Daily Market Reports | May 20 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) | 6932.00 | + 4.00 | 0.06% |
| S&P ASX 200 | 6931.70 | – 134.30 | – 1.90% |
| S&P500 | 4115.68 | – 12.15 | – 0.29% |
| Nasdaq Comp | 13299.74 | – 3.90 | – 0.03% |
| DJIA | 33896.04 | – 164.62 | – 0.48% |
| S&P500 VIX | 22.18 | + 0.84 | 3.94% |
| US 10-year yield | 1.68 | + 0.04 | 2.50% |
| USD Index | 90.18 | + 0.39 | 0.43% |
| FTSE100 | 6950.20 | – 84.04 | – 1.19% |
| DAX30 | 15113.56 | – 273.02 | – 1.77% |
By Greg Peel
Wash Out
I suggested yesterday morning things were looking a bit ominous, with Wall Street having closed with aggressive late selling, and our futures showing a rather substantial down -79 points. It is possible that futures selling was cover against an intended big selling order in the physical market yesterday.
Clearly it became a “sell everything” session, which would corroborate a big index selling order, but there was more going on as well, which is why the ASX200 closed down -134 and not -79.
The index immediately plunged -120 points, and a brief attempt at a rebound mid-morning gained no traction. All sectors closed well into the red, with the only “outperformers” being defensive staples (-0.7%) and healthcare (-1.0%).
Materials fell -3.0%. Beijing announced yesterday it would encourage Chinese companies to boost domestic exploration for iron ore, increase production, widen their sources of imports and explore overseas ore resources. This news knocked our big miners for six, and the iron ore price has fallen -3.7%.
Determined intent, propaganda, or folly? China simply does not have the ore, and what it has is low grade. As for exploration, it’s a long game. Most likely Beijing thought such an announcement might be one way to knock down iron ore prices, but -3.7% is pretty piddling under the circumstances.
Energy fell -2.8%, and utilities fell -1.6% on a -3.9% fall for AGL Energy ((AGL)). The federal government announced plans to build its own gas-fired power station. Where does this leave growth plans for private sector gas companies?
Technology fell only -1.6%, despite a -45.6% plunge for EML Payments ((EML)), after the company’s Irish subsidiary received a “please explain” from the Irish central bank. Otherwise, miners and mining servicers made up the top five losers’ board.
Appen ((APX)) organised an investor presentation and announced unchanged guidance. The embattled AI company shot up 17.4% against the tide. Nuix ((NXL)) continued its rebound with another 4.6%.
United Malt Group ((UMG)) reported earnings and managed 1.6% on a tough day.
I suggest that yesterday was more a case of buyers standing aside from the wave of selling, wherever that was coming from. In such cases we typically see at least a partial rebound the next day.
But despite Wall Street bouncing back strongly from early lows last night, the S&P500 still closed down -0.3%. Our futures are up only 4 points this morning.
Thinking Hats On
From last night’s Fed minutes:
“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases”
Having insisted it was not even thinking about thinking about tapering, now the FOMC has suggested that at the appropriate time it might begin to discuss a plan. Very Sir Humphrey. The funny thing was, Wall Street rallied on the afternoon release.
The morning had seen the Dow down almost -600 points. It was a follow-though from Tuesday night’s weak close, but there was also a bit of turmoil going on elsewhere.
Chinese regulators yesterday tightened restrictions that ban financial institutions and payment companies from providing services related to cryptocurrencies. Compared with a previous ban issued in 2017, the new rules greatly expanded the scope of prohibited services, and judged that "virtual currencies are not supported by any real value".
Before the open on Wall Street last night, bitcoin lost a third of its value. The cryptocurrency had already been in pullback mode for the last several sessions, so the scene was set. But it did not last long. Having traded under $32,000, bitcoin is currently back at US$39,000 – still down -8% over 24 hours.
