The Overnight Report: As You Were

This story features APPEN LIMITED, and other companies. For more info SHARE ANALYSIS: APX

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

World Overnight
SPI Overnight	7253.00	+ 36.00	0.50%
S&P ASX 200	7248.40	– 30.10	– 0.41%
S&P500	4345.72	+ 45.26	1.05%
Nasdaq Comp	14433.83	+ 178.35	1.25%
DJIA	34314.67	+ 311.75	0.92%
S&P500 VIX	21.30	– 1.66	– 7.23%
US 10-year yield	1.53	+ 0.05	3.24%
USD Index	94.00	+ 0.20	0.21%
FTSE100	7077.10	+ 66.09	0.94%
DAX30	15194.49	+ 157.94	1.05%

By Greg Peel

All the way with the RBA

It was of no great surprise the ASX200 turned tail yesterday after Monday’s surge in thin trading, but it was looking pretty ugly around lunchtime when the index was down -78 and en route to wipe out all of Monday’s gains. But at 7200 there was a slight bounce ahead of the RBA statement release.

Of course, the ASX has been tracking wild times on Wall Street, with the S&P500 up over 1% on Friday night and down over -1% on Monday night and wouldn’t you know, up over 1% again last night.

Welcome to October.

The RBA nevertheless saved the day, mostly, mid-afternoon.

As expected, nothing changed in terms of policy stance. But the market was pleased the board maintained its outlook:

“The economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year.”

On the subject of jobs:

“Looking forward, the Bank's business liaison and data on job vacancies suggest that many firms are seeking to hire workers ahead of the expected reopening in October and November.”

And on inflation:

“While disruptions to global supply chains are affecting the prices of some goods, the impact of this on the overall rate of inflation remains limited.”

…suggesting the no rate hike till 2024 stance remains in place.

The RBA also threw its support behind APRA, which is preparing a framework for mortgage market tightening before year-end. The expectation is for tighter limits on debt-to-income ratios and/or an increase in the so called “buffer”.

The buffer is the rate at which a bank must be satisfied an applicant can still service a mortgage, and is currently 2.5%, meaning if you apply for a mortgage at 2%, you must show you’re still able to service that mortgage at 4.5%.

Such tightening measures have been anticipated for months, which explains why the banks only fell back -0.2% yesterday after having stolen the show on Monday with a 2.6% gain.

The standout winner was energy (+2.2%) after OPEC-Plus decided not to make further increases to its production schedule. The standout loser was technology -3.0%, after the Nasdaq tanked overnight and Square’s fall took Afterpay ((APT)) down -5.0% yesterday, having now wiped out all 2021 gains.

Among other individual stocks, SeaLink Travel ((SLK)) is being de-rated (-6.3%) after missing out on a lucrative Melbourne bus contract, while tech sector favourites Appen ((APX)) and Zip Co ((Z1P)) were also in the wars (-5.0% and -4.8%).

On the upside, four of the top five were gold miners, along with meme stock Redbubble ((RBL)).

Wall Street has flipped over again last night but locally the futures are feeling a little once bitten-twice shy. The S&P500 closed up 1% but we’re up only 0.5% .

Go Figure

The Nasdaq’s plunge on Monday night was attributed to OPEC’s decision not to increase its production schedule, leading to higher oil prices, implying increased inflation, suggesting higher bond yields, and bringing forward the possibility of an earlier Fed rate hike.

The funny thing was, the US ten-year bond yield didn’t move.

It moved last night – up 5 basis points to 1.53% — on the back of a better than expected September services PMI. So you’d expect it would be curtains for the Nasdaq. But no, it bounced back 1.3%.

So what’s going on?

Well, that’s the point. On a net basis there’s nothing much going on other than seasonal volatility. September became a self-fulfilling prophecy, and now October is doing the same, only three sessions in. Level-headed fundamentalists are standing back, watching for opportunities.

Many have expected a more substantial pullback than -5%, so the more jumpy investors are fearful. But then there’s the other fear – FOMO – noting November and December are seasonally strong months, and the average Wall Street forecast is for the S&P500 to close the year higher.

The call last night was that Monday night’s sell-off sent tech companies, particularly the FAAMGs, into the oversold zone. Facebook had its own issues in falling -5%, but still bounced 2% last night. The others all fell -2.5-3% on Monday, and bounced back 1.5-2% last night.

Wall Street did not in general recover all of Monday night’s losses, but for all the ups and downs, the S&P is trading where it was at the end of September.

There’s still the debt ceiling issue to be resolved, and next week the big banks lead off the September quarter result season. Expectations are for far more muted earnings growth results given supply shortage problems, but as earnings forecasts have been downgraded on that basis, there’s still room for upside surprise.

Recent out-of-cycle reporters Nike (Dow) and FedEx drove home the supply shortage problem with surprise misses and subsequent share price falls, so Wall Street cannot suggest it wasn’t warned.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1760.00	– 8.30	– 0.47%
Silver (oz)	22.59	– 0.05	– 0.22%
Copper (lb)	4.13	– 0.05	– 1.08%
Aluminium (lb)	1.32	+ 0.01	0.40%
Lead (lb)	0.99	+ 0.01	1.34%
Nickel (lb)	8.15	– 0.09	– 1.14%
Zinc (lb)	1.37	– 0.00	– 0.25%
West Texas Crude	79.15	+ 1.55	2.00%
Brent Crude	82.75	+ 1.49	1.83%
Iron Ore (t)	117.80	0.00	0.00%

Base metals and iron ore are a little quiet in China’s absence.

Gold is back down again, so look for most of today’s top five losers’ board to be gold miners.

It wouldn’t be normal if the oils didn’t add another 2%.

The Aussie is flat for once, at US$0.7290.

Today

The SPI Overnight closed up 36 points or 0.5%.

The RBNZ meets this morning.

China is still closed.

The US will see September private sector jobs.

Mainstream Group ((MAI)) and NRW Holdings ((NWH)) hold AGMs.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AGL	AGL Energy	Upgrade to Neutral from Sell	UBS
BXB	Brambles	Upgrade to Buy from Neutral	UBS
COH	Cochlear	Upgrade to Neutral from Sell	Citi
PME	Pro Medicus	Upgrade to Hold from Reduce	Morgans
S32	South32	Downgrade to Hold from Add	Morgans
SFR	Sandfire Resources	Upgrade to Buy from Neutral	Citi

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms