The Overnight Report: Here We Go Again

This story features WESFARMERS LIMITED, and other companies. For more info SHARE ANALYSIS: WES

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

By Greg Peel

And it was going so well

On Wednesday night, Wall Street ignored confirmation from NATO that there had not been any troop withdrawal from the Ukraine border and closed flat, despite the previous night’s relief rally being driven by news there had been. This at least allowed the local market to focus specifically on the biggest day yet of earnings results yesterday.

It was a choppy, but positive morning session, as investors absorbed a long list of results, with some big names amongst them. The ASX200 then had a late morning pop, to up 74 points, in the wake of the jobs numbers.

The fear had been that the omicron peak in January would have stalled Australia’s jobs recovery, but in fact 12,900 jobs were added. Where the omicron impact was apparent was in an -8.8% fall in hours worked, as employees took annual leave, or sick leave, or iso-leave, but did not lose their jobs. This lead to a stable 4.2% unemployment rate. Josh was crestfallen.

The pop in the index post release likely reflects relief that the unemployment rate did not fall further, providing the RBA with reason to speed up its rate hike plans.

But by the afternoon, attention swung away from the local micro and economic news, and back to the macro. News of shelling on the Ukraine border had the Dow futures heading south, and we followed. We closed up 11 points, but this morning the futures are down -82. And there’s only a handful of companies reporting today.

For the record, the standout sector moves yesterday, against the tide, were in consumer discretionary (-3.4%), telcos (-3.1%) and technology (-2.9%). These respectively reflected a -7.5% plunge for Wesfarmers ((WES)), on result, -4.2% for Telstra ((TLS)) on result, and a -6.4% fall for Block ((SQ2)), because that’s what it does.

Another disappointing reporter on the day was Domain Group ((DHG)), which fell -6.2%.

On the delayed reaction front (one day after result), Pro Medicus ((PME)) dropped -6.0%, while Orora ((ORA)) gained 4.8% on upbeat broker reviews. The standout in this list was nevertheless CSL ((CSL)), which having jumped 8.5% on its result, added another 5.0% yesterday, again on encouraging broker reviews.

Healthcare was the standout sector on the green side, up 3.0%.

The big earnings report winners on the day were IPH ((IPH)), up 9.2%, and Challenger ((CGF)), up 6.6%.

Contributions from other sectors were all positive, but of much lower quantum. They did nonetheless help the big cap healthcare sector to counter discretionary and telcos.

We could keep banging on, but Wall Street’s taken a tumble again, so it’s pointless.

The geopolitical front will override any relief the market may have enjoyed from restrictions being lifted from today in NSW and Victoria.

It’s On

Russian-backed separatists in Ukraine have accused government forces of opening fire on them. The US and its allies have accused Russia of planning to use false reports of attacks on separatists as a pretext for an invasion. The Wall Street Journal reported Thursday that Russia has filed a report with the United Nations alleging that Ukraine’s military has committed “crimes” against residents of the eastern Donbas region.

It seems ages ago the US warned of Russia concocting a “false-flag” event that would provide an excuse to kick things off. Yet still, if reports are accurate, Russia thinks it can fool the world.

The event has led Biden to warn an invasion could come in the next few days.

Wolf!

But maybe this time there is one.

So suffice to say US stock indices tanked last night, the US ten-year yield fell -8 basis points to 1.97%, and a near thirty dollar jump in gold has it back at US$1900 for the first time since last June.

The only head-scratcher is oil, which had shot up previously on “imminent” invasion fears but last night fell modestly.

There’s little more we can say at this point.

Commodities

And we’ve got this pretty well covered too, other than iron ore.

Chinese government officials met with Chinese iron ore industry leaders yesterday. Enough said.

I had noted recently that Beijing’s attempts at iron ore market manipulation typically evoke an immediate impact, but it never lasts long. Morgan Stanley noted on Wednesday that Beijing has made three attempts to knock down the iron ore price in the past one and a half years, and all ultimately failed.

“The price tended to recover within a week as long as the underlying supply-demand fundamentals remained supportive,” Morgan Stanley noted.

The US dollar played safe haven again last night, but only to the tune of 0.1%. The local unemployment data had the Aussie jumping up above US72c briefly yesterday, but it’s currently off -0.1% at US$0.7190.

Today

The SPI Overnight closed down -82 points or -1.1%.

New Zealand reports its December quarter PPI tody, and Japan its January CPI.

QBE Insurance ((QBE)) is the biggie in a much smaller list of reporting companies today, which includes Inghams Group ((ING)) and others.

For upcoming earnings result dates, and a summary of results to date, please refer to the FNArena Corporate Results Monitor.

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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