The Overnight Report: Head Fake

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World Overnight
SPI Overnight	6997.00	– 49.00	– 0.70%
S&P ASX 200	7096.50	+ 47.40	0.67%
S&P500	4306.26	– 67.68	– 1.55%
Nasdaq Comp	13532.46	– 218.94	– 1.59%
DJIA	33294.95	– 597.65	– 1.76%
S&P500 VIX	33.32	+ 3.17	10.51%
US 10-year yield	1.71	– 0.13	– 7.18%
USD Index	97.39	+ 0.63	0.65%
FTSE100	7330.20	– 128.05	– 1.72%
DAX30	13904.85	– 556.17	– 3.85%

By Greg Peel

Patience

The RBA meeting yesterday was the first to be held post the Ukraine invasion. To that point the statement noted the events in Ukraine are “a major new source of uncertainty” that will likely cause inflation to “spike higher” than forecast in February.

But “uncertainties” about how persistent this will be and the continued “modest” growth in wages means the board continues “to be patient.” It is, however, looking beyond just wages to “labour costs” more broadly.

So no change in thinking, other than to acknowledge inflation will go higher still. The oil price alone is enough.

The last piece of data feeding into today’s local GDP release, out yesterday, was the current account, showing a reduction in surplus in the December quarter to $12.7bn, down from $22bn in the prior quarter. Exports fell -1.5%, impacted mostly by a -1.5% fall in resource exports offset by a 2.9% increase in rural exports. Imports fell -0.9%.

Putting together all the feed-in data over the last few days has ANZ Bank raising its GDP forecast to 3.6% growth (quarter on quarter) from an earlier 3.0%, taking annual growth up to 4.2% from 3.9%.

The Australian ten-year yield rose 5 points to 2.18% yesterday even as the US equivalent fell -15 points to 1.84% overnight. Australian banks more often than not follow US banks around for no reason but yesterday they led the ASX200 higher in market cap terms in rising 1.0%.

Wall Street had staged a late turnaround on Monday night to come roaring back from the depths, which likely provided the impetus for local buying yesterday. Falling US bond yields helped the Nasdaq to rebound, prompting a 5.7% jump for our tech sector.

This despite Zip Co ((Z1P)) falling -6.3% on its capital raising.

Block ((SQ2)) simply follows its US marker and rose 12.8%. Elsewhere there were some silly moves in the likes of PointsBet Holdings ((PBH)), up 17.5%, and Tyro Payments ((TYR)), up 10.7%. These stocks, and biotech Imugene ((IMU)), which rose 12.8%, have persistently featured on the top five boards, either way, for days now.

Incidentally the US ten-year yield has dropped another -13 points overnight but the Nasdaq’s down -1.7%. It looks very much like Wall Street’s Monday turnaround was all about end of month squaring and not any shift in sentiment.

Our futures are down -49 this morning.

Paladin Energy ((PDN)) was another star yesterday (+13.0%), more realistically, as surging oil prices refocus the world on nuclear energy. Gains in uranium and other exotics were not enough to stop materials slipping back -0.3% after Monday’s big jump. But iron ore is up another 4% and gold US$30/oz heading into today.

And oil, well…

Yesterday’s was the first session to be unencumbered by earnings results, thus showing true sentiment. Except that no one knows what sentiment should be right now, and today we go back down, if the futures are any guide.

Stagflation

WTI crude jumped 9% last night to US$104.30/bbl. The Atlanta Fed, which keeps a running calculation of estimated US GDP, now has March quarter growth at 0%.

Last month there was much talk of the Fed possibly undertaking seven consecutive rate hikes this year in the face of inflation. Now the market is beginning to entertain the idea there may not even be one this month.

On the inflation side, oil is the major concern, but add in wheat and other commodities and prices at the pump and supermarket are only going one way. Enough to tip the US economy into contraction?

Meanwhile, the world continues to step up its collective and individual sanctions on Russia. Canada has decided not to accept Russian oil exports, despite NATO (of which Canada is a member) not yet applying sanctions. The restrictions placed on the Russian financial system are a backdoor sanction on energy exports anyway, because they cannot be financed.

