The Overnight Report: Tech Revival

This story features PERPETUAL LIMITED, and other companies. For more info SHARE ANALYSIS: PPT

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

World Overnight
SPI Overnight	7528.00	+ 50.00	0.67%
S&P ASX 200	7513.70	+ 19.90	0.27%
S&P500	4582.64	+ 36.78	0.81%
Nasdaq Comp	14532.55	+ 271.05	1.90%
DJIA	34921.88	+ 103.61	0.30%
S&P500 VIX	18.57	– 1.06	– 5.40%
US 10-year yield	2.41	+ 0.04	1.47%
USD Index	98.99	+ 0.36	0.37%
FTSE100	7558.92	+ 21.02	0.28%
DAX30	14518.16	+ 71.68	0.50%

By Greg Peel

Defensive Tone

The ASX200 opened up 43 points yesterday and then bungled around to be up 29 at 4pm, before market-on-close orders knocked off -10 points.

Resources were once again in the spotlight, with materials gaining 1.0%, largely on iron ore and lithium, and energy 0.6% despite a dip in oil prices.

The banks continued to slip, leading to a -0.3% fall for financials despite movements among fund managers. Perpetual ((PPT)) has made an offer for Pendal Group ((PDL)), sending Pendal up 18.1%, and firing up comeback kid Magellan Financial Group ((MGF)) by another 9.7% on further industry consolidation speculation.

Bank of Queensland ((BOQ)) reports earnings next week and has suffered two FNArena database broker downgrades to Hold or equivalent since Friday, on concerns of over-exposure to mortgages and under-exposure to deposit growth. The stock fell -3.2%.

The fund manager moves had Pendal atop the top five index winners yesterday and Magellan in second, there followed by three of the lithium stocks that were among the five lithium stocks that topped the index on Friday.

We’ve been here before with lithium – boom and bust – but that was when it was all about an as yet unrealised green theme. This time it’s more real, evidenced by an upgrade last night to Tesla’s production forecast.

Consumer discretionary continues to pull back from budget euphoria (-1.0%), although yesterday it was all about a -3.0% drop in Aristocrat Leisure ((ALL)) after it revealed revenue from its Raid game dropped -28% year on year in March.

A quiet day for technology had that sector up 1.0%, but it’s looking more promising this morning. The unfamiliar winning sector on the day was utilities (+1.1%). Combine that with real estate, up 0.7% despite more weakness in consumer discretionary, and 0.6% for healthcare, despite a solid currency, and yesterday looked a little more defensive.

Staples still fell another -0.2% nonetheless, on grocery unaffordability.

We might argue that in the current climate, the poster child cyclicals that are the resources sectors are actually defensive as well – against inflation.

We begin today with the futures suggesting a 0.7% gain, in line with 0.8% for the S&P500 overnight, except that the bulk of that was driven by Big Tech, sending the Nasdaq up 1.7%. So little connection to Australia, other than Block ((SQ2)) was up 8.7%.

We did see overnight gains in the oils, iron ore and zinc so the index is not without support, once more.

All a Twitter

What do you do when you believe your favourite social media platform is stifling free speech, and you’ve got more money than you know what to do with? Buy 9% of the shares, of course.

Wall Street had begun poorly last night, with the Dow down -200 points early, before it was revealed that over March, Elon Musk acquired 9.2% of Twitter to become the company’s biggest individual shareholder. Twitter shares rose 27% last night.

What do Tesla shareholders think of the move? Tesla rose 5.6% but that gain was all about guidance to 2022 production of 1.45m EVs with the Berlin gigafactory now up and running and the Texas version about to be. Musk has filed his Twitter interest as a “passive” investor, but no one believes he will not ultimately get involved.

The news had investors deciding perhaps it’s time to pour back into Big Tech again, following the 2022 correction to date and the rebound thus far, hence the Nasdaq jumped 1.7% when the Dow could only manage 0.3%, despite Apple and Microsoft each gaining around 2%.

It’s interesting to see the Nasdaq powering on amidst debate about just how many 50 point rate hikes the Fed is about to unleash. This time last year the story was the complete opposite.

Yield curve inversion? No worries. The two-ten gap closed back somewhat last night to be hovering around flat.

Meanwhile, images out of Bucha have steeled the EU’s resolve, with Sargent Scholz calling for further sanctions and Macron, facing an election, calling for sanctions on Russian energy exports specifically. Germany is nevertheless not yet prepared to sacrifice its economy with energy sanctions.

Another fly in the ointment is Hungary, where the right-wing Orban has just been resoundingly re-elected. Orban is good chums with Putin, and in his victory speech named Zelensky as an “enemy”, despite taking in Ukrainian refugees across its common border.

Hungary is also a member of both the EU and NATO, so you can see there’s a problem.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1933.20	+ 7.60	0.39%
Silver (oz)	24.52	– 0.09	– 0.37%
Copper (lb)	4.71	+ 0.07	1.42%
Aluminium (lb)	1.64	– 0.03	– 1.92%
Lead (lb)	1.10	+ 0.00	0.27%
Nickel (lb)	14.94	– 0.03	– 0.19%
Zinc (lb)	1.99	+ 0.08	4.12%
West Texas Crude	103.28	+ 4.01	4.04%
Brent Crude	107.84	+ 3.45	3.30%
Iron Ore (t)	162.00	+ 2.02	1.26%

Macron’s call is behind renewed strength in oil prices.

A big drop in inventories held at the LME is behind the jump in the zinc price.

Iron ore is powering on (with China closed yesterday), and as Chinese steelmakers up the ante on production and restock accordingly, after a period of restriction, it would not be a surprise to see it back at US$200/t, which rather puts Beijing between a rock and a hard place, so to speak.

Strength in commodity prices has the Aussie breaking out of the grip of 75, last night gaining 0.7% to US$0.7546 despite the greenback rising 0.4%.

Today

The SPI Overnight closed up 50 points or 0.7%.

The RBA meets today.

China is closed for another day.

The US will see trade data.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ABP	Abacus Property	Upgrade to Outperform from Neutral	Macquarie
BOQ	Bank of Queensland	Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Hold from Accumulate	Ord Minnett
DHG	Domain Australia	Upgrade to Buy from Hold	Ord Minnett
MIN	Mineral Resources	Upgrade to Hold from Sell	Ord Minnett
PLS	Pilbara Minerals	Upgrade to Buy from Hold	Ord Minnett
SGM	Sims	Downgrade to Neutral from Buy	UBS
TAH	Tabcorp	Upgrade to Outperform from Neutral	Credit Suisse

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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