Daily Market Reports | Jun 03 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) | 7229.00 | + 16.00 | 0.22% |
| S&P ASX 200 | 7217.80 | + 75.20 | 1.05% |
| S&P500 | 4208.12 | + 6.08 | 0.14% |
| Nasdaq Comp | 13756.33 | + 19.85 | 0.14% |
| DJIA | 34600.38 | + 25.07 | 0.07% |
| S&P500 VIX | 17.48 | – 0.42 | – 2.35% |
| US 10-year yield | 1.59 | – 0.02 | – 1.49% |
| USD Index | 89.90 | – 0.02 | – 0.02% |
| FTSE100 | 7108.00 | + 27.54 | 0.39% |
| DAX30 | 15602.71 | + 35.35 | 0.23% |
By Greg Peel
Back in Black
No not the budget – that likely won’t be in the black for decades – but Australia’s economy. Having fallen -0.3% in the March quarter last year — the tail end catching the beginning of covid — Australia’s GDP rose 1.8% quarter on quarter this March quarter to be up 1.1% year on year.
In other words, the economy is now bigger than it was pre-pandemic.
The interesting number will come this quarter, given last year GDP shrunk -7.0% in the true covid quarter.
I suggested yesterday we could likely dismiss trading on Monday and Tuesday, the last and first days of May and June, as portfolio reshuffling would mask underlying market sentiment. And so it was, with Wall Street flat overnight, market sentiment reinstated itself to the positive yesterday.
The ASX200 was already up around 50 points late morning when the GDP result was released. There was a slight stumble – probably an attempt at sell-the-fact – but it lasted but a blink. Momentum then carried the index onward again to close on its highs.
It was a new all-time record, the 7200 has been breached, and it’s all blue sky from here. With Wall Street posting another flat session, our futures are up 16 points this morning, suggesting yesterday was no flash in the pan.
The 1% gain for the index did not nevertheless represent market-wide buying. The standout sector was energy, up 4.1% as OPEC kept current production levels steady. This spilt into utilities (+2.6%), with AGL Energy ((AGL)) jumping 4.0%, having been down -33% year to date.
Materials rose 1.9% as iron ore leapt back over US$200/t. If you want to talk inflation, talk materials.
And if you want to talk inflation hedge, talk REITs. Not CBD offices – they’re in for a rough time ahead as the working day office/home split becomes entrenched. But elsewhere landlords can counter inflation by raising rents, and thus yields, once we actually do get past covid. The property sector rose 2.0%.
Discretionary, staples and industrials all gained over 1%, and a 0.7% bounce-back from Tuesday for the banks was influential, while telcos (+0.2%) played defensive. More defensive on a day for the cyclicals was healthcare – one of only two sectors to close in the red (-0.5%).
The other was technology (-1.1%). Looks like the air is gradually being let out of that overvaluation balloon on actual results and guidance updates. Four of the top five index losers on the day were tech stocks.
Three of the top five winners were oil & gas producers or servicers. Whitehaven Coal ((WHC)) came in fifth, with another 5.4% gain.
To spot went, again, to Inghams Group ((ING)), which so far this week has been up 3.5%, down -3.8% and now up 6.6%.
Last word on the GDP goes to ANZ Bank’s economists:
“While policy support is still very high, the economy has weathered the withdrawal of emergency fiscal stimulus unexpectedly well. Business conditions point to ongoing solid expansion, high levels of capacity utilisation will support investment and consumers still have a very large savings buffer. The labour market recovery is poised for further gains, with job ads running nearly 30% above pre-pandemic levels.”
Happy days…as Melbourne extends its lockdown.
Box Office Bargain: the Sequel
Once again Wall Street traded higher in the morning and once again it eased back to be flat at the close, with no sign of rotation or preference.
Once again, it was all about the meme stocks.
Having risen 23% on Tuesday night after placing a chunk of new capital with a hedge fund, AMC Entertainment last night rose 95%. The hedge fund made US$30m on flipping the stock on the day. Bet the champagne went flat last night.