Last night the member countries of the International Energy Agency agreed to release a net 60mbbls of crude onto the market in an attempt to stem rising oil prices. WTI rose 9%. Saudi Arabia, which is aligned with Russia through OPEC-Plus, said it will not increase production beyond current quotas.

The world awaits the advance of the 40-mile column of Russian tanks into Kyiv. Word has it they’ve run out of fuel, and food, and increasingly, morale.

Note that the first casualty of war is truth.

The banks were again the hardest hit sector in the S&P500 last night, while energy was the only sector to close in the green.

The Dow did get close to halving its initial -800 point plunge during the session but faded to close down -600.

Bitcoin continues to rise, on the assumption Russians will be madly trying to shift their savings out of the rouble. The Kremlin has placed limits on capital outflows. They can’t sell their stocks – the Russian exchange was closed last night for a second day.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1940.40	+ 33.00	1.73%
Silver (oz)	25.32	+ 0.89	3.64%
Copper (lb)	4.58	+ 0.08	1.80%
Aluminium (lb)	1.54	– 0.03	– 1.75%
Lead (lb)	1.09	– 0.01	– 0.49%
Nickel (lb)	11.49	+ 0.05	0.42%
Zinc (lb)	1.70	+ 0.03	1.55%
West Texas Crude	104.30	+ 8.58	8.96%
Brent Crude	105.78	+ 4.79	4.74%
Iron Ore (t)	144.45	+ 5.35	3.85%

While there should be some signs of disruption in base metal markets, it’s not really showing.

The same can’t be said for iron ore. Beijing will be seething, but it was only a matter of time.

Gold has been boosted by falling US yields, despite a safe haven rush into the US dollar (+0.7%).

The Aussie has slipped slightly to US$0.7247 following its prior one cent jump.

Today

The SPI Overnight closed down -49 points or -0.7%.

GDP result today.

Note that Telstra ((TLS)) is on today’s list of stocks going ex-dividend.

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…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ABC	AdBri	Downgrade to Hold from Buy	Ord Minnett
AKE	Allkem	Upgrade to Buy from Accumulate	Ord Minnett
APX	Appen	Downgrade to Hold from Buy	Ord Minnett
BKL	Blackmores	Downgrade to Neutral from Outperform	Credit Suisse
BPT	Beach Energy	Upgrade to Neutral from Underperform	Macquarie
BVS	Bravura Solutions	Upgrade to Buy from Hold	Ord Minnett
BXB	Brambles	Downgrade to Neutral from Outperform	Macquarie
CHC	Charter Hall	Upgrade to Outperform from Neutral	Credit Suisse
DEL	Delorean Corp	Downgrade to Hold from Add	Morgans
GPT	GPT Group	Upgrade to Outperform from Neutral	Macquarie
HMC	HomeCo	Upgrade to Buy from Hold	Ord Minnett
IDX	Integral Diagnostics	Upgrade to Outperform from Neutral	Macquarie
ILU	Iluka Resources	Downgrade to Underperform from Neutral	Credit Suisse
IVC	InvoCare	Upgrade to Neutral from Sell	Citi
		Downgrade to Hold from Add	Morgans
KGN	Kogan.com	Downgrade to Neutral from Outperform	Credit Suisse
LME	Limeade	Downgrade to Neutral from Outperform	Macquarie
MPL	Medibank Private	Upgrade to Buy from Neutral	Citi
		Upgrade to Add from Hold	Morgans
MWY	Midway	Downgrade to Hold from Buy	Ord Minnett
NSR	National Storage REIT	Upgrade to Buy from Hold	Ord Minnett
NXT	NextDC	Upgrade to Buy from Accumulate	Ord Minnett
PAN	Panoramic Resources	Upgrade to Add from Hold	Morgans
QUB	Qube Holdings	Upgrade to Buy from Accumulate	Ord Minnett
RED	Red 5	Downgrade to Hold from Add	Morgans
RHC	Ramsay Health Care	Upgrade to Buy from Neutral	Citi
SGM	Sims	Downgrade to Neutral from Outperform	Macquarie
SGP	Stockland	Upgrade to Outperform from Neutral	Credit Suisse
TPG	TPG Telecom	Downgrade to Hold from Add	Morgans
WPR	Waypoint REIT	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.

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