The Overnight Report: Back To Business

This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies. For more info SHARE ANALYSIS: NAB

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

By Greg Peel

Resourceful

For once the banks sat it out yesterday (-0.4%), after US banks fell overnight on a fall in bond yields. The Aussie ten-year pulled back -4 points to 2.73% yesterday and the market took National Bank’s ((NAB)) announced double-up of its buyback, with $2.5bn now completed, in its stride, given it came as no surprise.

It was left to the resource sectors to once again provide support for the ASX200 yesterday on stronger commodity prices, with energy gaining 2.0% and materials 1.0%. Utilities rose 2.6%, distorted by the move of LNG producer Origin Energy ((ORG)) out of the energy sector and into the utilities sector. Origin rose 3.0%.

Gains in resources managed to counter weakness elsewhere, following a pullback on Wall Street on Wednesday night that has once again proven brief. Staples was the only other sector to close in the red (+0.6%).

Falls elsewhere were otherwise relatively modest, hence a flattish close. The futures had suggested a fall of -51 points given Wall Street weakness but the index managed only -21 from the open before grinding its way slowly higher all session, closing basically on its high.

Whitehaven Coal ((WHC)) topped the index with a 6.5% rise as coal prices push onward ever upward.

A solid earnings report from Brickworks ((BKW)) had that stock up 5.0% while a positive trading update from JB Hi-Fi ((JBH)) once again silenced the non-believers and was worth 4.3%.

On the losers’ board, Fisher & Paykel Healthcare ((FPH)) fell another -3.5% after warning on Wednesday of steeply rising costs. This, plus some enthusiasm tempering comments from ResMed ((RMD)) management, led Ord Minnett to pull back its rating for sleep rival ResMed to Accumulate from Buy, and that stock fell -4.2%.

James Hardie ((JHX)) dropped -3.4% on some weak US home sale numbers overnight which investors misinterpreted. Weak US sales are not a sign of easing demand (although rising mortgage rates would support that view) but of severe lack of supply, hence no houses to buy. This implies more need to be built, and that would mean lots of building materials.

As we move into today, Australia’s muted response yesterday to Wall Street’s Wednesday night pullback has been met by a muted response of a 0.5% rise in the futures overnight following a 1.4% gain for the S&P500, as Wall Street returns to bull mode.

Oil prices fell -3% last night and base metals were trimmed, following Wednesday night’s solid gains.

The US ten-year yield has risen again, but only by 2 points to 2.34%, so no great impetus for our banks today either.

The world waits for any further developments out of Brussels, where everyone is meeting everyone else to discuss Ukraine. Looks like Putin will be kicked out of the G20. I’m sure he’s miffed.

Well we knew that

If the US economy is at risk of heading into recession thanks to the Fed’s about-face rapid rate hike policy, it is not evident in last night’s flash PMI estimates for March. Manufacturing rose to 58.9 to 56.5, and services to 58.5 from 57.3, indicating ongoing expansion.

While such numbers only justify Fed urgency, Wall Street returned to rally mode last night following a Wednesday night pullback that now appears only to have been an interim profit-taking session in the middle of ongoing strength.

The fall was triggered by another Fedhead suggesting a 50 point hike in May, despite Powell having already hinted as such a couple of days earlier. There were lots of Fedheads out and about last night singing to much the same tune, but Wall Street appears to be set to take a 50 point hike in May in its stride.

The only sectors to close lower in last night’s session were energy and utilities, on the -3% pullback in oil prices. Big Tech again led the rally.

Wall Street is also likely cheering on Ukrainian accomplishments, with the Russians now having been pushed back some 30 miles to the east of Kyiv. The Ukrainians also took out a docked Russian warship last night carrying fresh supplies of tanks and trucks. The Ukrainians would not have known what the ship was carrying until a Russian state-media reporter stood proudly on its bow and told everyone.

In other news, the Russian stock market reopened last night after a two-week halt and went up, a bit. While this might seem surprising given Russian stocks listed in London have fallen some -90%, the reopening was limited to a handful of stocks, the session was limited to four hours, and short selling and selling by foreigners was banned.

Commodities

Base metal prices eased off a tad last night after Wednesday night’s big moves except for nickel, which was once again halted at limit-up (+15%). So ignore the actual prices above.

Oil prices fell on data showing US oil & gas production has recovered a lot faster in the March quarter than assumed. A Dallas Fed production index now reads 45 for oil, up from 19 in the December quarter, and 40 for gas, up from 14.

The Aussie is up again, slightly, at US$0.7514, and continues to belie the US dollar.

Today

The SPI Overnight closed up 38 points or 0.5%.

The US sees bi-monthly consumer sentiment tonight.

Premier Investments ((PMV)) reports earnings.

The Australian share market over the past thirty days…

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