Daily Market Reports | Jun 24 2021
This story features APPEN LIMITED, and other companies. For more info SHARE ANALYSIS: APX
The company is included in ALL-ORDS and ALL-TECH
| World Overnight | |||
| SPI Overnight (Jun) | 7170.00 | – 29.00 | – 0.40% |
| S&P ASX 200 | 7298.50 | – 43.70 | – 0.60% |
| S&P500 | 4241.84 | – 4.60 | – 0.11% |
| Nasdaq Comp | 14271.73 | + 18.46 | 0.13% |
| DJIA | 33874.24 | – 71.34 | – 0.21% |
| S&P500 VIX | 16.32 | – 0.34 | – 2.04% |
| US 10-year yield | 1.49 | + 0.02 | 1.02% |
| USD Index | 91.82 | + 0.10 | 0.11% |
| FTSE100 | 7074.06 | – 15.95 | – 0.22% |
| DAX30 | 15456.39 | – 179.94 | – 1.15% |
By Greg Peel
Here we go again
Gladys is hoping not, but the way things are going it’s hard to see Sydney, if not NSW, going back into lockdown shortly. Already the residents of seven council areas are banned from leaving Sydney, right before the school holidays.
And the delta strain is a whole new ball game.
The market appeared to make that assumption yesterday in selling down all bar two sectors by a roughly even one percent, with materials (+0.8%) and technology (+1.1%) the only gainers. In the former case we can look to the iron ore price and in the latter, both Zip Co ((Z1P)) and Appen ((APX)) appearing on the top five index winners’ board with gains of 6.4% and 3.3%.
Topping the board was investment conglomerate WH Soul Pattinson ((SOL)), which has fingers in more pies than Shane Warne, and has made a bid for stock/bond investment company Milton Corp ((MLT)), leading to gains of 8.5% and 5.2% respectively.
The popular media latched on yesterday to a note from Commonwealth Bank’s economists forecasting the first RBA rate increase in November 2022, when the RBA itself has (to date) continued to insist on 2024. That said, the last RBA minutes were more vague, simply suggesting “a long way off”.
But CBA is only the latest in a long line of bank and broker economists forecasting RBA tapering and rate rises well before the RBA’s timetable, maybe even early next year.
With regard tapering, the RBA will make a decision at the July meeting, before we learn the June quarter CPI numbers.
But were the RBA to move earlier than previously assumed, we would have expected, in isolation, this to be good for banks and bad for tech growth stocks, but yesterday they moved in the opposite direction. And having followed in lockstep with Wall Street in the previous two plunge-and-bounce sessions, yesterday the ASX200 did its own thing.
It’s not looking any more promising today, with the futures down -0.4% this morning against the S&P500’s -0.1% move overnight.
So it’s back to closely watching the daily case-count, and the ever growing list of hotspots.
A lockdown over the school holidays would be another kick in the guts for regional areas that have enjoyed a travel boom this year, which has gone some way to cover the losses of last year. Anecdotally I learned recently from a friend in regional hospitality of a swathe of wedding bookings in the months ahead that are the same weddings postponed last year.
That would hurt.
Now What?
It was a pretty nothing session on Wall Street last night, other than to note the Nasdaq crept to another new high and the S&P500 was trading at a new high before slipping back late.
It’s a fair bet traders are likely by now sick of the I-word, at least until Friday night when May PCE data are due.
Judging by Wall Street’s rather muted reaction to the 5.5% May CPI result and 6.6% PPI, a sizeable PCE may well be shrugged off too. And various Fedheads can say what they like, but Jay Powell is sticking to his guns.
It was nonetheless interesting to note an estimate of the US composite PMI (manufacturing plus services) falling to 63.9 from May’s 68.7. It’s quite a big fall but only to a still elevated level. Anything over 60 implies rapid growth.
The drop-off in output in no way reflects a drop-off in demand, rather supply bottlenecks and difficulty in finding staff.
Don’t mention the I-word.
Over in Europe, however, the equivalent composite PMI is estimated to be 59.2, up from 57.1, to mark the fastest rate of growth since 2006. Given its earlier struggle to control covid, Europe is running several months behind the US in terms of economic recovery. So we’ll have to wait to see if Europe runs into the same growth constraints as are now the case in the US.
US new home sales fell -5.9% in May. This is attributed to a 23% year-on-year increase in house prices. In this case, strong demand for housing has met similar supply-side issues, which have indeed translated into higher building costs. New homes have just become too expensive for most.
The median US home price in May was US$350,000. Don’t know what their problem is.
Just as an aside, when there’s little more to talk about, Amazon announced last night a commitment to acquire 1.5GW of electricity generation capacity from 14 new solar and wind plants across the world, in order to meet the company’s net-zero target of 2025.
2025! Barnaby would spontaneously combust.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1778.30 | – 0.50 | – 0.03% |
| Silver (oz) | 25.86 | + 0.10 | 0.39% |
| Copper (lb) | 4.16 | + 0.01 | 0.35% |
| Aluminium (lb) | 1.08 | – 0.00 | – 0.33% |
| Lead (lb) | 0.98 | + 0.01 | 0.52% |
| Nickel (lb) | 8.11 | + 0.06 | 0.75% |
| Zinc (lb) | 1.29 | + 0.00 | 0.15% |
| West Texas Crude | 73.08 | + 0.02 | 0.03% |
| Brent Crude | 75.38 | + 0.48 | 0.64% |
| Iron Ore (t) | 216.60 | + 3.90 | 1.83% |
Nothing to see here either.
The Aussie is up 0.3% at US$0.7578.
Today
The SPI Overnight closed down -29 points or -0.4%.
The US will see May durable goods orders tonight, which will be another closely watched data point.
The Bank of England holds a policy meeting.
I believe the daily new cases tally is revealed at 11am.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ABP | Abacus Property | Downgrade to Neutral from Outperform | Credit Suisse |
| ADH | Adairs | Downgrade to Hold from Accumulate | Ord Minnett |
| BLD | Boral | Upgrade to Hold from Lighten | Ord Minnett |
| CSL | CSL | Downgrade to Neutral from Buy | Citi |
| EBO | EBOS | Downgrade to Hold from Add | Morgans |
| FLT | Flight Centre Travel | Upgrade to Neutral from Underperform | Credit Suisse |
| ILU | Iluka Resources | Downgrade to Hold from Accumulate | Ord Minnett |
| JMS | Jupiter Mines | Downgrade to Neutral from Outperform | Macquarie |
| NHC | New Hope | Upgrade to Outperform from Neutral | Credit Suisse |
| RIO | Rio Tinto | Downgrade to Sell from Neutral | UBS |
| RMD | Resmed | Upgrade to Outperform from Neutral | Macquarie |
| S32 | South32 | Upgrade to Outperform from Neutral | Macquarie |
| SHL | Sonic Healthcare | Downgrade to Neutral from Buy | Citi |
| WAF | West African Resources | Upgrade to Outperform from Neutral | Macquarie |
| WSA | Western Areas | Downgrade to Equal-weight from Overweight | Morgan Stanley |
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CHARTS
For more info SHARE ANALYSIS: APX - APPEN LIMITED
For more info SHARE ANALYSIS: SOL - WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED