The Overnight Report: Book Squaring

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

World Overnight
SPI Overnight	7437.00	– 42.00	– 0.56%
S&P ASX 200	7499.60	– 14.90	– 0.20%
S&P500	4530.41	– 72.04	– 1.57%
Nasdaq Comp	14220.52	– 221.76	– 1.54%
DJIA	34678.35	– 550.46	– 1.56%
S&P500 VIX	20.56	+ 1.23	6.36%
US 10-year yield	2.33	– 0.03	– 1.31%
USD Index	98.35	+ 0.54	0.55%
FTSE100	7515.68	– 63.07	– 0.83%
DAX30	14414.75	– 191.30	– 1.31%

By Greg Peel

End of Quarter I

Despite a dip on Wall Street overnight, the ASX200 opened up 42 points yesterday on the back of big rises in metal and oil prices. Ultimately the index closed down -14, but a full -30 points were wiped off by market-on-close orders in the match-up after the bell.

While the energy sector did turn around mid-session on news the US was ready to release oil from its Strategic Reserve, clearly the day was all about end of quarter profit-taking after a solid month of March rally.

Wall Street did exactly the same last night, so our futures are down -42 points this morning. A drop in the oil price was anticipated, and as to whether the new quarter will begin with a sell-off is not a given.

Materials was the standout winner on the day (+1.5%), with Mineral Resources ((MIN)) and Fortescue Metals ((FMG)) each gaining 4.3%.

The White House is also looking to boost strategic metal supply, and Australia is a go-to destination. Battery materials and technology company Novonix ((NVX)) jumped 9.7% yesterday to top the index.

Communication services managed to rise 0.7%, with TPG Telecom ((TPG)) gaining 4.3%, while industrials (+0.2%) was the only other sector in the green.

The banks had a strong March on rising bond yields and budget handouts, but profit-taking took the sector down -1.0% to provide the biggest index impact. Consumer discretionary fell -1.3%, although Tabcorp ((TAH)) rose 2.5% after announcing plans for the long-awaited demerger of its lottery business.

Technology was another March winner, on the Nasdaq rebound. It fell -2.2%, while staples fell only slightly amidst falls of -0.6-0.9% amongst the remainder.

In economic news, new building approvals jumped a full 43.3% in February, after falling in omicron-hit January. While house approvals did rise, it was all about the lumpy apartment block effect. The rush will likely ease once rates start rising.

Job vacancies are up 46.6% year on year. You just can’t get good help. Is it because there are no migrants to do the tough stuff?

And it’s official – the Chinese economy is slowing. China’s March manufacturing PMI and services PMI both fell into contraction at 49.5 and 48.4 respectively.

As suggested, we sold off yesterday and the US followed suit last night for the end of the quarter, so whether we need to be down -42 points today is questionable.

End of Quarter II

As was the case here, Wall Street saw a large amount of sell-on-close orders. The Dow was only down -200 entering the final hour, before closing down -550 on last-minute selling.

All S&P500 sectors closed in the red, led by a -2.3% for the banks as bond yields slipped back further (spread still hanging around +4). The energy sector managed to fall only -1.4% despite the -6% plunge in the WTI crude price, but across the board selling, accelerating into the close, was classic end of quarter stuff.

The Dow closed up 2.3% for the month, with the S&P up 3.6% and the Nasdaq 3.4%. But the Dow closed down -4.6% for the quarter, the S&P -4.9% and the Nasdaq -9.1%.

It was the first losing quarter on Wall Street since March 2020.

Inflation numbers are failing to surprise anymore, at least until we get to March results. The Fed’s preferred PCE measure of inflation rose to 6.4% year on year in February from 6.2%, to mark the highest level since 1983. The core PCE rose to 5.4% from 5.2%.

Biden announced the release of one million barrels per day from the US Strategic Reserve in order to combat surging US fuel prices, as has long been expected. This equates to about 1% of global oil production and 5% of US consumption but as oil analysts agree, it won’t hurt, it’s really little more than a band aid solution, with the last pre-contracted, pre-sanction shipments of crude to the US from Russia due to arrive mid-April.

Meanwhile, Putin is insisting “unfriendly” countries must pay for their Russian imports with roubles. Germany and France have both said get stuffed. Germany, and Austria (these days neutral, a la Switzerland), are now talking about gas rationing. The German finance minister has warned Germans the country will be “poorer” as a result of the war.

OPEC-Plus meets tonight but is not expected to shift from its gradual production increase schedule, and less likely now US reserves are being released.

The problem remains lack of production, particularly in the US where a decade of underinvestment post GFC has left leases idle, and interim low oil prices (remember minus US$40/bbl?) have provided no incentive.

Flying in the face of his green policy push, Biden is now considering fining oil companies holding oil leases on government property if they don’t restart production. The more oil you don’t produce, the more you will be fined, noted Joseph Heller.

As is the case in Australia, we’ll have to wait to tonight to see just how much of a book-squaring exercise last night’s Wall Street sell-off proves to be, or whether sentiment has turned following the solid March rally. Commentators have noted the strong session earlier in the month when it was though Russia might be backing off, and that’s far from the case.

Tonight brings March US jobs numbers as well.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1937.10	+ 3.40	0.18%
Silver (oz)	24.76	– 0.08	– 0.32%
Copper (lb)	4.70	+ 0.01	0.20%
Aluminium (lb)	1.68	– 0.02	– 1.42%
Lead (lb)	1.09	– 0.01	– 0.85%
Nickel (lb)	14.67	– 0.35	– 2.33%
Zinc (lb)	1.91	+ 0.02	0.94%
West Texas Crude	101.02	– 6.38	– 5.94%
Brent Crude	107.91	– 4.69	– 4.17%
Iron Ore (t)	150.84	– 0.04	– 0.03%

Base metal prices have stalled after Wednesday night’s big gains.

Volatility in iron ore has evaporated, with Beijing suspiciously quiet on pricing.

Oils as noted.

On US dollars strength, the Aussie is down -0.4% at US$0.7486.

Today

The first of the month brings manufacturing PMI numbers from everyone else.

US non-farm payrolls tonight.

Summer time ends in Australia this weekend, hence as of Tuesday morning Wall Street will close at 6am Sydney time, while the SPI Overnight will continue to close at 7am.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
GOR	Gold Road Resources	Upgrade to Neutral from Underperform	Macquarie
UWL	Uniti Group	Upgrade to Accumulate from Hold	Ord Minnett
WPL	Woodside Petroleum	Downgrade to Neutral from Buy	UBS

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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