AMC is now up 3000% year to date. It is valued at multiple times more than it was pre-pandemic, has heavily increased its share count, and those cinemas that are actually open in the US are still mostly running at limited capacity.
AMC is not heavily shorted any more. Nor is GameStop, which rose 13% last night. But struggling homewares retailer Bed, Bath & Beyond is around 30% shorted, and it jumped 62%. Blast-from-the-past Blackberry is similarly shorted, and it rose 32%.
The short squeeze is on again. Not only that, AMC is revelling in the attention, now offering free popcorn to shareholders. A small cost for the company; a huge saving for film buffs.
Wall Street continues to watch nervously. When the meme craze all kicked off in January, driven by a bored social media demographic, the shorters were burned and had to dump other holdings to cover losses, which led to a general market correction as the snowball grew.
So far Wall Street is more circumspect this time, but unprepared to pile into the market. We know from experience that at some point this will again all end in tears, both for the shorters on one side or the late-to-the-game buyers on the other.
Another fun fact:
Given the extent of volatility in AMC’s share price on the day, the stock was twice halted by automatic exchange mechanisms. We recall that back in January, the retail broker behind the meme stock craze – Robinhood – was forced to itself halt trading due to liquidity constraints. Last night, following a barrage of incensed tweets, Robinhood was forced to tweet back “It wasn’t us!”
Back in the real world, energy was again the leading sector on Wall Street last night, followed by property.
Otherwise, if we look only at the day’s index movements on close, it was another dull session. The S&P500 remains anchored at the 4200 level, which it first reached in mid-April.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1908.20 | + 8.70 | 0.46% |
| Silver (oz) | 28.16 | + 0.28 | 1.00% |
| Copper (lb) | 4.56 | – 0.05 | – 1.10% |
| Aluminium (lb) | 1.09 | – 0.00 | – 0.19% |
| Lead (lb) | 1.00 | + 0.00 | 0.09% |
| Nickel (lb) | 8.18 | + 0.12 | 1.44% |
| Zinc (lb) | 1.39 | + 0.01 | 0.38% |
| West Texas Crude | 68.83 | + 1.11 | 1.64% |
| Brent Crude | 71.31 | + 0.68 | 0.96% |
| Iron Ore (t) | 209.45 | + 0.35 | 0.17% |
Weakening demand in China was blamed for copper’s fall last night. A long-term price upgrade from Fitch was blamed for nickel’s gain.
Gold dipped on Tuesday night as US bond yields ticked up and rebounded last night as US bond yields ticked back down.
Otherwise, the rally is ongoing for the oils.
The Aussie was heading lower ahead of yesterday’s GDP result but bounced back to be flat over 24 hours at US$0.7754.
Today
The SPI Overnight closed up 16 points or 0.2%.
Locally today we’ll see final numbers for April retail sales and trade, with preliminary numbers having been released previously.
The US will see private sector jobs numbers for May tonight.
Wesfarmers ((WES)) hosts a strategy day today.
Uniti Group ((UWL)) holds an EGM.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| CIP | Centuria Industrial Reit | Downgrade to Neutral from Buy | UBS |
| DXS | Dexus | Downgrade to Neutral from Outperform | Macquarie |
| IDX | Integral Diagnostics | Downgrade to Accumulate from Buy | Ord Minnett |
| NWS | News Corp | Downgrade to Neutral from Buy | UBS |
| SCG | Scentre Group | Upgrade to Neutral from Sell | UBS |
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CHARTS
For more info SHARE ANALYSIS: AGL - AGL ENERGY LIMITED
For more info SHARE ANALYSIS: ING - INGHAMS GROUP LIMITED
For more info SHARE ANALYSIS: UWL - UNITI GROUP LIMITED
For more info SHARE ANALYSIS: WES - WESFARMERS LIMITED
For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED