Daily Market Reports | May 07 2021
This story features ACCENT GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: AX1
The company is included in ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7049.00 | + 26.00 | 0.37% |
| S&P ASX 200 | 7061.70 | – 34.10 | – 0.48% |
| S&P500 | 4201.62 | + 34.03 | 0.82% |
| Nasdaq Comp | 13632.84 | + 50.42 | 0.37% |
| DJIA | 34548.53 | + 318.19 | 0.93% |
| S&P500 VIX | 18.39 | – 0.76 | – 3.97% |
| US 10-year yield | 1.56 | – 0.02 | – 1.45% |
| USD Index | 90.89 | – 0.38 | – 0.42% |
| FTSE100 | 7076.17 | + 36.87 | 0.52% |
| DAX30 | 15196.74 | + 25.96 | 0.17% |
By Greg Peel
What’s the Difference?
The National Development and Reform Commission of the People’s Republic of China has halted activities under the China-Australia economic dialogue. The move has been dubbed “symbolic”, given the occasional nature of such dialogue.
The last meeting was in 2017.
There has been no communication between Chinese ministers and Australian counterparts since January 2019, with the Chinese refusing to take calls after Australia dared call for a covid investigation.
If this is Beijing’s only response to the scrapping of Victoria’s Belt&Road involvement, then I’d suggest it’s actually a major relief. The Chinese must have run out of imports they can ban without being themselves disadvantaged.
The Aussie dropped half a cent on the news to test the US77c level, only to rocket back up and this morning be up 0.5% over 24 hours, thanks to a weaker greenback.
Yet there was widespread selling on the ASX yesterday.
It was not all about China nevertheless. The technology sector was set for a fall following weakness on the Nasdaq. Sector heavyweight Afterpay ((APT)) fell -7.0% for no other reason. But a full -3.6% plunge for the sector was exacerbated by individual stories.
Nearmap ((NEA)) went from hero to zero, jumping 15% on a positive update on Tuesday before entering a trading halt to announce it was being sued by a rival over patents. Back on yesterday, the stock fell -23.3% to be the worst index performer.
But not by much. Appen ((AX1)) dropped -21.1% after presenting at the Macquarie Conference. More artificial than intelligent, it seems.
National Bank ((NAB)) was the last of the majors to release official half-year results yesterday, and as was the case with ANZ Bank ((ANZ)) the day before, did not sufficiently improve its profit. NAB fell -3.0% and the sector fell -0.7%. Macquarie Group ((MQG)) reports today.
The general mood was not helped by news Sydney will go back under “light” restrictions given the detection of two cases. India reported 412,000 new cases. WA has lifted its temporary restrictions that were in place due to one case.
They still don’t know who the source of the Sydney cases is, but at least the Insular Peninsular can rest easy it’s south of the harbour this time.
Telstra ((TLS)) announced yesterday it will replace 2000 employees with robots. Often such cost-cutting is seen as productive, but in this case it’s seen more as desperate, given failure to profit from NBN broadband or 5G. Telstra fell -2.0% and the sector -1.6%.
Materials (+0.8%) and energy (+0.2%) were the only sectors to close in the green yesterday. Iron ore is up a full 5% and gold has reclaimed US$1800/oz overnight.
There were some winners among the losers nonetheless. QBE Insurance ((QBE)) topped the index with a 3.2% gain post AGM. Outside the index, Eclipx Group ((ECX)) rose 10.6% on its earnings result cum $20m share buyback and Southern Cross Media ((SXL)) rose 6.1% on a guidance upgrade.
But Adore Beauty ((ABY)) updated and fell -19.2%.
Taking the Risk
It was a meandering session on Wall Street, another in which the Dow was up half a percent and the Nasdaq was down half a percent, continuing the week’s rotation theme. The Nasdaq was on track for a five-day losing streak – its first since October – up until the last hour.
In the last hour, suddenly the buyers sprung to life. While by the close the Nasdaq had still underperformed, at least it closed in the green.
It was a bold move ahead of tonight’s non-farm payrolls report. Last night’s weekly new jobless claims number showed a drop to just under 500,000 for the first time since the pandemic began. While this is good news, the trend back down again has been painfully slow. Half a million new dole applicants in a week is still more than double pre-pandemic averages.
Yet economists are forecasting one million jobs to have been added in April.
