Daily Market Reports | Mar 05 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 (Mar) | 6736.00 | – 17.00 | – 0.25% |
| S&P ASX 200 | 6760.70 | – 57.30 | – 0.84% |
| S&P500 | 3768.47 | – 51.25 | – 1.34% |
| Nasdaq Comp | 12723.47 | – 274.28 | – 2.11% |
| DJIA | 30924.14 | – 345.95 | – 1.11% |
| S&P500 VIX | 28.57 | + 1.90 | 7.12% |
| US 10-year yield | 1.55 | + 0.08 | 5.44% |
| USD Index | 91.64 | + 0.72 | 0.79% |
| FTSE100 | 6650.88 | – 24.59 | – 0.37% |
| DAX30 | 14056.34 | – 23.69 | – 0.17% |
By Greg Peel
Dividend Dive
The ASX200 closed down -0.8% yesterday, led by healthcare (-3.5%), materials (-2.6%) and staples (-1.6%). The moves in these three sectors had two things in common.
CSL ((CSL)), BHP Group ((BHP)), Rio Tinto ((RIO)) and Woolworths ((WOW)) all went ex-dividend on the open. And all of those dividend dollar values were sizeable.
For the iron ore miners, dividends were historically large in yield terms. The other two are not overly big yield payers but they are very big companies, so the dollar values are still significant.
The ex-divs would explain why the ASX200 was down -50 points in the first half hour but then stalled. A wave of selling then hit but only briefly, before the index was back at the ex-div level (effectively flat). Did someone forget to tell the computers how dividends work?
Whether or not, from lunchtime the selling resumed.
The effect was one of selling these big names down further than their ex-divs suggested. CSL fell -4.2%. But sector colleagues Cochlear ((COH)) and Ramsay Health Care ((RHC)) fell -3.4% and -3.5%, reflecting the pressure on offshore earners from rising bond yields and the strong Aussie dollar.
The same could be said for the miners, despite another overnight gain in the iron ore price. The -2.6% for the materials sector was also exacerbated by another big fall in the gold price, and in nickel, which had IGO ((IGO)) falling -7.9% to be the biggest index loser on the day.
All other sectors posted falls as well, but for two. If it were not for a 1.1% gain in the banks, which benefit from rising bond yields, things would have looked quite nasty indeed. Property rose 0.8%, as REITs begin to come back from the covid brink.
Technology fell -1.5% as one might expect any time the Nasdaq drops, despite Computershare ((CPU)) topping the winners’ board yesterday with a 4.6% gain, being another beneficiary of rising yields. For a very long time Computershare dwarfed all other sector components in market cap. Then along came BNPL.
Australia posted a record trade surplus in January. Resources exports rose 9.7% thanks to iron ore (14.7%) and LNG (7.9%). Service exports fell -2.9% thanks to travel services falling -9.7% which, ANZ Bank economists suggests, represents foreign students heading home having completed their degrees.
A record trade surplus should have been fodder for the Aussie to go higher still, but it didn’t. And indeed thanks to Jay Powell, it’s down -0.8% over 24 hours.
Powell’s comments meant Wall Street had the wobbles again last night, sending our futures down another -17 this morning, but that’s not a lot under the circumstances.
Fortunately today’s ex-div list is modest. And oil prices have rather shot up overnight.
No Way RBA
“I would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals,” said Fed chair Jerome Powell last night, around early afternoon. He also acknowledged that as the US economy re-opened there would be upward pressure on prices.
But he also said the Fed would be “patient” with higher inflation, saying it was likely to be a “one time” effect and not price gains that continue year-after-year.
We recall that last week Wall Street enjoyed one almighty rally amidst what had been rising bond yields when the RBA stepped in to stamp on Australia’s soaring ten-year. The expectation was that the Fed would do the same. But no.
The Fed remains happy to let inflation run “hot” for a bit, reflecting a reopening surge, believing it would soon settle back down again. It has been noted that in the swift recovery out of the depths of the GFC, US core inflation ran up from a low of 0.6% to a high of 2.4% before falling back again. 2.4% is hardly crippling, and in fact a bit of inflation is ultimately good for stock markets.
