Daily Market Reports | Jul 26 2021
This story features CSL LIMITED, and other companies. For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7335.00 | + 22.00 | 0.30% |
| S&P ASX 200 | 7394.40 | + 8.00 | 0.11% |
| S&P500 | 4411.79 | + 44.31 | 1.01% |
| Nasdaq Comp | 14836.99 | + 152.39 | 1.04% |
| DJIA | 35061.55 | + 238.20 | 0.68% |
| S&P500 VIX | 17.20 | – 0.49 | – 2.77% |
| US 10-year yield | 1.29 | + 0.02 | 1.66% |
| USD Index | 92.91 | + 0.05 | 0.05% |
| FTSE100 | 7027.58 | + 59.28 | 0.85% |
| DAX30 | 15669.29 | + 154.75 | 1.00% |
By Greg Peel
Defiant
Covid concern was evident when the ASX200 opened on Friday down -30 points on the back of modest gains on Wall Street. Sydney continues to post triple-digit case-counts, albeit daily testing numbers are through the roof. It lasted all of ten minutes, as the index spun on a dime.
At 1pm the index was testing 7400 once more but failed, dropped -25 points, and then recovered to close with 7400 still firmly in sight.
The covid situation has not improved over the weekend. Sydney’s lockdown, albeit not yet confirmed, is now considered “indefinite”, and the weekend’s protest marches won’t help, although the signs are brighter for Victoria and SA.
If lockdowns are to be ongoing it raises the likelihood of the RBA delaying its QE tapering, which will keep bond rates low. This does not help the banks, on top of lockdowns raising the spectre of increased foreclosures and bankruptcies.
The banks fell -0.5% on Friday to be the biggest drag on the index, alongside a -1.1% fall for energy as merger speculation eases.
A big drop in the iron ore price, countered by ongoing excitement among other metals, saw materials down -0.1%.
The main counter was again healthcare (+1.3%). Aside from the weaker Aussie providing support, the government’s desperate AZ run-out sale boosts the prospects for local manufacturer CSL ((CSL)).
The consumer sectors were healthy in a lockdown fashion while tech made a bit of a comeback (+1.0%) after a tough week for BNPL.
Nickel Mines ((NIC)) was the best index performer (+6.5%) on the tails of the BHP-Tesla deal. Mineral sands are hot property at present on rising prices and Rio Tinto’s ((RIO)) suspended operation in South Africa. Iluka Resources rose 4.5%. The market likes the Evolution Mining ((EVN)) acquisition (+4.4%) from Northern Star Resources ((NST)) but the latter fell -6.2% on its production report, and Silver Lake Resources ((SLR)) fell -8.5% on its production report.
Star Entertainment ((SGR)) gave up on Crown Resorts ((CWN)), possibly part of negotiation strategy, sending Crown down -2.2%, while possible merger partners Santos ((STO)) and Oil Search ((OSH)) dropped over -2%, reflecting easing merger exuberance.
Wall Street posted another triple-new-high session on Friday night and our futures were up 22 points on Saturday morning.
Will it be delta blues again from the open today or can we put 7400 in the bag?
Beyond 35,000
Following the big sell-off last Monday, which to some extent reflected delta fears, the Dow closed the week up 1.1%, the S&P500 2.0% and the Nasdaq 2.8%. Friday saw all three close at new all-time highs, and the Dow close above 35,000 for the first time.
For those who love a good statistic, the last time the Dow fell over -2% on a Monday and closed higher on the Friday was in 1991.
This as the US case count jumps 65% week on week and Republican leaders (most of them anyway) start pleading with their supporters to get vaccinated. There is talk of masks being once again mandated (they already are in LA), even for the vaccinated, but then the governor of worst-hit Texas refuses to consider a lockdown.
Arguably, covid concerns have been simply outweighed by earnings results, which continue to run at over 80% “beats” and net 18% year on year earnings growth for the S&P500. A case in point on Friday night was Snap, which jumped 24%.
It was another very solid session for FAAMG as well, with Facebook in particular jumping over 5% ahead its result this week, despite there being no less than five anti-trust bills in Congress. All the Big Tech names, including Tesla, report this week.
Aside from playing the risk card ahead of earnings, this week brings a Fed meeting, and the First of August brings the end of a prior agreement to suspend the US debt limit due to covid, implying if Congress cannot agree on a debt ceiling increase the government will run out of money.
When this happened in 2011, the US lost its AAA rating and Wall Street was not impressed.
In other news, Beijing’s attack on US-listed Chinese companies continued on Friday night. This time it were education tech companies in the cross-hairs – deemed by the government to be a matter of national security – being threatened with a forced conversion to non-profit. The three majors listed on Wall Street fell -60-70%.
Chinese ride-share company Didi, which drew the ire of Beijing a couple of weeks ago for not dual-listing in Hong Kong, has now lost half its IPO value.
The Biden Administration has also officially warned US businesses in Communist Hong Kong it might be time to rethink.
There is apparently a long list of Chinese companies, mostly tech, lined up for US IPOs. Or at least there was. It’s hard to see the big US investment banks risking another underwrite that ends up like a Didi, or any investor interest anyway.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1802.20 | – 4.70 | – 0.26% |
| Silver (oz) | 25.17 | + 0.72 | 2.94% |
| Copper (lb) | 4.31 | + 0.08 | 1.78% |
| Aluminium (lb) | 1.12 | + 0.01 | 1.25% |
| Lead (lb) | 1.08 | + 0.01 | 0.66% |
| Nickel (lb) | 8.73 | + 0.21 | 2.44% |
| Zinc (lb) | 1.34 | + 0.02 | 1.35% |
| West Texas Crude | 72.07 | + 0.16 | 0.22% |
| Brent Crude | 74.10 | + 0.47 | 0.64% |
| Iron Ore (t) | 201.90 | + 0.40 | 0.20% |
Base metal prices responded on Friday night to the ECB’s QE extension, and the loss of production due to the floods in Germany.
The Aussie is down -0.2% at US$0.7367.
The Week Ahead
As the US hits its biggest week of earnings results, the local result pre-season ramps up ahead of the August result season proper.
This week sees results from Temple & Webster ((TPW)), Rio Tinto, Janus Henderson ((JHG)) and UR Westfield ((URW)).
Quarterly production reports nonetheless see out their last week, with Oil Search ((OSH)), OZ Minerals ((OZL)), Fortescue Metals ((FMG)), Mineral Resources ((MIN)) and Origin Energy ((ORG)) among those reporting.
Australia’s June quarter CPI numbers are due on Wednesday. Could be interesting.
The PPI follows on Friday along with private sector credit data.
Both the US and eurozone report June quarter GDP results this week.
The US will also see new and pending home sales, house prices, consumer confidence, durable goods and PCE inflation.
The Fed meets this week.
Amidst all the quarterlies and earnings results, ALS Ltd ((ALQ)) and Macquarie Group ((MQG)) hold their AGMs.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BLD | Boral | Downgrade to Lighten from Hold | Ord Minnett |
| CCP | Credit Corp | Upgrade to Add from Hold | Morgans |
| CIM | Cimic Group | Upgrade to Outperform from Neutral | Credit Suisse |
| CPU | Computershare | Upgrade to Outperform from Neutral | Credit Suisse |
| CRN | Coronado Global Resources | Upgrade to Outperform from Neutral | Macquarie |
| DMP | Domino's Pizza Enterprises | Downgrade to Underperform from Neutral | Macquarie |
| EVN | Evolution Mining | Upgrade to Outperform from Neutral | Credit Suisse |
| HUB | HUB24 | Downgrade to Neutral from Outperform | Macquarie |
| Downgrade to Hold from Add | Morgans | ||
| OSH | Oil Search | Upgrade to Neutral from Underperform | Credit Suisse |
| RHC | Ramsay Health Care | Upgrade to Buy from Accumulate | Ord Minnett |
| STO | Santos | Upgrade to Buy from Accumulate | Ord Minnett |
| WSA | Western Areas | Upgrade to Outperform from Neutral | Macquarie |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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CHARTS
For more info SHARE ANALYSIS: ALQ - ALS LIMITED
For more info SHARE ANALYSIS: CSL - CSL LIMITED
For more info SHARE ANALYSIS: CWN - CROWN RESORTS LIMITED
For more info SHARE ANALYSIS: EVN - EVOLUTION MINING LIMITED
For more info SHARE ANALYSIS: FMG - FORTESCUE LIMITED
For more info SHARE ANALYSIS: JHG - JANUS HENDERSON GROUP PLC
For more info SHARE ANALYSIS: MIN - MINERAL RESOURCES LIMITED
For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED
For more info SHARE ANALYSIS: NIC - NICKEL INDUSTRIES LIMITED
For more info SHARE ANALYSIS: NST - NORTHERN STAR RESOURCES LIMITED
For more info SHARE ANALYSIS: ORG - ORIGIN ENERGY LIMITED
For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED
For more info SHARE ANALYSIS: SGR - STAR ENTERTAINMENT GROUP LIMITED
For more info SHARE ANALYSIS: SLR - SILVER LAKE RESOURCES LIMITED
For more info SHARE ANALYSIS: STO - SANTOS LIMITED
For more info SHARE ANALYSIS: TPW - TEMPLE & WEBSTER GROUP LIMITED
For more info SHARE ANALYSIS: URW - UNIBAIL-RODAMCO-WESTFIELD SE