Daily Market Reports | Jun 02 2021
This story features WHITEHAVEN COAL LIMITED, and other companies. For more info SHARE ANALYSIS: WHC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7159.00 | + 12.00 | 0.17% |
| S&P ASX 200 | 7142.60 | – 19.00 | – 0.27% |
| S&P500 | 4202.04 | – 2.07 | – 0.05% |
| Nasdaq Comp | 13736.48 | – 12.26 | – 0.09% |
| DJIA | 34575.31 | + 45.86 | 0.13% |
| S&P500 VIX | 17.90 | + 1.14 | 6.80% |
| US 10-year yield | 1.62 | + 0.03 | 2.15% |
| USD Index | 89.92 | + 0.07 | 0.08% |
| FTSE100 | 7080.46 | + 57.85 | 0.82% |
| DAX30 | 15567.36 | + 146.23 | 0.95% |
By Greg Peel
Wobbly Start
The ASX200 was down -44 points to 11.30am yesterday to start the month on an uncertain note, but it appears the release of the current account numbers sparked some excitement. The index was back to square post the RBA statement at 2.30pm release but drifted off to the close.
Australia’s current account surplus (not to be confused with the budget surplus) hit a record high in the March quarter, thanks to a 7% increase in exports beating a 3% increase in imports. Economists have been feverishly upgrading their forecasts for today’s GDP result. The market had been at a consensus 1.1% quarterly growth pre the lead-in numbers but ANZ Bank, for one, has now lifted its forecast to 2.1%.
No surprises were expected from the RBA so it’s all about the subtleties in the language.
The May statement said the board is “prepared to undertake further bond purchases” after the second tranche rolls off in September. Yesterday’s statement said the board “will consider further bond purchases”. Economists still expect QE3, but maybe it won’t be another full $100bn.
That would be a “taper”. The decision will be announced at the July meeting.
In other economic news, building approvals fell back -8.6% in April but that followed a 17.4% jump in February. It’s all about lumpy apartment numbers up and down. Otherwise, house approvals rose 4.6%.
National average house prices rose 10.6% year on year in May to mark the strongest growth rate in eleven years. Sydney prices rose by the most in 33 years. The smallest capital city rise was in Melbourne. No prizes.
In the stock market, only energy (+1.3%) and materials (0.3%) managed to close higher on the day. The biggest falls were reserved for the banks and healthcare (both -0.7%) and telcos (-0.5%). It is clear investors are grappling with allocations as we approach EOFY. Value or growth? Inflation protection?
We should not read too much into the last couple of sessions of end-month and new month. Looks like a lot of shuffling before any trend returns.
Looks pretty definite now that Victoria’s lockdown will be extended, but the futures are up 12 points this morning following a flat Wall Street so fear has not taken over as yet.
Whitehaven Coal ((WHC)) was the standout index winner yesterday with a 5.7% gain on a big jump in thermal coal prices. To the downside, Bega Cheese ((BGA)) was the fifth biggest loser with -3.8%, having risen 3.5% on Monday.
Outside of the index, Infomedia ((IFM)) stood out with a 12.9% gain on a guidance update post-acquisition.
Stand by for the GDP.
Box Office Bargain
So-called “meme” stock AMC Entertainment doubled in value last week. Last night the cinema chain raised $230m in new capital (I mean, why wouldn’t you?), all of which was placed with one hedge fund at above Friday night’s closing price.
Typically a capital raise, implying dilution, would weigh on a stock price, but for the Reddits it was another signal to buy. The stock rose another 23% despite said hedge fund flipping the entire parcel on the day for a sly US$30m profit.
Who is buying this stuff? That’s the question everyone on Wall Street is scratching their heads about. It’s not about a short squeeze anymore – everyone’s too bloody scared to short it.
The problem is that when such madness occurs Wall Street gets nervous, remembering the big January sell-off when GameStop, and AMC and others, first went parabolic. Back then there were huge shorts on these stocks, and those shorters (including Archegos) had to sell everything else to cover losses. The Dow opened up over 300 points last night and spent the rest of the session reducing that gain.
In the end, Wall Street closed flat.
The early jump was attributed to two factors. Firstly, while America was on holiday on Monday night, the Stoxx Europe 600 index hit a new all-time high. Europe is finally getting covid under control, unlike Asia, or other countries in the Asian region we might know of.
Secondly, the US manufacturing PMI rose to 61.2 in May from 60.7, indicating the pace of recovery is showing no sign of abating.
But dig down, and the picture is not quite as rosy. The increase in pace was due to new orders, which is good, but met by lower production and hiring. That’s not so good, as it implies inflation.
Transitory or not? Remember there are still some 8 million (as of April) Americans out of work, and 8 million job vacancies left unfilled. May jobs numbers are out this week.
Banks and energy were the outstanding performers among sectors last night. The US ten-year yield rose 3 basis points to 1.61% and oil prices hit their highest levels since 2018.
Just as well central banks don’t count oil prices in their inflation assessments.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1899.50 | – 7.60 | – 0.40% |
| Silver (oz) | 27.88 | – 0.17 | – 0.61% |
| Copper (lb) | 4.61 | + 0.00 | 0.10% |
| Aluminium (lb) | 1.09 | + 0.01 | 0.56% |
| Lead (lb) | 1.00 | + 0.00 | 0.46% |
| Nickel (lb) | 8.07 | + 0.00 | 0.01% |
| Zinc (lb) | 1.38 | – 0.00 | – 0.02% |
| West Texas Crude | 67.72 | + 0.81 | 1.21% |
| Brent Crude | 70.63 | + 1.31 | 1.89% |
| Iron Ore (t) | 209.10 | + 10.35 | 5.21% |
Oil prices rose for two reasons.
Firstly, OPEC-Plus agreed to increase production at last night’s meeting. The reason this is good news is the production increase was already flagged weeks ago, was back then not as bad as expected, and the fact last night saw no change to that number was a positive.
Secondly, the US-Iran talks on a new nuclear deal had appeared to be moving swiftly to a positive conclusion (implying a return to Iranian oil exports) but now look to have stalled. This month brings a general election in Iran, and the incumbent has reached his allowable term. It looks like the talks might have to start all over again.
You can’t keep a good iron ore price down. Not even if you’re a dictatorship.
Gold might need to do some more work at US$1900/oz.
The Aussie is up 0.3% at US$0.7755.
Today
The SPI Overnight closed up 12 points.
GDP out late morning.
The Fed Beige Book is due tonight.
Worley ((WOR)) hosts an investor day.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| CGC | Costa Group | Upgrade to Outperform from Neutral | Credit Suisse |
| Downgrade to Hold from Add | Morgans | ||
| CIA | Champion Iron | Upgrade to Neutral from Sell | Citi |
| FPH | Fisher & Paykel Healthcare | Downgrade to Neutral from Outperform | Credit Suisse |
| IDX | Integral Diagnostics | Downgrade to Accumulate from Buy | Ord Minnett |
| NWS | News Corp | Downgrade to Neutral from Buy | UBS |
| XRO | Xero | Neutral | Citi |
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CHARTS
For more info SHARE ANALYSIS: BGA - BEGA CHEESE LIMITED
For more info SHARE ANALYSIS: IFM - INFOMEDIA LIMITED
For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED
For more info SHARE ANALYSIS: WOR - WORLEY LIMITED