Daily Market Reports | Mar 23 2021
This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 6705.00 | – 20.00 | – 0.30% |
| S&P ASX 200 | 6752.50 | + 44.30 | 0.66% |
| S&P500 | 3940.59 | + 27.49 | 0.70% |
| Nasdaq Comp | 13377.54 | + 162.31 | 1.23% |
| DJIA | 32731.20 | + 103.23 | 0.32% |
| S&P500 VIX | 18.88 | – 2.07 | – 9.88% |
| US 10-year yield | 1.68 | – 0.05 | – 2.77% |
| USD Index | 91.79 | – 0.13 | – 0.14% |
| FTSE100 | 6726.10 | + 17.39 | 0.26% |
| DAX30 | 14657.21 | + 36.21 | 0.25% |
By Greg Peel
Heavy is the head
On this day in 2020, the ASX200 hit its covid low at 4402. By mid-February the index had rallied back 58% to 6938 but had not yet regained the all-time high, pre-covid, of 7147. The subsequent bond yield scare has since kept the index going mostly sideways.
Yesterday was an up-day, with all sectors closing in the green bar one. Another drop in the iron ore price had the big miners struggling, with Fortescue Metals ((FMG)) topping the index losers’ list with a -4.2% fall, followed by Mineral Resources ((MIN)) on -4.0%. The sector lost -0.5%.
The iron ore price is down again this morning.
The upside was led by a rebound for the energy sector of 2.8%, thanks to oil prices rebounding 3%. Oil prices had fallen -8% on Thursday night, but the energy sector only fell -2.0% on Friday. Ampol took the silver in the index yesterday with a 5.7% gain.
The other big contributor was healthcare (+2.1%) as a lower Aussie and lower bond yields (down -4bps in the ten-year) prompted renewed buying in CSL ((CSL)), which rose 2.5%.
Utilities were big winners in percentage terms (+2.2%) after Macquarie upgraded AGL Energy ((AGL)) to Neutral. The stock rose 3.2%. Three FNArena database brokers nonetheless remain on Sell.
The big news of the day was a private equity bid for embattled Crown Resorts ((CWN)) at $11.85. The stock jumped 21.4% to $11.97. The Crown board is now considering. The move had consumer discretionary up 1.5%.
The financials sector managed a 0.3% gain, led by the banks but dragged down by the insurers given flood situation.
Rain is otherwise good for GrainCorp ((GNC)), which gained 4.9% on the day.
It was a solid night for the Nasdaq on Friday night but our technology sector managed only a 0.3% gain. Is unwarranted volatility finally receding?
So a good all-round performance, but despite gains overnight in all three major US indices, our futures are down -20 this morning.
Can’t seem to get out of this rut.
On the Retreat?
The US will celebrate Bottom Day tonight.
Last night the US yen-year yield eased back -5 basis points to 1.68%. While one swallow does not a summer make, the drop was interesting in the context of Biden’s infrastructure plans.
A report out last night suggested the administration is preparing to spend up to US$3trn on infrastructure and climate change, with the intention of boosting the economy, reducing carbon emissions and narrowing economic inequality.
This comes on top of the US$1.9trn covid relief bill now being rolled out, and again begs the question of is there enough demand to absorb all the required US Treasury bond supply?
The difference with the two stimulus measures is this one really is stimulus, while the covid package is more akin to welfare – warding off economic hardship ahead of a completion of the vaccine rollout. In theory what goes into to infrastructure and climate measures should come out with a net economic gain, although only over time.
Cleary the news didn’t spook the bond markets, as we’ve known for long enough this has been coming. And it perhaps suggests some of the skittishness is now easing.
Falling yields are, of course, always good for the Nasdaq, so last night was a night of outperformance. Could just as easily go the other way tonight. All three major indices closed in the green, suggesting general buying rather than rotation.
Technology was the standout sector in the S&P500 but it was another weak session for the banks, following Friday’s Fed decision on capital relief, and aided by lower yields. Energy, too, joined in the weakness, despite little movement in oil prices.
The banks and energy have been the star performers since November.
One might argue spending on climate change is anti-oil, but even so it will be a very long time before oil demand sees any significant drop. No one has yet mentioned electric planes or cargo ships, and those industries are the biggest consumers (under normal circumstances).
Fed chair Jerome Powell will testify before Congress this week and Wall Street will be listening closely, but there’s no reason to suspect he’s going to change his tune.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1739.50 | – 5.40 | – 0.31% |
| Silver (oz) | 25.74 | – 0.51 | – 1.94% |
| Copper (lb) | 4.13 | + 0.05 | 1.19% |
| Aluminium (lb) | 1.01 | + 0.02 | 2.35% |
| Lead (lb) | 0.88 | + 0.01 | 1.15% |
| Nickel (lb) | 7.42 | + 0.11 | 1.48% |
| Zinc (lb) | 1.29 | + 0.00 | 0.32% |
| West Texas Crude | 61.55 | + 0.13 | 0.21% |
| Brent Crude | 64.37 | – 0.16 | – 0.25% |
| Iron Ore (t) | 156.35 | – 3.85 | – 2.40% |
Big dollar infrastructure spending is clearly good news for base metals demand, and renewable energy, EVs etc use a lot more copper, while batteries draw on various elements.
You’d assume steel would be in the mix too but Beijing’s own environmental plans are weighing further on iron ore.
Friday night’s fall in the Aussie proved only brief. It’s back up 0.4% at US$0.7749.
Today
The SPI Overnight closed down -20 points or -0.3%.
Sigma Healthcare ((SIG)) and Kathmandu ((KMD)) report earnings today.
Carsales ((CAR)) goes ex-dividend.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AGL | AGL Energy | Upgrade to Neutral from Underperform | Macquarie |
| BLD | Boral | Downgrade to Lighten from Hold | Ord Minnett |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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CHARTS
For more info SHARE ANALYSIS: AGL - AGL ENERGY LIMITED
For more info SHARE ANALYSIS: CAR - CAR GROUP LIMITED
For more info SHARE ANALYSIS: CSL - CSL LIMITED
For more info SHARE ANALYSIS: CWN - CROWN RESORTS LIMITED
For more info SHARE ANALYSIS: FMG - FORTESCUE LIMITED
For more info SHARE ANALYSIS: GNC - GRAINCORP LIMITED
For more info SHARE ANALYSIS: KMD - KMD BRANDS LIMITED
For more info SHARE ANALYSIS: MIN - MINERAL RESOURCES LIMITED
For more info SHARE ANALYSIS: SIG - SIGMA HEALTHCARE LIMITED