The Overnight Report: Time Out

This story features ANZ GROUP HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: ANZ

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

By Greg Peel

Where the bloody hell are ya?

A choppy session on the ASX was underscored by two significant and opposing announcements. The ASX200 opened down -60 points, despite a gain for the S&P500, but immediately rallied to be down only -23 in the first hour.

ANZ Bank ((ANZ)) then released a quarterly trading update and it did not impress. The index plunged to be down -74 points, with ANZ shares down over -3% at the low. Whether or not buyers then saw the fall as overdone, Australia's PM Morrison stepped in to save the day. The international border will reopen to tourists in a couple of weeks.

Clever diversion. I’m waiting for free beer.

No surprise that the most shorted stock on the market (15%), Flight Centre ((FLT)), jumped 7.8%. Travel peer Webjet ((WEB)), also heavily shorted (9%), jumped 6.2%. In between was Corporate Travel Management ((CTD)), up 7.0%, and not in the index, Helloworld Travel ((HLO)) gained 11.3%.

Moving to industrials from consumer discretionary, Qantas ((QAN)) rose 4.6%. The news would once have been positive for Sydney Airport ((SYD)), but it’s about to go private.

Despite this strength, consumer discretionary closed down -0.1% and industrials -0.2%. Month of December retail sales data, released yesterday, were a bit soft, but we already knew that given preliminary numbers were released last week.

And of course tourists will still be barred from the Democratic People’s Republic of WA.

The index winner on the day was nonetheless GrainCorp ((GNC)), which surged 12.3% on its positive trading update. The company may yet double its FY21 profit, which was a cracker in itself after three years of drought. Elders ((ELD)) rose 5.2% in anticipation, but one might have thought Nufarm’s ((NUF)) similar update and share price surge last month could have provided a tip-off.

GrainCorp and stronger iron ore prices helped the materials sector to a 0.8% gain on the day, but as expected, energy topped the boards with 1.6%.

In the wash-up, the index closed down a mere -9 points, having been in the green briefly in the last half hour. ANZ managed to close down only -1.8% after some reflection.

The big loser on the day – no prizes — was Magellan Financial ((MFG)), which dropped yet another -11.2% after the chairman and chief investment officer fell on his sword, implementing a one for one Hamish swap. Magellan, once the star amongst listed fund managers, has lost -60% in the last year.

In other economic news, ANZ Bank’s job ads series showed only a -0.3% fall in ads in January after a -5.8% fall in December, reflecting omicron, but ads are still 9.6% above the delta low.

Wall Street has staged another one of its last half hour sell-offs this morning, and our futures are down -11.

Struggling for Traction

Inside the last half hour, the S&P500 had reached a point about half way back to its prior high ahead of the Fed-driven January sell-off. The Dow was up over 200 points. But once again Wall Street copped a barrage of late selling.

The market is still trying to come to terms with Friday night’s strong US jobs number, and its implications for the number of rate hikes the Fed might implement this year, and Thursday night brings the January CPI.

If this number comes in “hot” as well, Wall Street will consider a rate hike at every remaining meeting this year as more likely. But economists are forecasting 7.2%, so hot would have to be scalding.

US mortgage rates are nonetheless on the move. An average 30-year fixed rate of 3.7% is a full percentage point up from 2.7% six months ago and the only way is up from here. The US has seen a similar house price surge to our own, and if prices tip over the ensuing wealth effect will not be positive for the stock market.

Yet given ongoing strong demand meeting historically weak supply, it will be some time before higher rates have a meaningful effect on prices. They likely will just stop surging.

The market is also still trying to come to terms with an extraordinarily volatile earnings result season. Data show 47% of S&P500 companies reporting to date have seen responses of -1% or more, an improvement from 63% two weeks ago. But that’s nothing compared to Meta, which is widely held in index funds and ETFs.

Or was.

It seems TikTok is to Facebook what Facebook was to MySpace many years ago. Deciding it could no longer compete on the “cool” front, Meta is shifting its eggs into the metaverse, and it’s costing money, and Wall Street is yet to be convinced in an augmented reality future.

Meta fell another -4% last night.

Communication services was the worst performing S&P sector on the day, down -2.2%. Energy was best with 1.3%, despite oil prices pulling back a tad.

The suggestion is Wall Street will go a little quiet now ahead of Thursday night’s CPI release. We’ll believe that when we see it.

Commodities

A bit of a dip in energy prices is hardly surprising following the surge through the US$90/bbl mark.

Returned Chinese do not seem to be much interested in base metals – maybe they’re all glued to the TV — but iron ore continues to press higher.

Quick, get your Aussie before you book your trip. It’s up 0.7% at US$0.7127.

Today

The SPI Overnight closed down -11 points.

NAB’s monthly business confidence survey is out today.

Suncorp Group ((SUN)) and Shopping Centres Australasia ((SCP)) are among those reporting earnings today.

Macquarie Group ((MQG)) provides an update.

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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