Not last night though. Wall Street had been stable all morning after the week’s solid falls right up until Powell opened his mouth. Then the US ten-year jumped 8 basis points to 1.55%, the Nasdaq went back into free-fall, and the Dow fell over -700 points.
Buyers did take up the opportunity, with the Nasdaq close to “correction” (-10%) territory, but at the close the Dow was still down -1% and the Nasdaq -2%.
Once again it were the chip makers, overvalued stay-at-homes and other previous high-flyers such as Tesla (now in the S&P) that felt the brunt. However, last night most of the big names – FANG & Co – remained steady to slightly positive, reflecting some bargain hunting.
Any “correction”, if only nominal, will make investors sit up and take notice. It has been pointed out, for example, that chip makers are being trashed (from overvaluation) despite there being a global deficit of semi-conductors.
But the Elliot wave surfers also suggest that were the Nasdaq to head into correction territory and break the uptrend beginning a year ago (covid bottom), technically the flood gates could open.
So Wall Street is somewhat poised.
Notwithstanding progress of Biden’s stimulus bill has halted in the Senate with the Capitol now in security lockdown. Once bitten twice shy.
One sector nevertheless clearly bucked the trend last night. Energy rose 2.5%.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1694.90 | – 20.00 | – 1.17% |
| Silver (oz) | 25.29 | – 0.90 | – 3.44% |
| Copper (lb) | 4.08 | – 0.09 | – 2.16% |
| Aluminium (lb) | 0.97 | – 0.02 | – 2.42% |
| Lead (lb) | 0.91 | – 0.02 | – 2.06% |
| Nickel (lb) | 7.57 | – 0.34 | – 4.32% |
| Zinc (lb) | 1.22 | – 0.03 | – 2.55% |
| West Texas Crude | 64.13 | + 2.83 | 4.62% |
| Brent Crude | 67.05 | + 2.93 | 4.57% |
| Iron Ore (t) | 178.45 | + 1.00 | 0.56% |
OPEC-Plus decided last night not to wind back production curtailments, rather keep them in place at least until the end of April. Russia and Kazakhstan will be nevertheless granted small production increases to cope with seasonal fluctuations.
It’s not quite the usual six-month timescale OPEC-Plus agrees to at their bi-annual meetings, but clearly it has erased fears for now. April was when the cartel was next expected to meet anyway before holding this interim meeting. The fact they were holding an interim meeting is why traders were a bit nervous.
The effect of Jay Powell not indicating any potential of the Fed stepping into bond markets has the US dollar index up 0.8%, which was not good news for metals prices.
Except iron ore, which laughs in the face of the greenback.
The offset is a matching -0.8% fall in the Aussie to US$0.7730.
Today
The SPI Overnight closed down -17 points or -0.3%.
US jobs numbers are out tonight, with bond markets on edge.
Ampol ((ALD)) and Sims ((SGM)) are the ex-divs to watch out for today.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| DTC | Damstra Holdings | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| EVN | Evolution Mining | Upgrade to Buy from Neutral | Citi |
| ORI | Orica | Downgrade to Neutral from Buy | UBS |
| VOL | Victory Offices | Downgrade to Hold from Buy | Ord Minnett |
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: ALD - AMPOL LIMITED
For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED
For more info SHARE ANALYSIS: COH - COCHLEAR LIMITED
For more info SHARE ANALYSIS: CPU - COMPUTERSHARE LIMITED
For more info SHARE ANALYSIS: CSL - CSL LIMITED
For more info SHARE ANALYSIS: IGO - IGO LIMITED
For more info SHARE ANALYSIS: RHC - RAMSAY HEALTH CARE LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED
For more info SHARE ANALYSIS: SGM - SIMS LIMITED
For more info SHARE ANALYSIS: WOW - WOOLWORTHS GROUP LIMITED