperform from Neutral	Credit Suisse
		Upgrade to Add from Hold	Morgans
SLA	Silk Laser Australia	Downgrade to Accumulate from Buy	Ord Minnett

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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