The Overnight Report: Second-Guessing

This story features BEACH ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: BPT

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

By Greg Peel

Macro-Micro Muddle

Funny old market. On Friday night the S&P500 fell -1.9% but our futures suggested only a -0.5% for the ASX200 on Monday. The index opened down -36 points but swiftly rebounded to ultimately close up 26.

Last night the S&P500 fell -0.3% and our futures are showing down -0.9% this morning.

I noted yesterday that a volatile macro overlay for the market during reporting season is unfortunate as it distorts assessments of individual company performances. But it also works the other way. Defiant strength in the ASX200 yesterday was as much about positive earnings results as it was about oil and gold.

A geopolitically driven jump in oil prices on Friday night had our energy sector up 3.4% yesterday and utilities up 1.9%. Beach Energy ((BPT)) also provided a strong result on the day, and topped the index with a 9.4% gain.

The following four top five positions were filled by gold miners, with 7-8% gains.

Yet the materials sector fell -0.4%, on a weaker iron ore price and lithium/battery stocks going off the boil. Battery tech company Novonix ((NVX)) topped the index losers with a -10.8% fall, while miners Liontown Resources ((LTR)) and Pilbara Minerals ((PLS)) fell -7.9% and -7.6%, respectively.

Financials stood out with a 1.5% gain, as the big banks caught a bid and Bendigo & Adelaide Bank ((BEN)) gained 4.4% on its earnings result.

You can always rely on a JB Hi-Fi ((JBH)) result – it rose 5.4%, but weak responses followed results from Boral ((BLD)) and Aurizon Holdings ((AZJ)), while investment platform Praemium ((PPS)) was hammered -13.9%.

It was another poor session for healthcare (-1.7%) as CSL ((CSL)) struggles with US plasma collections.

The other interesting sector move to note was technology. It fell -0.3% with the Nasdaq down -2.8% on Friday night.

Amongst several earnings reports due today, that of Australia’s biggest company will be the one in the spotlight.

We have oil prices up again overnight, and gold up again, while iron ore has slipped slightly and base metals were mixed.

As to why the futures are down more emphatically than Wall Street this morning is unclear.

Russian About

It was a down-up-down-up session on Wall Street last night as the market responded to every little snippet of the constantly developing Ukraine-Russia story.

At different times we had the Russian foreign minister suggesting diplomatic talks will continue, German chancellor Sargent Sholz shuttling between Kyiv and Moscow, the Ukrainian president announcing Russia will invade on Wednesday, which turned out to be an ironic snipe at Western scare-mongers, and the US closing its embassy in Kyiv and moving it west to near the Polish border, destroying all communications hardware before departure.

So what’s going to happen? That’s the problem – everyone has an opinion but nobody, other than perhaps Putin, knows, and even he may not be certain.

Meanwhile, the flight to safety was again apparent in gold and the US dollar, but the US ten-year yield climbed up once more, by 4 basis points to 1.99%.

The Dow recovered from dropping more than -430 points early to close down -171, while the Nasdaq this time outperformed the rest in closing flat, despite higher yields.

The VIX volatility index has in the last few sessions traded above 30 on the day before slipping under by the close (28 last night). The 30 level is considered that beyond which it’s best left only to the day-traders. Everyone else stay out.

One interesting move in the S&P last night was that of the energy sector. WTI rose another 1.8% but the energy sector fell -2.2% to be the worst performer on the day.

It is suggested that while higher oil prices are clearly a positive for energy companies, when you get towards US$100/bbl you are facing demand-destruction and a possible economic downturn.

All we know for now is that Putin will either invade tomorrow, or next week, or after the Olympics so as to not upset his mate Xi, or not. It could just all be a big try-on.

Or not.

Commodities

As discussed. Note gold’s further gain defied both the US dollar and US yields, making it the clear store-of-wealth play.

Bitcoin has been all over the shop.

Today

The SPI Overnight closed down -64 points or -0.9%.

The US will release January PPI data tonight, just to remind us monetary policy as also a source of volatility at present.

On that subject, the minutes of the February RBA meeting are out today.

BHP Group ((BHP)) reports earnings, 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.

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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