The bitcoin move had Wall Street rather shaken, and the VIX jumped up to 26. But stock indices soon turned around and began a steady comeback. When the minutes were released, there was a predictable dip, but again the buyers returned.
While all three majors closed lower, they did so with upward momentum. The VIX fell back to 22.
On the Fed minutes, the US dollar bounced and the ten-year bond yield jumped 4 basis points to 1.68%, but this did not derail the comeback. Wall Street has been expecting the Fed to wake up and smell the roses for a while now, and had already made its own assumptions.
Did we just see the bottom? It remains touch and go.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1869.30 | + 0.20 | 0.01% |
| Silver (oz) | 27.70 | – 0.50 | – 1.77% |
| Copper (lb) | 4.57 | – 0.17 | – 3.53% |
| Aluminium (lb) | 1.09 | – 0.02 | – 2.01% |
| Lead (lb) | 0.99 | – 0.00 | – 0.37% |
| Nickel (lb) | 7.91 | – 0.21 | – 2.56% |
| Zinc (lb) | 1.33 | – 0.05 | – 3.60% |
| West Texas Crude | 63.36 | – 2.13 | – 3.25% |
| Brent Crude | 66.63 | – 1.86 | – 2.72% |
| Iron Ore (t) | 215.45 | – 8.30 | – 3.71% |
The bounce in the US dollar might go some way to explaining why base metals were all sold off, but the LME had closed before the Fed minutes were released. More likely, given copper and other metals have also raced higher on Chinese demand, it was a case of iron ore being a possible canary.
The fall in oil prices is due to the usual weekly US crude inventory lottery, which showed a build.
Despite hints of Fed tapering, a higher bond yield and US dollar, gold held its ground.
The good news, if we can find some, is the Aussie is down -0.9% at US$0.7722.
Today
The SPI Overnight closed up 4 points.
Australia’s April jobs numbers are out today. Yesterday’s March quarter wage price index showed an increase of 0.6% to 0.5% expectations, to a level described as a return to “normal”. What might the RBA be thinking about thinking about?
Nufarm ((NUF)) reports earnings today.
Galaxy Resources ((GXY)) and Auckland International Airport ((AIA)) hold AGMs.
Sydney Airport ((SYD)) reports April traffic stats.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ALD | Ampol | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| APA | APA | Downgrade to Neutral from Outperform | Macquarie |
| CAR | Carsales.Com | Upgrade to Add from Hold | Morgans |
| CCP | Credit Corp | Upgrade to Buy from Hold | Ord Minnett |
| CPU | Computershare | Upgrade to Hold from Lighten | Ord Minnett |
| NEA | Nearmap | Downgrade to Neutral from Buy | Citi |
| ORE | Orocobre | Upgrade to Accumulate from Hold | Ord Minnett |
| S32 | South32 | Downgrade to Neutral from Outperform | Macquarie |
| SBM | St Barbara | Downgrade to Underperform from Neutral | Macquarie |
| Downgrade to Hold from Buy | Ord Minnett | ||
| SUN | Suncorp | Upgrade to Buy from Neutral | Citi |
| Upgrade to Add from Hold | Morgans | ||
| TPG | TPG Telecom | Upgrade to Buy from Hold | Ord Minnett |
| TWE | Treasury Wine Estates | Upgrade to Add from Hold | Morgans |
| VCX | Vicinity Centres | Upgrade to Outperform from Neutral | Macquarie |
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CHARTS
For more info SHARE ANALYSIS: AGL - AGL ENERGY LIMITED
For more info SHARE ANALYSIS: AIA - AUCKLAND INTERNATIONAL AIRPORT LIMITED
For more info SHARE ANALYSIS: APX - APPEN LIMITED
For more info SHARE ANALYSIS: EML - EML PAYMENTS LIMITED
For more info SHARE ANALYSIS: NUF - NUFARM LIMITED
For more info SHARE ANALYSIS: NXL - NUIX LIMITED
For more info SHARE ANALYSIS: UMG - UNITED MALT GROUP LIMITED