Daily Market Reports | Jul 14 2021
This story features TRANSURBAN GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TCL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7255.00 | + 4.00 | 0.06% |
| S&P ASX 200 | 7332.10 | – 1.40 | – 0.02% |
| S&P500 | 4369.21 | – 15.42 | – 0.35% |
| Nasdaq Comp | 14677.65 | – 55.59 | – 0.38% |
| DJIA | 34888.79 | – 107.39 | – 0.31% |
| S&P500 VIX | 17.12 | + 0.95 | 5.88% |
| US 10-year yield | 1.42 | + 0.05 | 3.82% |
| USD Index | 92.79 | + 0.56 | 0.61% |
| FTSE100 | 7124.72 | – 0.70 | – 0.01% |
| DAX30 | 15789.64 | – 0.87 | – 0.01% |
By Greg Peel
Delta Blues
When Monday’s Sydney case-count number came in at 112, up from 77 the day before, it seemed almost inevitable a further lockdown extension would be forthcoming. The local market nevertheless appeared ambivalent, instead following Wall Street in rising 60 points.
The ASX200 was up again from the open yesterday, almost 50 points, on another solid Wall Street session, and then at 11am the update revealed a drop to 89 new cases, and other than some tighter restrictions in south-western Sydney, no lockdown extension.
The ASX200 was sold right back down to flat.
The odds of an extension remain elevated, and today’s number will be telling. We did see such fluctuations earlier in the outbreak. But as to why investors finally decided yesterday that delta might be a bit of an issue is unclear.
In the wash-up, only three sectors closed in the red. Financials, which is around 27% of market cap, fell -0.4%, energy (3%) fell -0.6% and property (6.5%) fell -0.9%. All other sectors closed in the green.
The best performer was industrials (+0.9). Just to further confuse, we could make covid cases (pardon the pun) for each of the three red sectors but as to why Transurban ((TCL)) rose 1.3% yesterday is a conundrum under the circumstances.
We might simply conclude that uncertainty has crept in, and uncertainty is any market’s nemesis. Wall Street closed modestly lower last night, and our futures are up 4 points this morning. Let’s see what happens at 11am.
Among individual stocks, Nearmap ((NEA)) leapt 14.4% yesterday to top the index, following a positive, US-driven trading update.
Outside the index, online car sales platform iCar Asia ((ICQ)) jumped 60% on a takeover offer, and in a sign of the times, meal delivery service Hellofresh has taken a swing at listed rival Youfoodz ((YFZ)), sending that stock up 77.5%.
It’s been a bumper almond harvest for Select Harvests ((SHV)), as drought ravages California. That stock jumped 16.0%.
Worst index performer was Platinum Asset Management ((PTM)), which fell -8.3% on its funds-flow update.
There was some interesting news from abroad last night. Apple and Goldman Sachs are partnering in a new BNPL service. US-based BNPL pure-play Affirm fell -11% on the news.
You have been warned. Drinks on UBS tonight.
Some don’t like it hot
JP Morgan and Goldman Sachs reported June quarter earnings last night and both beat forecasts. Goldman in particular posted more than double consensus forecast revenues and increased its dividend by 60%.
JPM fell -1.5% and Goldman -1.2%. Told yers.
Pepsico smashed its forecast and provided a better than expected outlook. It rose 2.3%. Ditto.
The big news of the day was, of course, the June CPI. It came in at a headline 5.4%, up from May’s 5.0%. The core CPI rose to 4.5% from 3.8% — a 29-year high.
I suggested yesterday that with Wall Street well prepared for a “hot” number, it would be the trend that would be more important than the nominal level. Judging by a fairly modest -0.3% across the indices, a still-upward trend is a little worrying, and enough to further stir up the transitory-or-not debate.
The US ten-year yield rose 5 basis points to 1.42%.
But the transitory camp remains stoic, Fed included. One third of the 0.9% month on month headline increase represented used car prices. Used cars are in hot demand because new car production has stalled due to the chip shortage, which is seen as transitory. It will be a rather lengthy “transitory” nonetheless, given US chip makers are in the process of building new onshore production capacity to alleviate the problem. That does take a while.
Energy was another significant contributor, with oil prices having risen steadily in past months. The last time headline inflation was above 5% (2008), oil was twice the price it is today.
Airline tickets and hotel rooms were in the mix, as these sectors try to recoup 2020 losses, but food and clothing were also contributors. And we note the bigger month-on-month jump was in the core rate, which excludes food and energy.
The transitories insist the CPI numbers simply reflect the re-opening of the economy, and an economy can only “re-open” for so long before it is, well, “open”.
The wholesale inflation (PPI) numbers for June are out tonight. Fed chair Jerome Powell will face a House committee to explain just what’s going on, and why US$120bn a month in money printing is still necessary.
Bank earnings reports will continue to roll in until the floodgates open on the rest of the market’s earnings from next week.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1807.30 | + 0.80 | 0.04% |
| Silver (oz) | 25.96 | – 0.25 | – 0.95% |
| Copper (lb) | 4.21 | – 0.04 | – 0.88% |
| Aluminium (lb) | 1.13 | + 0.00 | 0.37% |
| Lead (lb) | 1.05 | – 0.01 | – 0.97% |
| Nickel (lb) | 8.41 | – 0.04 | – 0.42% |
| Zinc (lb) | 1.32 | – 0.00 | – 0.09% |
| West Texas Crude | 75.25 | + 1.15 | 1.55% |
| Brent Crude | 76.50 | + 1.30 | 1.73% |
| Iron Ore (t) | 217.85 | – 0.60 | – 0.27% |
The CPI number sparked a 0.6% jump in the US dollar, which pressured metal prices. Gold initially popped up (inflation hedge) but fell back again (dollar).
Oil prices ignored the dollar, given anticipation of further draws on tight US inventories being reported this week.
On the greenback’s gain, the Aussie is down -0.4% at US$0.7448.
Today
The SPI Overnight closed up 4 points.
Business conditions and confidence took a bit of a hit last month, reflecting the then brief Victorian lockdown but not yet the Sydney lockdown in NAB’s survey. Confidence fell to +24 from +36 in May, and conditions to +11 from +20, but both remain well above average.
Westpac will publish its July consumer confidence survey today, which is more recent.
The RBNZ is meeting this morning.
The Fed Beige Book is out tonight, along with the PPI.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ARF | Arena REIT | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| CBA | CommBank | Downgrade to Underperform from Neutral | Macquarie |
| COF | Centuria Office REIT | Downgrade to Hold from Add | Morgans |
| NAB | National Australia Bank | Upgrade to Outperform from Neutral | Macquarie |
| SXY | Senex Energy | Downgrade to Neutral from Outperform | Macquarie |
| VEA | Viva Energy | Upgrade to Add from Hold | Morgans |
| WSA | Western Areas | Downgrade to Neutral from Outperform | Macquarie |
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CHARTS
For more info SHARE ANALYSIS: PTM - PLATINUM ASSET MANAGEMENT LIMITED
For more info SHARE ANALYSIS: SHV - SELECT HARVESTS LIMITED
For more info SHARE ANALYSIS: TCL - TRANSURBAN GROUP LIMITED