Daily Market Reports | Mar 25 2021
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The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 6737.00 | – 12.00 | – 0.18% |
| S&P ASX 200 | 6778.80 | + 33.40 | 0.50% |
| S&P500 | 3889.14 | – 21.38 | – 0.55% |
| Nasdaq Comp | 12961.89 | – 265.81 | – 2.01% |
| DJIA | 32420.06 | – 3.09 | – 0.01% |
| S&P500 VIX | 21.20 | + 0.90 | 4.43% |
| US 10-year yield | 1.61 | – 0.02 | – 1.47% |
| USD Index | 92.59 | + 0.24 | 0.26% |
| FTSE100 | 6712.89 | + 13.70 | 0.20% |
| DAX30 | 14610.39 | – 51.63 | – 0.35% |
By Greg Peel
Aussie, Aussie, Aussie
The local market again ignored Wall Street yesterday in posting a rally against falls in all major US indices. The Nasdaq was down -1.1% overnight yet our technology sector rose 0.4% yesterday.
But the biggest driver of yesterday’s net gains in the ASX200 was the big fall in the Aussie beginning Tuesday, of -1.6% over 24 hours, followed by a further fall yesterday, to be down another -0.5% over 24 hours.
While the weaker currency impacted across several sectors, the standout performer on the day was healthcare (+1.9%), which is loaded with offshore earners such as CSL ((CSL)), Cochlear ((COH)), ResMed ((RMD)), Sonic Healthcare ((SHL)) and Ramsay Health Care ((RHC)).
The fall in the currency was aided and abetted by another -8 basis point fall in the Australian ten-year yield, and all despite ratings agency Fitch upgrading its 2021 GDP growth forecast for Australia to 4.7% from a prior 3.8%.
The Aussie’s sharp pullback is being driven by falls in some commodity prices in recent times. Iron ore and oil (thus LNG) are both net lower, as are gold and nickel, while the copper rally has stalled for now. But coal prices have been surging, and NSW floods are set to impede shipments, leading to more upward price pressure.
A rebound in the US dollar has helped, but otherwise the sharpness of the fall in the past two days suggests a forex market that had set itself too long – which is a turn-up as they usually play us short – and once one mob got out, the floodgates opened.
Preliminary trade data for February released yesterday showed a 2% increase for both exports and imports, maintaining a solid trade surplus. The interesting numbers were the split of “where to” movements in exports. For all the grief, exports to China were down -8% and Japan -4%, while exports to Korea were up 30%, India 33% and Singapore 67%.
Mind you, China is a much bigger base dollar value.
The materials sector (+0.1%) played the trade-off between commodity prices and currency yesterday.
The Aussie also provided a boost to REITs (+0.9%), with offshore-exposed sector heavyweight Goodman Group ((GMG)) rising 3.1%.
The counterintuitive move vis a vis the Aussie was consumer discretionary, up 1.1%, given the amount of goods the retail sector imports, but the biggie in that sector is Aristocrat Leisure ((ALL)), which is as good as US-based.
The gain also belied ongoing selling in the travel agents, with domestic travel plans in the frame with NSW underwater ahead of Easter. Webjet ((WEB)) fell -4.5%.
Staples, which are largely currency agnostic, gained 1.1% with some help from GrainCorp ((GNC)). The stock had a good day on Tuesday and yesterday rose another 6.2% to top the index, following a trading and investment plan update. The supermarkets also performed well.
The only real laggard on the day was energy, which fell -0.9% on a -6% overnight fall in oil prices countered by the Aussie. The Aussie is down again overnight and oil prices last night rose 6%.
With the S&P500 down another -0.5% last night, and the Nasdaq down a full -2.0%, our futures are showing down -12 points this morning which might look underdone, except that presently we don’t seem to care.
Zooming Out
Some interesting news was forthcoming on Wall Street last night.
GameStop fell -33% on its earnings release – not only the first earnings release since the fairground ride began in January but the first time management has opened its mouth in the meantime. The company’s post-earnings conference call was booked out hours before the aftermarket release on Tuesday night.
Citi announced from now on Fridays will be “Zoom-free”, while Goldman Sachs told its mid- and lower-level employees they would no longer have to work on Saturdays.
Saturdays?
The unexpected fallout from the casual benefits of work-from-home, amidst heightened market volatility and a surge in M&A and capital raisings, have been the long hours of work that have resulted. A worker survey by Goldmans found its minions were suffering burnout, putting in up to 100 hours a week, all while trapped in what has now become the prison of home.