The rotation trade continues even as the US ten-year bond yield continues to drift lower – down another -2 basis points last night to 1.56%. This is perplexing some, but the suggestion is foreign buyers from countries with lower rates, such as Japan, the world’s second largest holder of US bonds (behind China), are providing the offset.
US yields are also being backstopped by the Fed’s ongoing insistence there’ll be no rate hikes in the foreseeable future. Last night the Bank of England board voted 8-1 to slow the pace of its QE “somewhat”. The Bank of Canada, where covid remains a problem, has already begun to slow.
Following on from Biden’s proposal to waive patents on vaccines on Wednesday night, last night Angela Merkel said nein. We call it the “Pfizer vaccine” but it’s actually a joint venture between Pfizer and Germany’s BioNTech, so she does get a say. But WHO is pushing for the waivers, and healthcare was still the S&P500’s most underperforming sector last night.
Towards the end of last night’s session, the Fed put out a regular stability report suggesting, in not so many words, asset prices are overheated and becoming a risk.
It didn’t deter the late buying nevertheless.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1814.70 | + 28.10 | 1.57% |
| Silver (oz) | 27.29 | + 0.83 | 3.14% |
| Copper (lb) | 4.55 | + 0.04 | 0.90% |
| Aluminium (lb) | 1.13 | + 0.02 | 2.13% |
| Lead (lb) | 0.98 | – 0.00 | – 0.27% |
| Nickel (lb) | 8.13 | + 0.04 | 0.46% |
| Zinc (lb) | 1.33 | + 0.01 | 0.62% |
| West Texas Crude | 64.71 | – 0.92 | – 1.40% |
| Brent Crude | 68.26 | – 0.42 | – 0.61% |
| Iron Ore (t) | 202.65 | + 9.95 | 5.16% |
I was half expecting China to return and sell iron ore yesterday, given the gains seen in China’s absence. Nothing could be further from the truth.
Who needs dialogue?
Gold has become rather fickle of late, and last night’s pop seems only to be US dollar-driven, along with just a slight dip in bond yields.
Aluminium’s jump has been put down to a deficit of scrap, and to an anticipated easing in the deficit of computer chips ahead. The chip shortage is causing auto manufacturers around the globe to cut production, which thus means less aluminium consumption. But with new chip production capacity madly being built, one day the shortage will end.
The Aussie is up 0.5% at US$0.7787.
Today
The SPI Overnight closed up 26 points or 0.4%.
The RBA will release a Statement on Monetary Policy today.
China will release April trade numbers.
Macquarie Group, REA Group ((REA)) and News Corp ((NWS)) report earnings.
Goodman Group ((GMG)) provides an update.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ANZ | ANZ Banking Group | Downgrade to Neutral from Outperform | Credit Suisse |
| Downgrade to Equal-weight from Overweight | Morgan Stanley | ||
| COE | Cooper Energy | Upgrade to Add from Hold | Morgans |
| CSL | CSL | Upgrade to Outperform from Neutral | Macquarie |
| DMP | Domino's Pizza | Downgrade to Neutral from Outperform | Macquarie |
| FLT | Flight Centre | Upgrade to Neutral from Sell | Citi |
| GUD | GUD Holdings | Downgrade to Neutral from Buy | Citi |
| JHC | Japara Healthcare | Downgrade to Hold from Accumulate | Ord Minnett |
| MTO | Motorcycle Holdings | Upgrade to Add from Hold | Morgans |
| SEK | Seek Ltd | Upgrade to Neutral from Underperform | Macquarie |
| SKI | Spark Infrastructure | Upgrade to Add from Hold | Morgans |
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CHARTS
For more info SHARE ANALYSIS: ABY - ADORE BEAUTY GROUP LIMITED
For more info SHARE ANALYSIS: ANZ - ANZ GROUP HOLDINGS LIMITED
For more info SHARE ANALYSIS: AX1 - ACCENT GROUP LIMITED
For more info SHARE ANALYSIS: GMG - GOODMAN GROUP
For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED
For more info SHARE ANALYSIS: NAB - NATIONAL AUSTRALIA BANK LIMITED
For more info SHARE ANALYSIS: NWS - NEWS CORPORATION
For more info SHARE ANALYSIS: QBE - QBE INSURANCE GROUP LIMITED
For more info SHARE ANALYSIS: REA - REA GROUP LIMITED
For more info SHARE ANALYSIS: SXL - SOUTHERN CROSS MEDIA GROUP LIMITED
For more info SHARE ANALYSIS: TLS - TELSTRA GROUP LIMITED