The Monday Report – 23 May 2022

This story features LIFE360 INC, and other companies. For more info SHARE ANALYSIS: 360

The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

By Greg Peel

All is Forgiven

The ASX200 fell -118 points on Thursday, taking its lead from a Wall Street session which confirmed US retailers were not handling supply chain and inflation issues as well as was assumed. The local consumer discretionary sector fell -3.1% on Thursday and staples -3.7%, with the banks subsequently down -1.8% on the sentiment.

The resource sectors provided no support on what was a general selling day.

On Friday, with the futures suggesting down -9 points, the ASX200 shot up from the open to post all its 80 point gain for the day by late morning, and then everyone went to lunch.

Consumer discretionary bounced back 2.0% and the banks 0.9% although staples remained timid on just 0.3%.

Technology, having fallen -2.7% on Thursday, roared back 4.6% despite the Nasdaq having closed slightly weaker on Thursday night. Materials returned to its role of support group, rising 2.2%, although energy went the other way and fell -1.6% to buck the trend on the day.

Commodity prices were buoyed by news the PBoC had significantly cut its lending rate.

Maybe local investors took Thursday night’s action on Wall Street, which was a case of down, up, and then down again, as not being a further capitulation as may have been feared after Thursday night, suggesting a bounce might be in the offing.

Perhaps a -7 point drop in the Aussie ten-year bond rate to 3.31% also helped, taking some heat off RBA rate hike expectations.

It was nevertheless clear that while Thursday’s wipe-out was a fairly uniform one across sectors, Friday’s rebound was more selective.  Best index performer on the day was Life360 ((360)), up 12.1%, but it could just as easily be down -12% today for no reason, as that has been the pattern for this livewire of late.

We could say the same for Zip Co ((Z1P)), which rose 6.9%, and for anything lithium, including Novonix ((NVX)), up 11.7%, and Liontown Resources ((LTR)), up 6.5%.

On the other side of the ledger, UR Westfield ((URW)) fell -8.9% to be worst loser after announcing it would rebrand old flagship Unibail-Rodamco shopping malls in Spain, Sweden and Poland as Westfields.

Nufarm ((NUF)) fell another -4.1% after its earnings result was poorly received on Thursday. Woodside Petroleum ((WPL)) fell -3.7% after suggesting that having completed the BHP deal, it would change its name and its ticker.

Looking ahead to today, we’ve had a bit of a shift over the weekend. The stock market will likely be indifferent to losing one government for another, but would prefer that the new government could govern in its own right, which is yet to be determined.

Otherwise, there were no real market-impacting policies put forward leading into the election and little difference between what was offered to significantly alter the macro/micro climate.

The futures closed down -15 points on Saturday morning, before the polls opened.

Rinse and Repeat

On Thursday night the Dow fell -450 points from the open, was up 80 with an hour to go and closed down -230. On Friday night the Dow was up up 260 from the open, down -600 at lunchtime and closed up 8.

For the week, the Dow fell -2.9%, the S&P500 -3.1% and the Nasdaq -3.8%. An eighth straight down-week for the Dow was its longest since 1932.

The S&P fell down through the -20% level mid-session on Friday night but recovered to close above it.

There was no new news on Friday night to drive market sentiment.

A couple more US discount retail chains reported and fell significantly as is the current mood, and Deere & Co, maker of tractors, ride-on mowers and the like, fell -14% on its earnings result after it beat on revenue but missed on earnings, and no prizes for guessing why.

But Foot Locker, which is a about as discretionary as they come and should be subject to the same problems as everyone else right now, rose 4.1% on its result.

So again we note signs of micro differentiation before the macro backdrop.

If down -20% for the S&P500 does prove to be the line in the sand, and the ultimate bottom, currently Wall Street is just banging along it.

Commodities

That nickel price jump is not reinforced by LME reports on the day, so either happened very late in the aftermarket or there’s a blip in the data.

We would otherwise have expected metals to rally on the PBoC stimulus news.

Perhaps testament to the lack of market impact from results in Sydteal, Brisgreen and the Swinging West is the fact the Aussie has not moved a muscle, at US$0.7051.

The SPI Overnight closed down -15 points or -0.2% on Saturday morning.

The Week Ahead

Locally we’ll see numbers for March quarter construction work done and private sector capex this week in the lead-up to next week’s GDP result.

The US will revise its first March quarter GDP estimate, and see further inflation measures late in the week with PCE data for the March quarter and the month of April. The Fed has locked in two 50 point hikes ahead, so the numbers would have to be wildly off key to make a difference.

The US will also see durable goods orders and consumer sentiment.

The local market will this week see a raft of earnings results, beginning with Incitec Pivot ((IPL)) and Elders ((ELD)) today.

Results from TechnologyOne (((TNE)), ALS ((ALQ)), Catapult Group International ((CAT)), Fisher & Paykel Healthcare ((FPH)), Champion Iron ((CIA)) and Select Harvests ((SHV)) will follow through the week.

AGMs will be held this week by Alumina Ltd ((AWC)), Costa Group ((CGC)) and Appen ((APX)).

There are several ex-divs this week that I’ll highlight on the day.

The Australian share market over the past thirty days…

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