The Overnight Report: Damn The Torpedoes

This story features NEW HOPE CORPORATION LIMITED, and other companies. For more info SHARE ANALYSIS: NHC

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

World Overnight
SPI Overnight	7343.00	+ 31.00	0.42%
S&P ASX 200	7341.10	+ 62.60	0.86%
S&P500	4511.61	+ 50.43	1.13%
Nasdaq Comp	14108.82	+ 270.36	1.95%
DJIA	34807.46	+ 254.47	0.74%
S&P500 VIX	22.94	– 0.59	– 2.51%
US 10-year yield	2.37	+ 0.06	2.51%
USD Index	98.46	– 0.04	– 0.04%
FTSE100	7476.72	+ 34.33	0.46%
DAX30	14473.20	+ 146.23	1.02%

By Greg Peel

Big is Better

The futures had suggested a full 80 point gain for the ASX200 yesterday morning despite a flat S&P500 and it didn’t take long to get there, even as high as 99 points, in a mostly sideways session from the opening spike. Last hour selling and a drop of -10 points after the close settled the index at up 62.

It was all about three sectors leading the way, offsetting the drag of six negative sectors, and one stock alone contributed over half the day’s index gain.

Yes, the Big Australian is now bigger than ever, following the end of the London listing and the recent index rebalance, hence BHP Group’s 5.1% gain on the day was worth 35 points, and a silver medal.

The materials sector rose a standout 3.3% as a result, with prices of all things material pushing higher, and all of the top five index winners yesterday hailed from the sector. Lithium stocks were over-represented.

New Hope Corp ((NHC)) – not in the index – jumped 8.5% after announcing a special dividend to reward shareholders for surging thermal coal prices.

Energy gained 1.7%, on another move up in oil prices, while the banks added 0.6%. The Aussie ten-year yield followed up the US equivalent yesterday in jumping yet another 16 points to 2.74%.

Communication services, consumer discretionary, healthcare, industrials, technology and property all did their bit to counter BHP and Co in falling yesterday, but to no avail.

Of the five top index losers on the day, four of them end up on either board most days, including the tiresome BNPLs, while Atlas Arteria’s ((ALX)) board-topping -5.3% drop was due to it going ex.

Amcor ((AMC)) currently has three factories in Russia generating 2-3% of total sales. The company stated yesterday it will be focusing on supporting only existing multinational customers, will be suspending new projects and investments, and will discontinue exports from Russia as soon as possible.

The dilemma for large international companies wanting to do their bit for the war effort is the extent to which they believe everyday Russians, oblivious to the truth, should be punished for Putin’s actions, both in the sense of jobs and basic essentials.

Hence the likes of Nestle, Kellogs and Pepsico have ceased supplying discretionary foods and drinks, but maintained supply of the likes of cereal, milk, infant formula and baby food, and in Barillo’s case, pasta.

Let’s hope that missing out on a can of Pepsi Max is enough to fuel another Russian revolution.

Back in Black

The Wall Street rebound wobbled only for the one session on Monday night, after the US ten-yield spiked up 17 points following ever more bullish comments from the Fed chair. An initial fall on the day was followed by a recovery to the close, leaving the S&P500 flat on the day.

Last night the ten-year rose another 6 points to 2.37%, but it was back to business in equity markets, led by a 2% gain for the Nasdaq as Big Tech continues its comeback. Tesla, for example, rose 8% after announcing its new gigafactory in Berlin is ready to commence production, thus supplying Europe directly rather than having to transport cars by boat from its Shanghai gigafactory as has been the case to now.

Otherwise there was no new news of note to drive the rally last night. The S&P500 has recovered from correction territory to now be only -6% below its January all-time high.

Yet still there is talk of rate hike-induced recession. The spread between the US two-year yield and ten-year yield dropped as low as 13 points last night before blowing back out to 22 by the close.

While the two-ten spread is seen as an early indicator of a possible recession, if it inverts, the real confirmation sought by economists is the spread on the three-month Treasury to the ten-year. The three-month has rallied 50 points since the beginning of 2022, but that only gets it to 0.54%, compared to 2.37% for the ten-year.

So don’t panic just yet.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1921.10	– 13.90	– 0.72%
Silver (oz)	24.76	– 0.42	– 1.67%
Copper (lb)	4.62	– 0.00	– 0.06%
Aluminium (lb)	1.69	– 0.00	– 0.27%
Lead (lb)	1.03	+ 0.01	1.16%
Nickel (lb)	12.88	+ 1.86	16.84%
Zinc (lb)	1.77	– 0.01	– 0.38%
West Texas Crude	111.76	– 0.27	– 0.24%
Brent Crude	115.02	– 1.26	– 1.08%
Iron Ore (t)	148.50	– 1.75	– 1.16%

Nickel volumes reportedly surged last night as the metal managed to trade within its limits for the first time since trading resumed. Eventually the “true” price might be discovered.

Otherwise, a sightly red day for most commodities.

This hasn’t stopped the Aussie nonetheless. It’s up another 0.9% at US$0.7469 as it continues to trade with disregard for its denominator.

Today

The SPI Overnight closed up 31 points or 0.4%.

The US will see numbers for durable goods orders and home sales tonight.

Seek ((SEK)) will go ex a decent dividend.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
MYD	MyDeal.com.au	Downgrade to Hold from Add	Morgans
RED	Red 5	Upgrade to Add from Hold	Morgans

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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