The Overnight Report: More Of The Same

This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: FLT

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

By Greg Peel

Rethink

The feature of yesterday’s lacklustre session on the ASX was that the sectors that were bought up on Friday in the wake of the RBA Statement on Monetary Policy, and subsequent fall in bond yields, were all sold down again, despite bond yields falling further.

Telcos fell -0.8%, utilities -0.7% and staples fell -0.5%. Only property managed a second day of gains (+0.3%) following increases in retail REITs, likely related to more easing of restrictions.

On that note, with the international border reopening Flight Centre ((FLT)) rose 5.7% to top the index and Webjet ((WEB)) 4.8% but consumer discretionary fell a net -0.5%.

Best performing sector on the day was energy (+2.0%) as oil prices bounced back, followed by industrials (+1.0%) after Sydney Airport ((SYD)) rose 2.8% as the board accepted the takeover bid from a private consortium.

That bid may well be destined to be knocked back by the ACCC from the start, given the consortium has shareholdings in nine of Australia’s airports including Melbourne and Brisbane.

Materials was the only other positive sector on the day helped by a jump in the gold price, and BHP Group’s ((BHP)) sale of its 80% stakes in two met coal mines to Stanmore Resources ((SMR)). BHP had held back on its plan to sell off thermal coal assets given the price plunge.

For the second day in a row the banks actually performed better than it would appear in rising 0.1% when both ANZ Bank ((ANZ)) and Macquarie Group ((MQG)) went ex.

Technology was again the worst performing sector (-1.7%) on the usual Square tie-up but also a -4.9% for Xero ((XRO)) ahead of its earnings result.

Healthcare fell -1.2% as CSL ((CSL)) fell mildly but Polynovo ((PNV)) dropped -10.0%, on the resignation of its CEO, and Clinuvel Pharmaceuticals ((CUV)) another -8.3% after Friday’s drop.

The ASX200 is struggling to push towards 7500 at the same time Wall Street posts new highs day after day. Only minor gains last night, and our futures are up 9 points.

Running out of puff?

Wall Street opened strongly last night (Dow up 238) no doubt with a kicker from the weekend’s passage of Biden’s infrastructure bill but quietly faded away to the close.

Relevant infra beneficiaries within the Dow led that index to outperformance, but it was among smaller caps the greater impact was felt.

Companies that build EV charging infrastructure, for example, rose double-digit percentages given the US$7.5bn support package within the mix. Let’s hope for America’s sake they can settle on a universal plug, which is already an issue in Australia’s half a dozen charging points.

Morrison is now a huge EV fan, having previously told us they would “ruin the great Aussie weekend”. Withdraw and claim victory.

There was nothing else much new on the day as Wall Street continued to absorb Friday night’s jobs numbers. Although Fed officials indicated last night the central bank could raise rates by the end of 2022 based on the rapid recovery of the economy and an extended bout of high inflation.

Note the role of Fed chair is up for reappointment and while Powell can be reinstated, it’s not a given. The Democrats may push for someone even more dovish.

In other news, old guard chip maker Advanced Micro Devices jumped 10% last night to a new all-time high after signing a supply deal with Meta. You remember Meta? It used to be called Facebook.

And in typical Musk style, the world’s richest CEO, in response to the Democrat proposal to tax billionaires’ unrealised capital gains (a policy already dead in the water it seems), tweeted last night that he would sell 10% of his Tesla shares. The tweet drew the usual gasps from the Tesla board and regulators in terms of its means of disclosure.

But at least Musk didn’t sell first. He doesn’t take a salary, Musk noted, so his only means of paying tax is to sell stock – US$21bn worth.

Tesla shares fell -5%.

US earnings results continue to roll in, albeit now at a diminishing pace, and sentiment remains bullish heading into what is historically the best seasonal period of the year. But with the Dow, S&P500 and Nasdaq all up around 25% year to date, how long can it go on for?

Commodities

The infrastructure bill didn’t exactly light a fire under metals prices.

Gold continues to be supported, but we’ve been here a few times before this year. Each apparent break above US$1800/oz has shortly seen a swift reversal.

The Aussie is up 0.3% at US$0.7423.

Today

The SPI Overnight closed up 9 points.

Today brings NAB’s business confidence survey for October.

National Bank ((NAB)) reports earnings and James Hardie ((JHX)) provides quarterly numbers.

Fortescue Metals ((FMG)) and Bendigo & Adelaide Bank ((BEN)) hold AGMs.

CSR ((CSR)) goes ex.

The Australian share market over the past thirty days…

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