Daily Market Reports | Mar 24 2021
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The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 6715.00 | – 2.00 | – 0.03% |
| S&P ASX 200 | 6745.40 | – 7.10 | – 0.11% |
| S&P500 | 3910.52 | – 30.07 | – 0.76% |
| Nasdaq Comp | 13227.70 | – 149.84 | – 1.12% |
| DJIA | 32423.15 | – 308.05 | – 0.94% |
| S&P500 VIX | 20.30 | + 1.42 | 7.52% |
| US 10-year yield | 1.64 | – 0.05 | – 2.73% |
| USD Index | 92.35 | + 0.56 | 0.61% |
| FTSE100 | 6699.19 | – 26.91 | – 0.40% |
| DAX30 | 14662.02 | + 4.81 | 0.03% |
By Greg Peel
Disconnecting?
The S&P500 rose 0.7% on Monday night and the ASX200 closed down -7 points. The S&P500 fell -0.8% last night and this morning the futures are down -2 points.
Has the market suddenly realised not everything that happens in America needs to be unequivocally mimicked in Australia?
The ASX200 largely went into defensive mode yesterday with healthcare (+0.7%), telcos (+1.0%), utilities (+0.8%) and property (+0.6%) the only sectors to close in the green bar materials (+0.2%).
Materials played off a fall in the iron ore price against gains in base metals. That scenario reversed overnight.
Industrials (-0.2%) and staples (-0.1%) didn’t much spoil the day either so it was left to energy (-1.0%), financials (-0.5%), which includes insurers, discretionary (-0.7%) and technology (-0.9%) to provide the balance.
Technology fell even as the Nasdaq rose 1.3% overnight, Now that really is a sudden disconnect.
CSL ((CSL)) only saw a slight gain on the day but the star performer in health was Sonic Healthcare ((SHL)), which has already had a solid run on its covid testing capacity and rumours of that run soon coming to an end have been greatly exaggerated. We need only look at the European Third Wave, let alone what’s going on elsewhere, including close to home.
Sonic rose 3.5%. ResMed ((RMD)) chimed in with 3.3%.
In telcos, the market is warming to the idea of the great Telstra ((TLS)) carve-up which may end in not three but four individual entities, with at least the infrastructure assets sold off. Telstra rose 2.5%.
The Lazarus effort from AGL Energy ((AGL)) continued yesterday, this time on the announcement the company had lodged a planning application for a 200 megawatt grid-scale battery at its dead-man-walking Loy Yang brown coal power station in Victoria. AGL topped the index with a 5.1% gain.
On Monday investors decided GrainCorp ((GNC)) would benefit from a soggy NSW and yesterday it was Nufarm’s ((NUF)) turn. It rose 4.0% to add a bit to the materials sector.
Weakness in consumer discretionary was mostly felt in travel stocks, which have been yo-yoing all year on the ups and downs of vaccines versus lockdowns. Both Flight Centre ((FLT)) and Corporate Travel Management ((CTD)) featured in the top five losers yesterday as Germany extends its hard lockdown through Easter.
Wall Street has taken a turn for the worse last night in unusual fashion for these times, oil has tanked again overnight and base metals have reversed Monday night’s gains. On the flipside, the iron ore price has bounced and the Aussie is down a full cent and a quarter.
So perhaps -2 is on the money.
Ahead of Ourselves?
A funny thing happened on Wall Street last night. The US ten-year bond yield fell -5 basis points to 1.64% and the Nasdaq dropped -1.1%. All year, the ups and downs of bond yields – mostly up – have been met with downs and ups in growth stocks, including Big Tech. 2021 has seen the great reopening rotation back into value and cyclicals.
But the reality is, despite a rapid pace of vaccination, America is not an island, and what happens in the rest of the world, as well as at home, does count.
It was not counting much in the morning in New York, as all three indices meandered around going nowhere, but suddenly at lunchtime the mood changed and down Wall Street went in unison.
The change of mood cannot be attributed to testimony before Congress of both Fed chair Powell and Treasury Secretary Yellen, because neither said anything we haven’t already heard, time and time again. Yes we’re going to see some inflation but it will revert back in due course, and no we won’t be suddenly deciding to tighten policy – any change of heart will come with a significant warning period.
So what happened?
