Daily Market Reports | Apr 12 2022
This story features GRAINCORP LIMITED. For more info SHARE ANALYSIS: GNC
The company is included in ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7440.00 | – 22.00 | – 0.29% |
| S&P ASX 200 | 7485.20 | + 7.20 | 0.10% |
| S&P500 | 4412.53 | – 75.75 | – 1.69% |
| Nasdaq Comp | 13411.96 | – 299.04 | – 2.18% |
| DJIA | 34308.08 | – 413.04 | – 1.19% |
| S&P500 VIX | 24.37 | + 3.21 | 15.17% |
| US 10-year yield | 2.78 | + 0.07 | 2.47% |
| USD Index | 99.98 | + 0.18 | 0.18% |
| FTSE100 | 7618.31 | – 51.25 | – 0.67% |
| DAX30 | 14192.78 | – 90.89 | – 0.64% |
By Greg Peel
That was weird
It was easy to predict a quiet day on the ASX yesterday ahead of tonight’s US inflation data. A close of up 7 points, and no major moves amongst sectors, suggests this was indeed the case. So what the hell happened in the morning?
The index opened up a modest 15 points in the first half hour and then was suddenly up 46 points half an hour later. Half an hour after that, it was back to flat on the day.
Suggestions are that the 11am turnaround was triggered by the Aussie ten-year yield crossing 3%, and/or Chinese inflation numbers coming in greater than expected, and/or the Chinese case-count taking another leg up.
But the ten-year’s been knocking on the door of 3% for a while, the Chinese lockdowns were extended indefinitely because of the rising case-count, and China’s 1.5% CPI exceeded a 1.4% forecast and the PPI was 8.3% to 8.1%.
So really?
It’s possible that when the index crossed 7500 in the first half hour it triggered a buy order that was quickly quashed, but we were above 7500 last week, so my guess is someone simply hit the wrong button.
Anyway, it matters not to those of us who know the cash rate is 0.1% and the unemployment rate is 4.0%.
The banks (+0.8%) and staples (+0.6%) held the fort yesterday against falls in technology (-0.9%) and discretionary (-0.7%) and modest falls in materials, energy and healthcare. Rising yields are good for banks (until mortgage stress bites) and rising inflation is good for supermarkets (until we can’t afford meat).
Chinese lockdowns are bad for resources.
GrainCorp ((GNC)) went on another run yesterday, in the wake of another guidance upgrade, rising 6.7% to top the index. GrainCorp is up 217% since the drought broke in early 2020.
That only takes it back to the levels it was trading at during the drought nonetheless, and brokers are warning of the risk of blindly trusting the weather come next harvest.
The other four of the top five yesterday were gold miners.
On the downside, uranium and lithium miners saw a bit of give-back after Friday’s surge.
Wall Street decided last night not to wait to learn tonight’s CPI result as the US ten-year hit another new post-covid high. Our futures are down a modest -22 points this morning, so another quiet-ish day is on the cards, assuming people can hit the right buttons.
Just Bail
The US ten-year yield rose another 7 points to 2.78% last night ahead of tonight’s inflation reading. This set the Nasdaq off again, but unlike Friday night there was no rotation into industrials (Dow).
Inflation, yields and fear of the Fed being too aggressive are one issue, but unless Xi does an about-face on zero-covid the Chinese lockdowns seem currently without end, and Russia has begun to ramp up its attack from the east.
Heading into the last hour last night, all three major indices were down, with the Dow down -200, before losses doubled to the close.
If the Big Tech cash flow machines are supposedly defensive, they were not showing that last night. Microsoft fell -3.9% and waved the flag for all of FANG and Co. By the way, the ‘N” these days is Nvidia, not Netflix. All chip makers have been carted this month.
That seems strange given the global chip shortage, but given everything is being held up by Chinese lockdowns, chip demand has stalled.
Last night Chinese EV maker Nio announced it was shutting down production due to the lockdowns, and raising the price of its SUVs due to soaring battery input costs (eg lithium). Tesla fell -4.8%, having last year manufactured 50% of its EVs in Shanghai.
Meanwhile, scenes of oil cargoes stranded off the coast of China had oil prices tumbling again.
With an hour to go, a small number of S&P500 sectors, including the banks, were in the green. By the close, all sectors were in the red, with technology down -2.6% and energy down -3.1%.
A poll conducted by CNBC has Wall Street calling a 25% chance of a US recession within 12 months and a 40% chance in 24.
The biggest fear, outside of everything else, is that having been a good year or more behind the curve up to recently, the Fed will do it again with too rapid a balance sheet run-off.
Speaking of curves, the two- ten yield spread is now out to +28 points.
Wall Street will be braced for tonight’s CPI number, followed by JPMorgan’s earnings result on Wednesday night.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1954.10 | + 7.40 | 0.38% |
| Silver (oz) | 25.07 | + 0.30 | 1.21% |
| Copper (lb) | 4.62 | – 0.06 | – 1.26% |
| Aluminium (lb) | 1.61 | – 0.01 | – 0.88% |
| Lead (lb) | 1.10 | – 0.00 | – 0.05% |
| Nickel (lb) | 14.82 | – 0.66 | – 4.25% |
| Zinc (lb) | 1.97 | + 0.05 | 2.87% |
| West Texas Crude | 94.29 | – 3.97 | – 4.04% |
| Brent Crude | 99.52 | – 3.26 | – 3.17% |
| Iron Ore (t) | 153.18 | – 2.32 | – 1.49% |
Inventories may be at historical lows but demand is falling as well.
Gold continues to grind its way higher despite rising US yields and a subsequently rising US dollar, playing safe haven.
The Aussie is again lower, down -0.5% at US$0.7423.
Today
The SPI Overnight closed down -22 points or -0.3%.
NAB will publish its March business confidence report today.
Seven West Group ((SVW)) goes ex.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ANZ | ANZ Bank | Upgrade to Buy from Neutral | Citi |
| ORG | Origin Energy | Downgrade to Hold from Add | Morgans |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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