Daily Market Reports | Apr 21 2021
This story features CHALLENGER LIMITED, and other companies. For more info SHARE ANALYSIS: CGF
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 6911.00 | – 86.00 | – 1.23% |
| S&P ASX 200 | 7017.80 | – 47.80 | – 0.68% |
| S&P500 | 4134.94 | – 28.32 | – 0.68% |
| Nasdaq Comp | 13786.27 | – 128.50 | – 0.92% |
| DJIA | 33821.30 | – 256.33 | – 0.75% |
| S&P500 VIX | 18.68 | + 1.39 | 8.04% |
| US 10-year yield | 1.56 | – 0.04 | – 2.44% |
| USD Index | 91.21 | + 0.12 | 0.13% |
| FTSE100 | 6859.87 | – 140.21 | – 2.00% |
| DAX30 | 15129.51 | – 238.88 | – 1.55% |
By Greg Peel
No stairs, just elevators
I noted yesterday the ASX200 had remained dead flat for two sessions despite Wall Street accelerating to ever new all-time highs, and that a slight pullback on Wall Street on Monday night would nonetheless send our index south, as the futures were suggesting.
And it did. By lunchtime the fall was a fairly benign -20 points but in the afternoon the selling ramped up. And it’s only going to get worse. With Wall Street pulling back more emphatically last night our futures are down -86 this morning.
That’s -1.2% to the S&P500’s -0.7%.
The minutes of the April RBA meeting, released yesterday, suggested Australia’s GDP likely returned to pre-pandemic levels in the March quarter and noted employment had indeed returned to pre-pandemic levels, much faster than anticipated. Surely, thus, the RBA must be ready to raise rates again from an effective zero.
The Aussie ran up to US$0.7815 – over half a cent higher than before the stock market open, and the ten-year bond yield jumped 6 basis points to 1.77%, to be well over the US equivalent.
Yet the RBA insisted it does not, as it constantly reassures, plan to touch rates until 2024.
Higher bond yields did not spur on the banks. Financials fell -0.9% to be the main drag on the index, with help from a -15.8% plunge for Challenger ((CGF)), after admitting at its quarterly update it had gotten credit spreads all wrong in its annuity payments.
Bank of Queensland ((BOQ)) was nevertheless the second best index performer on the day with a 2.7% gain.
Solid price increases in copper and iron ore overnight could not save materials (-0.3%), although the sector was one of the better performers on the day. Mineral Resources ((MIN)) topped the index with a 3.0% gain, likely on the back of a strong iron ore price as well as renewed excitement in the lithium space.
But while rare earths are also sparking some excitement these days, Lynas Rare Earths ((LYC)) fell -8.3% on a disappointing quarterly report.
Telcos (+0.2%) was the only sector to buck the trend while healthcare (-1.1%) and technology (-1.2%) posted the biggest falls.
But no point in banging on any further, with today set to be a poor one. We will note however the Aussie has fallen all the way back to US$0.7725, which is down -0.4% over 24 hours but down -1.2% from yesterday’s high, and that the iron ore price has shot up another US$6.50/t to a ten-year high.
Yesterday took the ASX200 back down to be close to the 7000 level, and today will see that level smashed through from the open. Will we see any bargain hunters? If not, there is solid support at 6800.
It has been noted that the S&P500 could pull back a full -3% from its Friday night high and still be inside the upward trend channel that began from the covid bottom.
Still no surprise
Those who became addicted to Netflix last year may be interested to know the company reported after the bell last night and is currently down -9% in the aftermarket. Netflix posted a big beat on earnings but a very big miss on the number that matters to Wall Street – subscriber growth.
The subs growth number missed not only analyst forecasts by a margin but also the bottom end of management’s own guidance. Seems everyone signed up last year, and that’s it. It had already been suggested Netflix no longer deserves to be the ‘N’ in FANG, and should be replaced by chip-maker Nvidia, which is going gangbusters.
That was after the bell. Before the bell, there was nothing in particular to send Wall Street lower once more other than the fact it had rolled over on Monday night having hit new highs on Friday night, at which point everyone was screaming overvaluation. Investors had become just too carried away with the “reopening trade”.
Airline stocks were slammed last night after The US State Department on Monday urged Americans reconsider any international travel they may have planned and said it would issue specific warnings not to visit roughly 80% of the world’s countries due to risks from the pandemic.
Interesting to note the US border has been open for some time (outbound) to all but a handful of countries while here we’re all excited about being able to fly to New Zealand. Whoopee.
The US has averaged 67,175 new cases a day in the past week, up 4% from the average two weeks ago, but about 50% of adults have now received one shot of vaccine.
The day’s earnings reports were otherwise again net positive but results have taken a back seat to a simple pullback from overbought conditions. We saw the same scene play out in the prior two quarters with Wall Street running hot into earnings season to the point “beats” were not rewarded.
Apple launched its new range of products last night and fell -1.3%.
The pullback is proving relatively uniform, with not a lot of difference between the three major indices last night.
Banks and energy were the worst performing sectors, having been the best all year.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1778.80 | + 7.80 | 0.44% |
| Silver (oz) | 25.82 | + 0.01 | 0.04% |
| Copper (lb) | 4.30 | – 0.00 | – 0.05% |
| Aluminium (lb) | 1.06 | + 0.01 | 0.58% |
| Lead (lb) | 0.92 | + 0.00 | 0.41% |
| Nickel (lb) | 7.28 | + 0.02 | 0.23% |
| Zinc (lb) | 1.27 | – 0.01 | – 0.84% |
| West Texas Crude | 62.44 | – 0.94 | – 1.48% |
| Brent Crude | 66.26 | – 0.90 | – 1.34% |
| Iron Ore (t) | 187.75 | + 6.55 | 3.61% |
Iron ore is the standout, while oil prices have slipped.
The Aussie, as noted, is at US$0.7725.
Today
The SPI Overnight closed down -86 points or -1.2%.
A preliminary look at March retail sales will be provided by the ABS today.
Quarterly reports are due today from BHP Group ((BHP)), Beach Energy ((BPT)), Deterra Royalties ((DRR)) and Woodside Petroleum ((WPL)), along with Atlas Arteria ((ALX)).
Wesfarmers ((WES)) will host an investor day.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AWC | Alumina | Downgrade to Underperform from Neutral | Macquarie |
| BOQ | Bank Of Queensland | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| Upgrade to Accumulate from Hold | Ord Minnett | ||
| DXS | Dexus | Upgrade to Overweight from Underweight | Morgan Stanley |
| MYX | Mayne Pharma Group | Downgrade to Underperform from Neutral | Macquarie |
| SCG | Scentre Group | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| WHC | Whitehaven Coal | Downgrade to Neutral from Outperform | 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: ALX - ATLAS ARTERIA
For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED
For more info SHARE ANALYSIS: BOQ - BANK OF QUEENSLAND LIMITED
For more info SHARE ANALYSIS: BPT - BEACH ENERGY LIMITED
For more info SHARE ANALYSIS: CGF - CHALLENGER LIMITED
For more info SHARE ANALYSIS: DRR - DETERRA ROYALTIES LIMITED
For more info SHARE ANALYSIS: LYC - LYNAS RARE EARTHS LIMITED
For more info SHARE ANALYSIS: MIN - MINERAL RESOURCES LIMITED
For more info SHARE ANALYSIS: WES - WESFARMERS LIMITED