Apart from the energy sector continuing the reversal of its strong rally since November, with oil prices dropping another -6%, and banks continuing to pull back from their strong rallies since November, as bond yields stabilise, consensus suggests Wall Street had gotten ahead of itself on reopening excitement, economic rebound excitement and the subsequent rotation trade.
As noted, Germany has extended its lockdown, as other European countries return to lockdown. Brazil is still a basket case, and case-counts are rising in those Republican US states that have damned the medical advice and fully reopened their economies, masks optional.
Scenes of Miami Beach choc-o-block with Spring Break revellers has the likes of Dr Fauci shaking his head in despair. So often now has he reminded that last year’s second wave in the US began in the spring.
Also spooking the market last night was a report out on a survey conducted by UBS. A sample set of average US consumers was surveyed on the question of what they will spend their accumulated savings on once the economy is indeed fully reopened. The results came as a bit of a shock.
So often we have heard of “pent-up demand” for taking off on a holiday, by air or sea, for going out to see a sporting event or concert, for just being able to go to a restaurant or bar without all the distancing and masks and other detractions. These assumptions have been very much drivers of the rotation trade.
But no. UBS’s survey found high on the list of what money will be spent on were groceries, fuel, household goods and health. Very low on the list were travel, entertainment and hospitality. In other words, the complete opposite of what has been assumed.
Put it together and Wall Street decided last night perhaps the rotation trade has run too far and it’s time to reconsider; pull out and wait until the timing is more appropriate.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1727.70 | – 11.80 | – 0.68% |
| Silver (oz) | 25.03 | – 0.71 | – 2.76% |
| Copper (lb) | 4.09 | – 0.04 | – 1.08% |
| Aluminium (lb) | 0.99 | – 0.02 | – 2.40% |
| Lead (lb) | 0.87 | – 0.01 | – 0.83% |
| Nickel (lb) | 7.31 | – 0.10 | – 1.41% |
| Zinc (lb) | 1.27 | – 0.01 | – 1.03% |
| West Texas Crude | 57.52 | – 4.03 | – 6.55% |
| Brent Crude | 60.53 | – 3.84 | – 5.97% |
| Iron Ore (t) | 160.50 | + 4.15 | 2.65% |
The US dollar jumped 0.6% last night in its role as safe haven currency when things turn a bit sour globally.
This impacted on base metal prices and gold, as did the realisation a global recovery is still not clearly on the horizon.
As I’ve noted often enough, iron ore always marches to its own tune.
The second big slump in oil prices in a week comes on the German announcement. The first came on announcements of re-lockdowns in France and elsewhere, all of which implies ongoing constrained demand.
The greenback gain contributed to the Aussie’s fall, but the Aussie’s fall was much steeper at -1.6% to US$0.7625, given a slower recovery implies slower commodity demand growth.
Don’t mention iron ore. Or coal, for that matter.
Today
As noted, the SPI Overnight closed down all of -2 points. Are we just looking to sit this all out? Of course, not only is Australia almost covid-free (pending more returned travellers), our vaccine rollout has only just begun.
We’ll see local February trade numbers today and around the globe, flash estimates of March manufacturing PMIs will be provided.
The US will see durable goods orders.
Premier Investments ((PMV)) reports earnings today while Spark New Zealand ((SPK)) hosts an investor presentation.
Can’t call them “investor days” any more it seems. It’s all zoom-zoom.
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 |
| XRO | Xero | Upgrade to Outperform from Neutral | Credit Suisse |
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CHARTS
For more info SHARE ANALYSIS: AGL - AGL ENERGY LIMITED
For more info SHARE ANALYSIS: CSL - CSL LIMITED
For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED
For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED
For more info SHARE ANALYSIS: GNC - GRAINCORP LIMITED
For more info SHARE ANALYSIS: NUF - NUFARM LIMITED
For more info SHARE ANALYSIS: PMV - PREMIER INVESTMENTS LIMITED
For more info SHARE ANALYSIS: RMD - RESMED INC
For more info SHARE ANALYSIS: SHL - SONIC HEALTHCARE LIMITED
For more info SHARE ANALYSIS: SPK - SPARK NEW ZEALAND LIMITED
For more info SHARE ANALYSIS: TLS - TELSTRA GROUP LIMITED