The Overnight Report: Broken Record

This story features TYRO PAYMENTS LIMITED, and other companies. For more info SHARE ANALYSIS: TYR

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

By Greg Peel

Shame

The local market took heart in Wall Street’s comeback from the depths on Tuesday night as initial, modest sanctions were placed on Russia. With Wall Street still closed down, the ASX200 only lost -16 points from the open before turning positive.

Alas, it was but a brief breather. Wall Street has bottled again and our futures are down -90 points this morning.

So for what it’s worth, a bit of stability yesterday provided the opportunity to focus on the day’s corporate earnings and economic news.

The “good” news on the economic front came in the morning on the release of the December quarter wage price index. It rose 0.7% — the biggest gain since 2014 – but at 2.3% annual it’s still well below the RBA’s target of “sustainably” at 3%.

Most economists have been targeting August for the first rate hike, but others as early as June. This result likely takes June off the table.

That was good news for the embattled tech sector, which gained a winning 2.2% yesterday. Zip Co ((Z1P)) bounced back 8.4% and Tyro Payments ((TYR)) 8.6%. Unfortunately, the tech sector will be embattled once more today.

Only two sectors closed in the red, being utilities (-0.7%), as AGL Energy ((AGL)) takeover excitement came off the boil, and property (-0.3%), with Scentre Group ((SCG)) falling -4.4%.

Consumer discretionary managed to scrape into the green (+0.2%) despite the train wreck that followed Domino’s Pizza’s ((DMP)) result, which was worth -14.0%.

Staples jumped 1.1% despite Tuesday result hero Costa Group ((CGC)) being slammed back -8.6%. It just needed a 1.4% gain from Woolworths ((WOW)) on result.

Telcos had a strong session (+1.9%) as brokers cheered the new Telstra ((TLS))-TPG Telecom ((TPG)) sharing arrangements.

Hub24 ((HUB)) reported on Tuesday but a thumbs-up in broker reviews yesterday had it at the top of the winners’ board with a 9.8% gain, ahead of Paladin Energy ((PDN)), which reported yesterday and rose 9.1%.

I could go on, but given we appear set for another macro-driven fall today, and it’s the peak day of this earnings season, it’s a bit pointless.

Two things to note however:

Rio Tinto ((RIO)) reported what appears a forecast-beating result last night in London. Either way, it declared a whopping great dividend.

Speaking of whopping great dividends, BHP Group ((BHP)) goes ex today, which is worth around a -30 index handicap from the open, and is not accounted for in the -90 point futures fall (futures don’t pay dividends).

Tell us again Joe

The Ukraine was hit with a massive cyber-attack last night. No one’s quite sure where from.

After a week of falls, this news was not enough to cause further panic – it’s long been expected – but a still uncertain Wall Street stumbled around in the morning without any obvious conviction. Until the afternoon, when Washington warned Russian forces are “as ready as they can be” for an invasion.

I might be wrong, but I’m sure I’ve heard this before.

Nonetheless, a jittery Wall Street tumbled once more to the close.

Meanwhile, a more infectious sub-variant of omicron – called BA.2 — has surged to account for more than a third of global covid cases, Dow Jones reports, adding to the debate about whether countries are ready for full reopening, and contributing to concerns about the broader economic rebound taking hold.

That’s all we need.

The issue now for Wall Street is a technical one. All three major indices are close to breaching their January intra-day lows, set during the big Fed scare. The low for the S&P500 is 4222, and last night it closed at 4225.

As is always the case with such important levels (and charting in general), 4222 could prove to be support or a breach would open up a black hole.

It’s hard to see where any good news might come from at present. The concept of Putin backing down seems remote. Wall Street’s only hope, therefore, is a “buy the fact” response to an actual invasion, given a good two weeks have now passed with an invasion being “imminent”, the ramifications have been well discussed, and Wall Street has corrected accordingly.

Commodities

The initial sanction passage included a halt to the certification by Germany of the Nord Stream 2 gas pipeline built by the Russians. The pipeline is completed, but Sargent Scholz will not now sign off on it.

Last night further financial sanctions were placed on the company that built the pipeline.

Meanwhile, oil markets are in a state of flux, weighing up the potential loss of Russian oil on the market, the potential return of Iranian oil to the market, and Biden’s pledge to do whatever it takes to keep oil prices down (in the US).

This includes possible reserve releases, leaning on the Saudis to up production, and perhaps even allowing more drilling at home in defiance of his own climate change policies.

What is notable now is that the gap between the WTI price and Brent price has widened out to close to US5/bbl from the usual US$2/bbl. Europe has fewer options.

The Aussie has ticked up another 0.1% to US$0.7233.

Today

The SPI Overnight closed down -90 points or -1.3%.

More GDP lead-in data today in the form of December quarter private sector capex.

It’s the biggest day on the earnings season calendar, which contains around 50 stocks covered by FNArena database brokers.

It’s also a big day for ex-dividends. Apart from BHP we have OZ Minerals ((OZL)), Whitehaven Coal ((WHC)) and Woodside Petroleum ((WPL)) on the list, among 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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