The Overnight Report: Squaring Up

This story features METCASH LIMITED, and other companies. For more info SHARE ANALYSIS: MTS

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

World Overnight
SPI Overnight	7052.00	+ 20.00	0.28%
S&P ASX 200	7078.70	– 20.50	– 0.29%
S&P500	4328.82	– 19.51	– 0.45%
Nasdaq Comp	13335.78	– 156.74	– 1.16%
DJIA	33714.71	– 12.72	– 0.04%
S&P500 VIX	14.25	+ 0.81	6.03%
US 10-year yield	3.72	– 0.02	– 0.53%
USD Index	102.76	– 0.14	– 0.14%
FTSE100	7453.58	– 8.29	– 0.11%
DAX30	15813.06	– 16.88	– 0.11%

By Greg Peel

Some Stability

After a two-day thumping, the ASX200 opened down around -40 points yesterday but began to see some buying interest. There followed a choppy session in which the index ranged between down -10 late morning to down -45 late afternoon, before closing down -20. At its nadir, the index hit a three-month low.

While tentative buying was evident, all bar two sectors still managed to close in the red.

Buyers clearly moved back into technology (+0.9%) but that will be tested today. Real estate rose 0.1% as the two-year bond yield fell -7 points.

The banks were again the main culprit (-0.5%) in index terms, aided by healthcare (-0.6%).

Buying appears to have been funded out of the defensive sectors that held up best during the sell-off. Staples and utilities both fell -0.6%.

Resources were not so much in play yesterday as energy was flat and materials fell only -0.2%, with gold miners offsetting falls elsewhere in the sector.

Discretionary, communication services and industrials didn’t much trouble the scorer.

Metcash ((MTS)) reported earnings yesterday and managed a 4.7% gain against the tide of selling in staples.

Lark Distilling ((LRK)), not in the index, fell -16.3% on a profit warning. I had been wondering how much further the craft beer/spirits craze could run.

AI company Appen ((APX)) fell -12.3% on the abrupt resignation of its CFO.

The good news is the futures are up 20 points this morning with the S&P500 down -0.5% overnight – not that they’ve been great predictors of late but this suggests we may have found an interim bottom.

Had we not suffered two sessions of carnage we’d be assuming some selling this week anyway ahead of books close for the FY. Now that we’ve had the selling it is not clear which way fund managers will try to push the market in the remaining days.

The signs are more clear on Wall Street.

Reallocation

There were fears the mutiny in Russia over the weekend would lead to oil market uncertainty and a surge in prices, which in turn would unsettle Wall Street. But given it was over as quickly as it began, it has left only unanswered questions.

To that end oil prices rose only modestly and Wall Street went about business as usual.

For the last week of the quarter, for a many a fund manager that means readjusting portfolios to return to intended weightings. 2023 to date has been all about surging tech stocks, on PE multiple expansion ignited by the AI frenzy, leaving fund managers who rode the wave to be grinning at quarter’s end.

But not only is it an opportunity to take some profits, particularly given “bubble” calls, there will be a need to trim back positions to more desirable weightings within a portfolio, which means selling tech and buying something else.

Hence, we saw the Nasdaq hit last night and the likes of Nvidia, Google and Meta falling -3%. Tesla lost -6% on a downgrade from Goldman Sachs.

By contrast the Dow was flat.

Instability in Moscow remains a potential source of volatility, but the clearer focus is on inflation and central bank rates hikes, and the ever-present prospect of a global recession.

Friday night brings the US May PCE numbers and while many dismiss this data set as “old news”, being a full month after the event, the core PCE remains the Fed’s preferred inflation measure, the FOMC is “data dependent”, and it is the trend that will be important.

A healthy fall in the PCE would bring about doubts about the Fed’s call for two more hikes, given the bulk of economists are already forecasting zero to one more hike, with only a small cohort going for two.

Meanwhile, Wall Street could remain volatile this week simply because it is the end of quarter.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1922.80	+ 2.60	0.14%
Silver (oz)	22.77	+ 0.35	1.56%
Copper (lb)	3.82	– 0.01	– 0.19%
Aluminium (lb)	0.96	– 0.00	– 0.26%
Nickel (lb)	9.13	– 0.50	– 5.22%
Zinc (lb)	1.06	– 0.01	– 0.50%
West Texas Crude	69.37	+ 0.18	0.26%
Brent Crude	74.40	+ 0.55	0.74%
Iron Ore (t)	109.91	– 0.08	– 0.07%

Small moves up in the oils and gold were the best Prigozhin could achieve.

Mining.com reports exchanges are in an uncomfortable wait for the outcome of a lawsuit by two financial firms against the London Metal Exchange for voiding nickel contracts in last year’s short-covering debacle, worried about possible curbs on their ability to react in crisis situations if the LME loses.

Whichever side wins, in the case that wrapped up three days of hearings on Thursday in the wake of a chaotic spike in nickel prices in March last year, the stakes are huge for London’s status as a major global financial centre.

If the LME wins the argument, there’s potential for angry investors to move their business elsewhere – less convinced by London markets and their governance.

Otherwise, all quiet.

The Aussie is down slightly at US$0.6673.

Today

The SPI Overnight closed up 20 points or 0.3%.

The US will see monthly consumer confidence tonight, along with durable goods orders and home sales.

Collins Foods ((CKF)) reports finger-licking earnings today.

CSR ((CSR)) holds its AGM.

The Australian share market over the past thirty days…

Index	26 Jun 2023	Week To Date	Month To Date (Jun)	Quarter To Date (Apr-Jun)	Year To Date (2023)
S&P ASX 200 (ex-div)	7078.70	-0.29%	-0.18%	-1.38%	0.57%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BSL	BlueScope Steel	Downgrade to Neutral from Buy	Citi
CLW	Charter Hall Long WALE REIT	Upgrade to Neutral from Sell	UBS
		Downgrade to Neutral from Buy	Citi
CMM	Capricorn Metals	Upgrade to Outperform from Neutral	Macquarie
CMW	Cromwell Property	Upgrade to Buy from Accumulate	Ord Minnett
COF	Centuria Office REIT	Upgrade to Buy from Neutral	UBS
ERD	Eroad	Downgrade to Hold from Buy	Bell Potter
FLT	Flight Centre Travel	Upgrade to Hold from Lighten	Ord Minnett
HDN	HomeCo Daily Needs REIT	Upgrade to Buy from Neutral	UBS
HLO	Helloworld Travel	Upgrade to Accumulate from Lighten	Ord Minnett
IGO	IGO	Upgrade to Equal-weight from Underweight	Morgan Stanley
JLG	Johns Lyng	Downgrade to Hold from Buy	Bell Potter
LOV	Lovisa Holdings	Upgrade to Accumulate from Hold	Ord Minnett
MND	Monadelphous Group	Upgrade to Accumulate from Hold	Ord Minnett
NHC	New Hope	Downgrade to Underperform from Neutral	Macquarie
NST	Northern Star Resources	Downgrade to Equal-weight from Overweight	Morgan Stanley
PME	Pro Medicus	Downgrade to Reduce from Hold	Morgans
PMV	Premier Investments	Upgrade to Hold from Lighten	Ord Minnett
RRL	Regis Resources	Upgrade to Overweight from Equal-weight	Morgan Stanley
		Downgrade to Neutral from Buy	UBS
SKT	SKY Network Television	Upgrade to Accumulate from Hold	Ord Minnett
TPG	TPG Telecom	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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms