Daily Market Reports | May 19 2021
This story features PLS GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: PLS
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 6982.00 | – 79.00 | – 1.12% |
| S&P ASX 200 | 7066.00 | + 42.40 | 0.60% |
| S&P500 | 4127.83 | – 35.46 | – 0.85% |
| Nasdaq Comp | 13303.64 | – 75.41 | – 0.56% |
| DJIA | 34060.66 | – 267.13 | – 0.78% |
| S&P500 VIX | 21.34 | + 1.62 | 8.22% |
| US 10-year yield | 1.64 | + 0.00 | 0.12% |
| USD Index | 89.79 | – 0.43 | – 0.48% |
| FTSE100 | 7034.24 | + 1.39 | 0.02% |
| DAX30 | 15386.58 | – 10.04 | – 0.07% |
By Greg Peel
Resourceful
A rebound in the iron ore price, a big jump in gold, renewed strength in base metal prices and further gains in oil were the primary factors behind a 42 point rise in the ASX200 yesterday, with some help from the banks.
It all happened in the first half hour, and nothing much happened thereafter. If you weren’t on you missed out. Volumes were to the low side. All academic nonetheless, given the futures are down -79 points this morning.
Which, if accurate, would take the index back down through 7000.
Materials and energy were the best performing sectors – both rising 1.6%. The big iron miners had strong sessions, lithium miner Pilbara Minerals ((PLS)) rose 7.9%, copper/gold miner OZ Minerals ((OZL)) rose 6.4%, and the top five index winners were rounded out by gold miners.
Not all gold miners had a good day though. After cutting production guidance and increasing cost guidance, St Barbara ((SBM)) fell -9.0% to be the biggest loser.
James Hardie ((JHX)) reported earnings, disappointed with its dividend and warned of raw material inflation, and fell -4.5%. Building materials are also materials, sector-wise.
The banks did their part, up 0.8% on what appears at present to be simple momentum, although Commonwealth Bank ((CBA)) did baulk at the $100 mark. Macquarie Group ((MQG)) rebounded 2.3% after 30%-owned Nuix ((NXL)) shot back up 11.5% after Monday’s big fall, on reassurance from the Nuix CEO.
Property was the worst performer in falling -0.7%, followed by industrials (-0.5%), utilities (-0.5%) and healthcare (-0.2%), with staples up a mere 0.1%. This appears to be a switch out of defensives, except telcos rose 0.7%.
The RBA minutes, released yesterday, suggested no change to policy as expected. There may be no change in June either, as the board has signalled the July meeting as decision time whether or not to roll over QE.
Late Selling
After a solid rebound on Friday night, Wall Street fell early on Monday night before recovering the bulk of losses, then opened higher last night before drifting away in the afternoon. There followed a wave of late selling.
The long tail of US earnings season brings retailers to the fore, and last night Dow components Walmart (Dow) and Home Depot (Dow) reported along with Macy’s. All three blew forecasts away. Only Walmart saw buying in response (2.2%). Home Depot fell -1.0% and Macy’s fell -0.4%.
Not big numbers, but emblematic of this quarter’s result season. If blow-away earnings results can’t push stocks higher, what can?
US housing starts fell -9.5% in April from March. The US housing market has been booming since late last year.
The Nasdaq had been outperforming for most of the session until late selling came in indiscriminately, leading to relative even falls among the major indices by the close. Most of that selling was in the final half hour, and was rather aggressive.
Among the heavily sold stocks was AT&T (Dow), down another -5.8% after falling on Monday night on merger news. AT&T had been paying a 6% yield, which in US terms, for a mega-cap, is enormous. But the company will now cut dividends to support the merger, given the balance sheet remains loaded with debt.
The dividend yield, say commentators, is the only reason you’d hold the stock.
It’s hard to find a Wall Street commentator that is not longer-term bullish at the moment, but it’s also hard to find one who is not anticipating a more substantial, “healthy” pullback, of -10% or even -15%.
This despite forecast June quarter earnings growth for the S&P500 sitting around 30%. Clearly commentators continue to see price/earnings ratios as stretched.
The VIX volatility index had fallen back to 18 on Friday night, implying Wall Street had again relaxed. Last night it jumped up to 21.
