The Overnight Report: Cannon Fodder

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

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

By Greg Peel

Gas & Milk

AGL Energy ((AGL)) was due to put its demerger plans to shareholders in June but clearly the chief whip had been doing the numbers, leading to the board deciding to abandon the idea yesterday.

Four senior board members were shown the window.

AGL analysts had up to yesterday declared the demerger to be in the best interests of shareholders, other than the biggest one. But this would be to ignore the less empirical consideration of the ESG groundswell, and to have not learned anything from the election. Analysts had suggested the share price could well plummet if the demerger was voted down.

It never got to be voted down, and the share price didn’t plummet either – down only -1.7% yesterday — presumably on the assumption Cannon-Brookes will now take a third swing.

Utilities were thus the only sector to close in the red yesterday (-0.7%) in a session in which most other sectors went surging, taking the lead from a revitalised Wall Street. No surprise technology stood out to the upside with a 4.6% leap, with Zip Co ((ZIP)) waving the flag (+14.0%) along with co-conspirator Block ((SQ2)) (+10.9%).

Other familiar yo-yo stocks also saw solid gains.

I had been wondering why there had been little response among Australian/Kiwi baby formula stocks to the severe US shortage, which has sent Biden scouring the globe for imports. That all changed yesterday when Bubs Australia ((BUB)) announced it had been approved as a supplier. Bubs jumped 42% but is outside the ASX200, while inside, a2 Milk ((A2M)) rose 10.4%.

Consumer staples gained 1.6% but only found itself among the pack yesterday with the index up 1.5%.

Materials was second best (+2.2%) on metal price rises while energy (flat) played it safe ahead of last night’s EU meeting regarding Russian oil bans. More on that below.

All other sectors posted relatively uniform gains in line with the index itself, except for financials which only rose 0.6%. The banks were solid but insurers not, as everyone in the east looked out the window.

I had noted yesterday an aspect of selling the “duds” or taking profits on the winners to recycle into beaten down-names that had suffered most in the May sell-off. This was evident again yesterday on the index losers’ board, with Tabcorp Holdings ((TAH)) falling -4.5% post a successful demerger, Appen ((APX)), which was briefly under takeover, falling -3.7%, UR Westfield ((URW)) which had enjoyed a bit of a spurt falling -2.8%, and earnings result winner Elders ((ELD)) falling -2.7%.

The ASX200 wasted no time yesterday morning in powering through resistance at 7200 from the bell, before spending the afternoon feeding on itself. From here it’s all about picking the right stocks.

News this morning is that Albo has secured a majority of seats. Even the most shattered Coalition voters in the market will agree that a majority government of either stripe is better for the economy than a hamstrung hung parliament.

Commodities

EU members met last night and failed to reach an agreement on Russian oil bans. While Hungary remains the main stumbling block, the Putin-friendly nation is not a lone voice among Europe’s smaller economies that would face economic disaster if their energy supplies were cut off, moral inclinations notwithstanding.

Oil prices nonetheless rose another 2% last night. The EU does believe that some sort of agreement, inclusive of concessions, is close to being reached.

Meanwhile, restrictions are beginning to be slowly lifted in Beijing, while Shanghai’s month-long easing schedule is set to begin from tomorrow.

Metal and mineral prices continue to fight back.

Which is having its impact on the Aussie, up 0.5% at US$0.7199.

Today

After yesterday’s surge and with no lead from Wall Street overnight, it is of no surprise the futures are off a bit this morning. The SPI Overnight closed down -12 points.

I had assumed yesterday would bring data for March quarter company profits an inventories, because they have always been on the Monday ever since Albo lived in public housing (which he now is again). But for some reason they’re out today, along with the current account as per normal.

We’ll also see April numbers for building approvals and private sector credit.

China will report its May PMIs today.

The US will see monthly consumer confidence tonight.

Paladin Energy ((PDN)) holds its AGM today.

Orica ((ORI)) goes ex.

The Australian share market over the past thirty days…

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