Daily Market Reports | Mar 11 2021
This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Mar) | 6742.00 | + 34.00 | 0.51% |
| S&P ASX 200 | 6714.10 | – 57.10 | – 0.84% |
| S&P500 | 3898.81 | + 23.37 | 0.60% |
| Nasdaq Comp | 13068.83 | – 4.99 | – 0.04% |
| DJIA | 32297.02 | + 464.28 | 1.46% |
| S&P500 VIX | 22.56 | – 1.47 | – 6.12% |
| US 10-year yield | 1.52 | – 0.03 | – 1.68% |
| USD Index | 91.82 | – 0.12 | – 0.13% |
| FTSE100 | 6725.60 | – 4.74 | – 0.07% |
| DAX30 | 14540.25 | + 102.31 | 0.71% |
By Greg Peel
Big Caps, Big Falls
For the third day in a row, the ASX200 poked its head above 6800 and promptly had it cut off. This time it wasn’t someone hitting a sell button at lunchtime. This time it only took twenty minutes.
The index opened up 35 points from the bell – a little more aggressively than the futures had suggested – on the back of strength on Wall Street. But given that strength was all about Big Tech, and extraordinary rebounds for the likes of Tesla, the correlation to our market was tenuous.
The index then proceeded to grind lower all session, not in the sharp fashion that had been the feature of the prior two, and was only down -36 points with a minute to go. Someone slammed the closing settlement to the tune of -21 extra points.
Technology was the standout winner on the day as was easily predictable. It rose 3.2% to the Nasdaq’s 3.7% overnight, as Australia’s FANGs and EV manufacturers led the way. Well, Afterpay ((APT)) bounced back 7.5%. That’s all you need.
While Afterpay may by now be top 20-worthy, it still can’t stand up against the big miners and banks. It was also predictable that following a -10% drop in the iron ore price overnight, along with falls in base metals, the materials sector dropped -2.5%. It’s not often you’ll see Fortescue Metals ((FMG)) posting the worst index performance on the day (-8.3%), with Rio Tinto ((RIO)) in tow (-5.5%).
It would have been a lot worse for materials were it not for an offsetting rebound in the gold price, ensuring three of the top five winners on the day were gold miners.
The Nasdaq had rebounded hard overnight thanks to a rare drop in US bond yields. They dropped again last night – more on that below. But Aussie rates have also been on a tear in tandem, until yesterday the RBA governor was back on the attack. Not with QE this time, but with:
“Our judgement is that we are unlikely to see wages growth consistent with the inflation target before 2024. This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024”.
Philip Lowe’s address to an AFR business summit, along with falls overnight in US yields, had the Aussie ten-year down -7 basis points to 1.70%. US banks have been resurgent since November on rising yields, and Australian banks have not been far behind, proving a major force in recent stock market sessions.
The banks fell -1.3% yesterday. On the flipside, industrials, which benefit from lower rates, rose 0.9%.
It wasn’t all text book nonetheless, as REITs are also lower rate beneficiaries and that sector fell -1.1%. Similarly, oil prices fell only modestly overnight yet energy dropped a full -3.0%.
So it was all a bit of a mish-mash on an intraday basis, and the current day to day mish-mash is set to continue today. With Wall Street strong once more, our futures are up 34 points.
Moving On
The US headline CPI rose 0.4% in February to a 1.7% annual rate. The core CPI rose 0.1% to 1.3%. These are not numbers suggesting inflation has now arrived. Indeed, they were a little short of expectations.
It should have been good news for Big Tech, but after jumping 3.7% on Tuesday night it appears the Nasdaq was a bit stiff and sore when it got out of bed last night so decided just to have a quiet one. The Dow had enjoyed a bit of a rest on Tuesday night so it took the baton instead.
We could say Tuesday night’s rotation-reversal lasted all of one session but the Nasdaq was not sold off to counter the Dow’s gain.
And the bulk of those 464 Dow points is attributable to just three stocks – Boeing, Goldman Sachs and Caterpillar. Boeing had already jumped up the night before on news of positive order flow while Caterpillar has, since the November election, become the new high flyer.
There are further clues as to why in the S&P500’s performance last night.
The energy sector was the strongest performer on modest gains in oil prices, and tagging long were materials, despite benign movement in metals. Industrials also had a solid session while other sectors, banks being the exception, did little.
The House passed the Senate-amended stimulus bill last night, which is a clear positive. But there was little doubt it would. The passage did not spark another jump in bond yields, rather the ten-year closed down -3bps to 1.52%.
The US Treasury auctioned ten-year bonds last night and while no one was exactly knocked down in the rush, the auction was put away, unlike a seven-year auction the week before.
I would wager that what Wall Street is now looking ahead to is not this Biden stimulus bill now passed (just needs a signature) but rather the next step down the policy path – infrastructure spending.
Many have argued, and Treasury Secretary Janet Yellen is one of them, that Biden’s bill is not stimulus at all, rather a rescue package. Infrastructure spending is nevertheless undoubtedly stimulus.
Which poses an interesting question.
The Republicans had fought Biden’s bill tooth and nail for being way too big, and now an infrastructure bill is afoot that may be even bigger. The bill just passed doesn’t create jobs, but the next one will. Trump had always trumpeted his plans for infrastructure spending, but never got around to it.
What stance do Republicans now take?
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1724.40 | + 5.30 | 0.31% |
| Silver (oz) | 26.15 | + 0.15 | 0.58% |
| Copper (lb) | 4.03 | + 0.04 | 0.96% |
| Aluminium (lb) | 0.97 | + 0.00 | 0.06% |
| Lead (lb) | 0.88 | – 0.01 | – 1.51% |
| Nickel (lb) | 7.51 | + 0.00 | 0.04% |
| Zinc (lb) | 1.24 | – 0.00 | – 0.38% |
| West Texas Crude | 64.64 | + 0.58 | 0.91% |
| Brent Crude | 68.11 | + 0.63 | 0.93% |
| Iron Ore (t) | 164.70 | + 1.10 | 0.67% |
Nothing much to highlight other than both iron ore and copper recovering some ground.
The Aussie is up another 0.1% at US$0.7737.
Today
The SPI Overnight closed up 34 points or 0.5%.
The ECB holds a policy meeting tonight.
OZ Minerals ((OZL)) and South32 ((S32)) are among those stocks going ex today.
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 |
| CSL | CSL | Upgrade to Buy from Neutral | Citi |
| 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 |
| QAN | Qantas Airways | Upgrade to Buy from Hold | Ord Minnett |
| SLK | Sealink Travel | Upgrade to Outperform from Neutral | Macquarie |
| WPL | Woodside Petroleum | Upgrade to Buy from Hold | Ord Minnett |
| WSA | Western Areas | Downgrade to Hold from Add | Morgans |
| Z1P | Zip Co | Downgrade to Sell from Neutral | UBS |
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: FMG - FORTESCUE LIMITED
For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED
For more info SHARE ANALYSIS: S32 - SOUTH32 LIMITED