The aggressive late sell-off may go some way to explaining why our futures are down a full -1.1% this morning to the S&P500’s -0.9%. Little else does.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1869.10 | + 2.70 | 0.14% |
| Silver (oz) | 28.20 | + 0.05 | 0.18% |
| Copper (lb) | 4.73 | + 0.07 | 1.49% |
| Aluminium (lb) | 1.11 | – 0.00 | – 0.13% |
| Lead (lb) | 1.00 | + 0.00 | 0.47% |
| Nickel (lb) | 8.12 | + 0.11 | 1.36% |
| Zinc (lb) | 1.38 | + 0.02 | 1.15% |
| West Texas Crude | 65.49 | – 0.78 | – 1.18% |
| Brent Crude | 68.49 | – 1.08 | – 1.55% |
| Iron Ore (t) | 223.75 | + 6.75 | 3.11% |
This week’s weak retail sales number set off selling in the US dollar, and last night’s housing starts number did not change any minds. The dollar index is down another -0.5%, but fortunately the Aussie has only countered with +0.2% to US$0.7789.
The weaker greenback is continuing to support commodity prices in general, demand aside, while iron ore’s comeback took another leg up.
Oil prices bucked the trend, attributed to news suggesting the Iran nuclear talks – reinstated after the US administration change – were progressing well. Peace with Iran reduces the prospect of any retaliation via oil exports.
After Monday’s night’s jump, and despite the weaker greenback, gold had a rest.
Today
The SPI Overnight closed down -79 points or -1.1%.
Australia’s March quarter wage price index is out today.
The minutes of the last Fed meeting are due tonight.
Webjet ((WEB)), United Malt Group ((UMG)) and Serko ((SKO)) report earnings today.
Eagers Automotive ((APE)), G8 Education ((GEM)) and Dalrymple Bay Infrastructure ((DBI)) hold AGMs, and Appen ((APX)) hosts an investor day.
Auckland International Airport ((AIA)) reports April traffic stats.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ALD | Ampol | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| APA | APA | Downgrade to Neutral from Outperform | Macquarie |
| CAR | Carsales.Com | Upgrade to Add from Hold | Morgans |
| CPU | Computershare | Upgrade to Hold from Lighten | Ord Minnett |
| CSR | CSR | Downgrade to Neutral from Outperform | Credit Suisse |
| CWN | Crown Resorts | Upgrade to Buy from Hold | Ord Minnett |
| FCT | Firstwave Cloud Technology | Upgrade to Speculative Buy from Hold | Morgans |
| GNC | GrainCorp | Downgrade to Neutral from Outperform | Credit Suisse |
| NEA | Nearmap | Downgrade to Neutral from Buy | Citi |
| NHC | New Hope Corp | Upgrade to Outperform from Neutral | Credit Suisse |
| ORI | Orica | Upgrade to Buy from Neutral | Citi |
| S32 | South32 | Downgrade to Neutral from Outperform | Credit Suisse |
| Downgrade to Neutral from Outperform | Macquarie | ||
| SUN | Suncorp | Upgrade to Buy from Neutral | Citi |
| Upgrade to Add from Hold | Morgans | ||
| TPG | TPG Telecom | Upgrade to Buy from Hold | Ord Minnett |
| TWE | Treasury Wine Estates | Upgrade to Add from Hold | Morgans |
| WHC | Whitehaven Coal | Upgrade to Outperform from Neutral | Credit Suisse |
| Upgrade to Outperform from Neutral | Macquarie | ||
| WSA | Western Areas | Downgrade to Neutral from Outperform | Credit Suisse |
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: AIA - AUCKLAND INTERNATIONAL AIRPORT LIMITED
For more info SHARE ANALYSIS: APE - EAGERS AUTOMOTIVE LIMITED
For more info SHARE ANALYSIS: APX - APPEN LIMITED
For more info SHARE ANALYSIS: CBA - COMMONWEALTH BANK OF AUSTRALIA
For more info SHARE ANALYSIS: DBI - DALRYMPLE BAY INFRASTRUCTURE LIMITED
For more info SHARE ANALYSIS: GEM - G8 EDUCATION LIMITED
For more info SHARE ANALYSIS: JHX - JAMES HARDIE INDUSTRIES PLC
For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED
For more info SHARE ANALYSIS: NXL - NUIX LIMITED
For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED
For more info SHARE ANALYSIS: PLS - PLS GROUP LIMITED
For more info SHARE ANALYSIS: SBM - ST. BARBARA LIMITED
For more info SHARE ANALYSIS: SKO - SERKO LIMITED
For more info SHARE ANALYSIS: UMG - UNITED MALT GROUP LIMITED
For more info SHARE ANALYSIS: WEB - WEB TRAVEL GROUP LIMITED