All the above has led investors to become increasingly concerned the 2020 covid winners are one-trick ponies whose hour in the sun has now passed. Hence stocks like Zoom, smart exercise bike maker Peloton and e-signature cloud service DocuSign have recently been trashed.
Hence, last night alone, the Nasdaq fell -2% when the US ten-year yield fell another -2bps.
In the case of GameStop, the difference between January and now is the flood of first-time investors into the market and their preference for the “it” stocks of the time has now evaporated. Tesla has been another victim. A lot of millennials have been burned.
The babies were allowed to put their hands in the fire.
The rush to the WFH and “it” stock exits continues to play out, offering an opportunity for the adults to come in and pick up some bargains. It would be ingenuous to assume the likes of Zoom are now dead in the water. Previously overvalued? Definitely.
Eventually the wash-out will end but for now it seems when millennials get out of bed in the afternoon the first thing they do is sell. For the second night in a row, all the downside on Wall Street came late in the session. Late morning, the Dow was up 350.
Also weighing on Wall Street in general is the reality that Biden’s US$3trn infrastructure and climate stimulus package will be paid for in part by a reversal, to some degree, of Trump’s tax cuts. As to how much is as yet unclear, and may not be clear for a while.
It is nevertheless unlikely Biden will go in all guns blazing with tax increases before the US economy is clearly back on its feet.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1734.10 | + 6.40 | 0.37% |
| Silver (oz) | 25.07 | + 0.04 | 0.16% |
| Copper (lb) | 4.08 | – 0.01 | – 0.16% |
| Aluminium (lb) | 1.00 | + 0.01 | 0.97% |
| Lead (lb) | 0.87 | + 0.00 | 0.11% |
| Nickel (lb) | 7.36 | + 0.05 | 0.66% |
| Zinc (lb) | 1.28 | + 0.01 | 0.61% |
| West Texas Crude | 60.81 | + 3.29 | 5.72% |
| Brent Crude | 64.05 | + 3.52 | 5.82% |
| Iron Ore (t) | 159.55 | – 0.95 | – 0.59% |
Oil prices plunged -6% on Tuesday night when Germany extended its lockdown and last night jumped back 6% on another lockdown – the Suez Canal, through which exports of Brent crude pass daily.
Not a lot going on elsewhere.
The Aussie is down -0.5% at US$0.7587.
Today
The SPI Overnight closed down -12 points.
The official December quarter Australian financial accounts will be released today while the US will post its last revision of December quarter GDP, both of which are very old hat.
Brickworks ((BKW)) reports earnings today.
Cochlear is among a number of stocks going ex-dividend this morning.
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 |
| BEN | Bendigo And Adelaide Bank | Upgrade to Outperform from Neutral | Macquarie |
| CBA | Commbank | Upgrade to Neutral from Underperform | Macquarie |
| CSL | CSL | Upgrade to Outperform from Neutral | Credit Suisse |
| DHG | Domain Holdings | Downgrade to Neutral from Outperform | Macquarie |
| REA | REA Group | Upgrade to Outperform from Neutral | Macquarie |
| SIG | Sigma Healthcare | Downgrade to Neutral from Buy | Citi |
| URW | Unibail-Rodamco-Westfield | Downgrade to Sell from Hold | Ord Minnett |
| WBC | Westpac Banking | Downgrade to Neutral from Outperform | Macquarie |
| WTC | Wisetech Global | Upgrade to Outperform from Neutral | Macquarie |
| XRO | Xero | Upgrade to Outperform from Neutral | Credit Suisse |
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: ALL - ARISTOCRAT LEISURE LIMITED
For more info SHARE ANALYSIS: BKW - BRICKWORKS LIMITED
For more info SHARE ANALYSIS: COH - COCHLEAR LIMITED
For more info SHARE ANALYSIS: CSL - CSL LIMITED
For more info SHARE ANALYSIS: GMG - GOODMAN GROUP
For more info SHARE ANALYSIS: GNC - GRAINCORP LIMITED
For more info SHARE ANALYSIS: RHC - RAMSAY HEALTH CARE LIMITED
For more info SHARE ANALYSIS: RMD - RESMED INC
For more info SHARE ANALYSIS: SHL - SONIC HEALTHCARE LIMITED
For more info SHARE ANALYSIS: WEB - WEB TRAVEL GROUP LIMITED