Daily Market Reports | Apr 23 2021
This story features AGL ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: AGL
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7010.00 | – 15.00 | – 0.21% |
| S&P ASX 200 | 7055.40 | + 57.90 | 0.83% |
| S&P500 | 4134.98 | – 38.44 | – 0.92% |
| Nasdaq Comp | 13818.41 | – 131.81 | – 0.94% |
| DJIA | 33815.90 | – 321.41 | – 0.94% |
| S&P500 VIX | 18.71 | + 1.21 | 6.91% |
| US 10-year yield | 1.55 | – 0.01 | – 0.64% |
| USD Index | 91.28 | + 0.15 | 0.16% |
| FTSE100 | 6938.24 | + 42.95 | 0.62% |
| DAX30 | 15320.52 | + 124.55 | 0.82% |
By Greg Peel
Buyers Win
Following a strong rebound from Wall Street overnight the scene was set yesterday morning for another ASX200 assault on the stubborn 7000 level with the futures showing up 37. A tough battle played out right through to late morning but eventually the sellers succumbed.
The ASX200 then tracked steadily higher in the afternoon in a day otherwise dominated by individual company updates.
Sector gains on the day ranged from consumer discretionary (+0.5%) to healthcare (+1.7%) – the latter despite a bounce-back in the Aussie, which has reversed again overnight. Buying was market-wide but for two sectors. Energy fell -0.6% to be the standout loser on lower oil prices while the announced resignation of AGL Energy’s ((AGL)) CEO had utilities down a tick.
Sinking ship?
The good news is that while Wall Street has gone into reverse again last night – this time with reason – our futures are down only -15 points this morning appreciating that an increased tax on American higher-net worth individuals does not much impact on us downunder.
Biden’s planned corporate tax increase does impact, specifically on the many large Australian companies sourcing revenues and paying tax in the US, but this should be offset by the benefits of offsetting infrastructure stimulus.
So we should be able to hold above 7000 as we close the week but then nothing is a given on a Friday.
Turning to those company updates, the day’s index winners on their quarterly numbers were Megaport ((MP1)), up 9.7%, and Monadelphous ((MND)), up 5.8%, the latter being tied to solid iron ore prices. There followed a couple of gold miners.
The losers were led out by Pilbara Minerals ((PLS)), down -10.8% after a miss on its numbers, compounded by news China plans to increase its domestic supply of EV-related metals, which include lithium and rare earths. All lithium miners were hit on the day along with Lynas Rare Earths ((LYC)), down another -4.2% in a tough week for the company.
Blackmores ((BKL)) also disappointed and lost -4.3% and blow me down if the shadow of the former AMP ((AMP)) didn’t reveal further outflows and lose -3.4% on the day.
Outside the index, online art & design marketplace Redbubble ((RBL)) announced a 100% year on year increase in profit and fell -23.1%.
Only 100%?
Wake-up call
Biden had campaigned on a platform of reversing Trump’s massive corporate tax cut and increasing taxes on the wealthy, so it should have been no surprise last night when the White House revealed a planned capital gains tax hike for anyone earning over a million.
Wall Street had shrugged off the earlier plan to increase the corporate tax rate to 28% from 21% given the balance of infrastructure spending it will fund, but last night’s announcement the capital gains tax rate for high-earners would, in order to address growing income inequality, increase to 39.5% from a current 20% did come as a bit of a shock.
Add in a universal investment income sur-tax of 3.8%, and anyone earning over a million would be paying 43.4% of their annual gains to the government.
The announcement would certainly have given those holding paper gains on stocks that have risen tens to hundreds of percent since the covid bottom a bit of a fright. And such gains have not been restricted to any one sector, as evidenced by all three major indices falling a uniform -0.9% on the news.
Wall Street had been wandering along doing nothing all morning, not responding to another fall in weekly new jobless claims to a covid low of 547,000, but when the tax news hit the wires early in the afternoon the Dow promptly fell -420 points, recovering only part of that fall by the close.
The surprise is that Biden’s stimulus package to provide economic relief has only just started to make its mark, and the infrastructure package remains untested in Congress, so why now hit the economy with this big counter-measure? It couldn’t have been put off for a while, to allow the economy to truly recover?
The assumption is the final capital gains rate will not be so high. From a negotiating point of view, it’s a starting point. Already it appears Biden will have to pare back his corporate tax increase from 28% to 25% even to gain the necessary support form his own party. The chances of a 40% plus capital gains tax look slim.
It will land somewhere in the middle, and likely take a lot of to-ing and fro-ing to get there over an extended period. We might call it a shot across the bow.
As to whether it will evoke a full investment portfolio rethink from the wealthy, leading to a more systemic pullback on Wall Street, is not considered likely at this stage.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1783.90 | – 9.70 | – 0.54% |
| Silver (oz) | 26.12 | – 0.43 | – 1.62% |
| Copper (lb) | 4.28 | + 0.01 | 0.22% |
| Aluminium (lb) | 1.07 | + 0.00 | 0.37% |
| Lead (lb) | 0.91 | + 0.00 | 0.47% |
| Nickel (lb) | 7.25 | + 0.02 | 0.26% |
| Zinc (lb) | 1.27 | – 0.00 | – 0.31% |
| West Texas Crude | 61.43 | + 0.08 | 0.13% |
| Brent Crude | 65.58 | + 0.52 | 0.80% |
| Iron Ore (t) | 183.60 | – 2.15 | – 1.16% |
Not a lot going on among commodities last night yet the Aussie is down -0.5% to US$0.7707 with the US dollar up only 0.2%. Recent volatility is a bit hard to fathom on a fundamental basis.
Today
The SPI Overnight closed down -15 points or -0.2%. Not so much a reaction to US taxes but a dip back on a Friday from yesterday’s strength.
Today is April manufacturing PMI flash estimate day across the globe.
Iluka Resources ((ILU)) is among those providing quarterly reports today.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ALG | Ardent Leisure | Downgrade to Sell from Hold | Ord Minnett |
| AMC | Amcor | Downgrade to Neutral from Outperform | Macquarie |
| BOQ | Bank Of Queensland | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| CGF | Challenger | Downgrade to Neutral from Outperform | Credit Suisse |
| GXY | Galaxy Resources | Upgrade to Neutral from Underperform | Credit Suisse |
| HUB | HUB24 | Upgrade to Accumulate from Hold | Ord Minnett |
| PLS | Pilbara Minerals | Downgrade to Sell from Neutral | Citi |
| WSA | Western Areas | Upgrade to Add from Hold | Morgans |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website. Click here. (Subscribers can access prices on the website.)
(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com
FNArena is proud about its track record and past achievements: Ten Years On
Click to view our Glossary of Financial Terms
CHARTS
For more info SHARE ANALYSIS: AGL - AGL ENERGY LIMITED
For more info SHARE ANALYSIS: AMP - AMP LIMITED
For more info SHARE ANALYSIS: BKL - BLACKMORES LIMITED
For more info SHARE ANALYSIS: ILU - ILUKA RESOURCES LIMITED
For more info SHARE ANALYSIS: LYC - LYNAS RARE EARTHS LIMITED
For more info SHARE ANALYSIS: MND - MONADELPHOUS GROUP LIMITED
For more info SHARE ANALYSIS: MP1 - MEGAPORT LIMITED
For more info SHARE ANALYSIS: PLS - PLS GROUP LIMITED