Daily Market Reports | Mar 10 2021
This story features INSURANCE AUSTRALIA GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: IAG
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Mar) | 6794.00 | + 18.00 | 0.27% |
| S&P ASX 200 | 6771.20 | + 31.60 | 0.47% |
| S&P500 | 3875.44 | + 54.09 | 1.42% |
| Nasdaq Comp | 13073.82 | + 464.66 | 3.69% |
| DJIA | 31832.74 | + 30.30 | 0.10% |
| S&P500 VIX | 24.03 | – 1.44 | – 5.65% |
| US 10-year yield | 1.55 | – 0.05 | – 3.13% |
| USD Index | 91.94 | – 0.44 | – 0.48% |
| FTSE100 | 6730.34 | + 11.21 | 0.17% |
| DAX30 | 14437.94 | + 57.03 | 0.40% |
By Greg Peel
Rinse & Repeat
Someone sure doesn’t like the ASX200 over 6800. We recall that on Monday the index shot up 120 points from the open on positive US news but at lunchtime was slapped down hard to close up only 28. It was not just a typical rollover from an over-exuberant opening.
Traders stood back and allowed it to happen – no point in getting bowled over – and waited to yesterday morning to set things to right. Despite an overnight fall in the S&P500, the ASX200 opened to the upside once more and was up 70 points at midday.
Then bang – straight down another big -60 point hole. It seems the trigger in both cases was the index sticking its head above 6800. Frustrated traders did nevertheless fight back somewhat late in the session to provide for a +30 close.
There was admittedly one exogenous factor yesterday. The iron ore price started tanking and eventually closed down over -10%. This flipped the big miners from positive into negative during the session. The materials sector did manage to hang in there for a mere -0.1% close.
Energy fell -0.5% on a -2% fall overnight in oil prices while technology was the worst performer, as it typically is after a bad night for the Nasdaq.
Hang on to your hats today, this will no doubt reverse big-time today. But good luck getting on.
The banks (+1.0%) were yet again the driving force and do my eyes deceive? Healthcare rose 1.0% after at least a week’s worth of being carted. The Aussie did nothing but rebound all day.
It could have been a different story for financials when Insurance Australia Group ((IAG)) plunged -10% before calling a trading halt. The trigger was supply chain finance company Greensills filing for bankruptcy in the UK, and the fact IAG is its insurer.
But it isn’t. IAG used the trading halt to explain it had sold the business unit that held the Greensills policy to the Japanese back in 2019. Crisis averted, but IAG still closed down -4.0%.
Consumer discretionary had a solid day (+1.0%) on the back of strength in “comeback kids” or the so-called value trade. Corporate Travel Management ((CTD)), UR Westfield ((URW)) and Appen ((APX)) all appeared in the top five winners.
Top winner was Vocus Group ((VOC)), which jumped 8.6% as a Macquarie-led consortium upped the ante on its takeover bid.
Yet every day brings a new swing or roundabout on Wall Street, and last night was certainly no exception. The S&P500 closed up 1.4%, but it’s all about Big Tech. Meanwhile, metals prices have been taken to the cleaners – all of copper, nickel and iron ore are down solidly – with the offset of a bounce-back for gold.
Put it together and our futures are up 18 points this morning.
Vehicle Reversing
Call me the accidental guru but I did note yesterday that questions were now being asked on Wall Street as to whether the growth-to-value rotation, at least in the short term, had gotten a bit out of hand. Well whaddya know?
Two factors came together last night: (1) the Nasdaq had on Monday night hit the -10% correction level and (2) last night the US ten-year bond yield fell back -5 basis points to 1.55%. That was enough.
The Nasdaq leapt 3.7%. Tesla, which I noted yesterday had been down -37% from its high, jumped back 18%. Tech leviathans Apple and Amazon had been down around -20% and they both jumped 4%.
It wasn’t a complete reversal of the rotation trade, given the Dow did actually rise on the day, but only by 0.1%. That was mostly down to the Dow’s “biggest” (by nominal share price) stock, Boeing, rising 2.9% after reporting its first net positive aircraft orders since the 737 Max disasters.
Otherwise the Dow would have closed in the red.
The turnaround came with Biden’s stimulus bill back in the House and expectations of his signature being on it before week’s end. Current unemployment support expires on Sunday. So despite this “good” but potentially inflationary news, Wall Street decided last night that both US bonds and the Nasdaq had been oversold.
The momo algos would have had a field day. Mind you, the momentum ETFs now have a major dilemma when they get to their end-of-quarter rebalancing. As of Monday night, they would have been forced to bail out of growth and into value as that’s where the momentum has been. Now what?
That depends whether last night was just a one-day wonder or whether a bit more mean reversion is required before Wall Street settles back into some sort of stable routine.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1719.10 | + 36.90 | 2.19% |
| Silver (oz) | 26.00 | + 0.85 | 3.38% |
| Copper (lb) | 3.99 | – 0.06 | – 1.47% |
| Aluminium (lb) | 0.97 | – 0.01 | – 1.09% |
| Lead (lb) | 0.89 | – 0.01 | – 1.51% |
| Nickel (lb) | 7.51 | – 0.25 | – 3.20% |
| Zinc (lb) | 1.25 | – 0.01 | – 1.02% |
| West Texas Crude | 64.06 | – 0.59 | – 0.91% |
| Brent Crude | 67.48 | – 0.41 | – 0.60% |
| Iron Ore (t) | 163.60 | – 10.55 | – 6.06% |
If bonds and growth were oversold, it seems metals and bulks have been overbought. As US bond yields fell last night so did the US dollar, yet so too did base metal prices and the iron ore price, which is the wrong way round.
It is the perfect playground for gold. Maybe gold had been oversold as well.
So it seems last night was a bit of a reversal night across all markets, except the oils, which have their own issues to deal with.
Unfortunately that means the Aussie is back up 1.0% at US$0.7726.
Today
The SPI Overnight closed up 18 points or 0.3%.
We saw a very positive NAB business confidence survey yesterday and today it’s Westpac consumer confidence.
The RBA governor will speak today.
The US will see CPI data. Could be fun.
More ex-divs today, and Centuria Industrial REIT ((CIP)) holds an EGM.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ALQ | ALS Ltd | Upgrade to Hold from Lighten | Ord Minnett |
| ARB | ARB Corp | Upgrade to Accumulate from Hold | Ord Minnett |
| MFG | Magellan Financial Group | Downgrade to Neutral from Outperform | Macquarie |
| NCM | Newcrest Mining | Upgrade to Outperform from Neutral | Macquarie |
| PAN | Panoramic Resources | Upgrade to Outperform from Neutral | Macquarie |
| Upgrade to Add from Hold | Morgans | ||
| SM1 | Synlait Milk | Downgrade to Reduce from Hold | Morgans |
| WPL | Woodside Petroleum | Upgrade to Buy from Hold | 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: APX - APPEN LIMITED
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For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED
For more info SHARE ANALYSIS: IAG - INSURANCE AUSTRALIA GROUP LIMITED
For more info SHARE ANALYSIS: URW - UNIBAIL-RODAMCO-WESTFIELD SE