The Overnight Report: Familiar Territory

This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG

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

By Greg Peel

Material Fortitude

The ASX200 curiously shot up 40 points in the first ten minutes yesterday and 20 minutes later was down -9. Not sure what happened there. Perhaps a fat finger from an algo. From that point the index stumbled its way up to a modest gain.

That gain was all about the resource sectors, and materials in particular. Led out by a 6.6% jump for Fortescue Metals ((FMG)) on result and hand-out, the materials sector gained 2.8%. Price rises on Friday night in base metals and minerals had BHP Group ((BHP)) up 2.5% and South32 ((S32)) up 6.2%, while a post Jackson Hole boost for gold had those miners performing well.

Energy came in second with 0.7% gain, as oil prices rose on Hurricane Ida shutting down Gulf rigs. Consumer staples chimed in with 0.7%, while property (+0.4%) was the only other sector to not close in the red.

Financials posted the biggest loss (-0.7%), possibly on a rotation trade into resources, which if it’s all about iron miner dividends, then one might be forgiven for thinking it’s a bit of a bolted horse call. You can’t buy for the dividend on announcement day, and iron ore prices have since been off a tad.

After a benign Friday, it was back to some wild rides among the day’s earnings reporting stocks.

InvoCare ((IVC)) topped the index with an 8.7% gain, followed by PolyNovo ((PNV)) on 7.5%. Thereafter miners made up the top five.

On the downside, Altium ((ALU)) led out with a -14.2% drop, very volatile Nuix ((NXL)) followed with -10.8% and then Healius ((HLS)) on -7.3%.

Outside the index, lockdown star Temple & Webster ((TPW)) jumped 10.6% to annoy its many shorters.

With one more day of result season to go today, FNArena’s Corporate Results Monitor shows close to 300 stocks having reported (as of Friday) on an above average beat miss ratio of 35% to 21.5%.

June quarter company profits grew by 7.1%, according to the ABS, after falling -0.3% in the March quarter. But it’s all about the year or half ended June. Since then we’ve had delta.

Macquarie calculates that an FY22 earnings forecast of 13% index growth has now been pared back to 10.5% post June-end results, with the industrials sector – hard hit by lockdowns – the main drag. 

With Wall Street back into rotation mode, into all those Mega-Caps our market doesn’t have, our futures are up 17 points this morning.

Rotation Resurrection

It was sixteen years ago almost to the day Hurricane Katrina wreaked havoc on the Gulf Coast when Ida put in a pretty good repeat performance. A lot has been learned in that time, and amidst all the other hurricanes in between, one being that stock markets no longer react to such events because the economic bounce-back always matches the initial cost.

But if anything last night Wall Street took on a defensive tone, reflected in selling in the banks and energy (the biggest hit sectors in 2020) and buying once more in FAAMG. Hence Nasdaq outperformance and Dow underperformance.

In a nod to the above, energy stocks fell even as oil prices rose again on Ida’s impact, but experience now shows that rigs and refineries have much improved their capacity to restart quickly.

For the banks, a post Jackson Hole dip in the US bond rate of -3 basis points to 1.29% was the influence.

Among the FAAMGs. Apple jumped 3% on an analyst report suggesting the new iPhone 13 will have satellite connectivity. Satellite company Globalstar jumped 60%.

In the wake of a deal with Walmart, America’s biggest pure-play BNPL company, Affirm, has now signed a deal with Amazon. Amazon rose 2%, and Affirm 47%.

Bear that in mind today.

On the other hand, PayPal is now developing a share trading platform.

Otherwise, it simply was a solid day for all the Big Tech companies, which are seen as steady growth defensives, along with the likes of Tesla and others.

In other news, Zoom reported earnings in the aftermarket this morning and is down -12%. Scary stuff, except that Zoom rose 400% in 2020 before flattening out this year on US reopening.

Commodities

The UK holiday last night had the LME closed, so no base metals trading.

Crude prices are likely to remain elevated, even if energy stocks are not, until supply is restored.

The Aussie is down -0.2% at US$0.7394.

Today

The SPI Overnight closed up 17 points or 0.2%.

Today brings the last trickle of earnings reports, with Harvey Norman ((HVN)) among them.

On the economic front, we’ll see the June quarter current account which will no doubt feature an impressive terms of trade.

We’ll also see July building approvals and private sector credit.

China will report August PMIs.

The US will see monthly consumer confidence.

Irongate Group ((IAP)) and Webjet ((WEB)) hold their AGMs.

A reporting calendar and summaries of analyst responses to the day’s results are available on the FNArena Corporate Results Monitor.

(https://www.fnarena.com/index.php/reporting_season/)

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.

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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