The Overnight Report: Too Much Good News

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The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

World Overnight
SPI Overnight	7390.00	– 27.00	– 0.36%
S&P ASX 200	7405.40	+ 91.50	1.25%
S&P500	4701.21	+ 14.46	0.31%
Nasdaq Comp	15786.99	+ 100.07	0.64%
DJIA	35754.75	+ 35.32	0.10%
S&P500 VIX	19.90	– 1.99	– 9.09%
US 10-year yield	1.51	+ 0.03	1.96%
USD Index	95.94	– 0.44	– 0.46%
FTSE100	7337.05	– 2.85	– 0.04%
DAX30	15687.09	– 126.85	– 0.80%

By Greg Peel

Good Innings

The ASX200 did not immediately respond in kind to Wall Street’s comeback this week, given we did not much fall on Wall Street’s tech driven crunch. But momentum did start to pick up downunder given the comeback was largely due to positive signs for omicron, and that affects everyone.

Hence while Tuesday saw signs of FOMO returning, yesterday investors let loose. The index opened up 60 points and stalled there for a while, before a first ball wicket led to another, and another, and momentum began to build. With half an hour to go the index was up 130 points.

Then rain stopped play.

Late profit-taking had us back at 7400 – the index pivot point of the last few months. It’s the point at which the market says now what? With Wall Street taking a bit of a breather last night our futures are down -27 points this morning.

All sectors closed in the green, albeit by varying amounts. Materials rose 2.1% on stronger iron ore prices and energy rose 1.5% on stronger oil prices.

Telcos rose 2.2% after Telstra ((TLS)) bought a load of new spectrum and rose 1.3%, while TPG Telecom ((TPG)) sold 50% of its digital business and jumped 3.2%.

Technology rose 2.2% which was not surprising on the Nasdaq comeback, except that Zip Co ((Z1P)) posted a second consecutive gain of 10%. Having fallen two days ago by -10%, Zip is now 10% higher than where it started. Afterpay ((APT)) followed Square up 4.2%.

Josh got out his big stick and waved it at cryptos and BNPL. Everyone giggled.

Any positive covid news is good for discretionary (+1.2%) and with CSL ((CSL)) now seemingly past its tequila hangover, healthcare rose 1.2%.

A 0.9% gain for the banks was one of the lesser performances percentage-wise but still one of the biggest in market cap. Bond yields have been ticking quietly back up after initially crashing on omicron.

Other laggards were staples (+0.8%), industrials (+0.7%), property (+0.6%) and utilities (+0.2%). Defence was not in fashion.

If there was any fear of Chinese retaliation following Morrison’s so-called “diplomatic boycott” it was not evident, given Australia wasn’t planning to send any officials anyway, China wasn’t going to invite them anyway, and what’s Beijing gonna do? Slap a 200% tariff on iron ore? It’s already hit every Australian sector it can do without, and funnily none of the ones it can’t.

There was more positive omicron news out of the US last night but after two days of rally which have taken the S&P500 almost back to its high, Wall Street backed off the pace last night.

Three times a charm

Pfizer announced last night tests show two doses of its vaccine should provide protection from severe illness from omicron but three increases protection against catching omicron by 25-fold, back to levels of two-dose protection against the original Wuhan virus.

Moderna is also testing and Dr Fauci is confident of similar results, given the similarity of the two mRNA vaccines.

It was more good news for Wall Street on top of indications omicron only results in mild illness, but while stock indices all closed in the green again the pace of excitement unsurprisingly waned. In the prior two sessions the S&P500 rallied over 3% and the Nasdaq over 4%.

There was no waning of excitement in travel stocks however – they had a big run for a third day and had no doubt been heavily shorted.

The biggest company in the world – Apple – continues to hit new highs and last night was just shy of a US$3trn market cap, which is about 340 ASX200s.

In economic data news, the US Job Openings & Labour Turnover Survey (JOLTS) for October showed a climb back to over 11m job openings, which is about 50 times the 210,000 job additions reported for November.

The assumption has always been that once fiscal handouts ended, US workers would rush back to find jobs. But they ended in September and there is yet no sign whatsoever, as wage price inflation continues to rise.

The only thing left that can close the gap is an end to covid, but in the US vaccine hesitancy is just as strong as going back to work with a virus running round hesitancy. Or danger money, through yet higher wages.

Or maybe covid, automation and the online shift has killed off any opportunities for non-skilled workers, or workers with twenty-first century skills no longer needed.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1786.90	+ 1.00	0.06%
Silver (oz)	22.47	– 0.05	– 0.22%
Copper (lb)	4.38	+ 0.05	1.25%
Aluminium (lb)	1.19	– 0.00	– 0.36%
Lead (lb)	1.02	+ 0.01	1.26%
Nickel (lb)	9.24	+ 0.01	0.09%
Zinc (lb)	1.49	+ 0.00	0.24%
West Texas Crude	72.50	+ 0.57	0.79%
Brent Crude	75.95	+ 0.54	0.72%
Iron Ore (t)	107.00	– 1.55	– 1.43%

Nothing much to see here, other than iron ore’s backed off a tad and the oils just keep heading back towards their highs.

And the fact rampant short-covering has the Aussie up another 0.9% to US$0.7176, albeit the greenback fell -0.5%.

Today

The SPI Overnight closed down -27 points or -0.4%.

The RBA governor makes a speech today.

China reports November inflation numbers.

Australia 5/350 by stumps, weather permitting.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
EVN	Evolution Mining	Upgrade to Neutral from Sell	UBS
FMG	Fortescue Metals	Downgrade to Hold from Buy	Ord Minnett
IAG	Insurance Australia Group	Downgrade to Underweight from Equal-weight	Morgan Stanley
MTS	Metcash	Upgrade to Outperform from Neutral	Macquarie
NST	Northern Star Resources	Upgrade to Buy from Neutral	UBS
RIO	Rio Tinto	Downgrade to Hold from Buy	Ord Minnett
RMD	ResMed	Upgrade to Outperform from Neutral	Macquarie
SIG	Sigma Healthcare	Downgrade to Neutral from Outperform	Credit Suisse
Z1P	Zip Co	Upgrade to Neutral from Sell	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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