Daily Market Reports | Jun 28 2021
This story features WOOLWORTHS GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: WOW
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7212.00 | + 5.00 | 0.07% |
| S&P ASX 200 | 7308.00 | + 32.70 | 0.45% |
| S&P500 | 4280.70 | + 14.21 | 0.33% |
| Nasdaq Comp | 14360.39 | – 9.32 | – 0.06% |
| DJIA | 34433.84 | + 237.02 | 0.69% |
| S&P500 VIX | 15.62 | – 0.35 | – 2.19% |
| US 10-year yield | 1.54 | + 0.05 | 3.30% |
| USD Index | 91.85 | + 0.04 | 0.04% |
| FTSE100 | 7136.07 | + 26.10 | 0.37% |
| DAX30 | 15607.97 | + 18.74 | 0.12% |
By Greg Peel
Lockdown
Friday’s trade on the ASX was boosted by a strong session on Wall Street and possibly by relief that what seemed an inevitable Sydney lockdown extended only to the eastern suburbs. While the action was fairly choppy, the 7300 mark was conquered by the close.
With Wall Street a little stronger again on Friday night, our futures closed up 5 points at 7am on Saturday morning.
A few of hours later, Gladys announced the full Sydney and regional lockdown for two weeks. Snap lockdowns were subsequently announced in Perth and Darwin and borders slammed shut across the country.
All in time for school holidays.
So we might assume a +5 point indication by the futures for today can be dismissed.
For the record, Friday saw a relatively uniform rally among sectors but with three bucking the trend.
The excitement over the Woolworths ((WOW))/Endeavour ((EDV)) split, which saw Woolworths effectively rally ex-Endeavour on Thursday, waned on Friday. Woolworths fell -2.6% and the staples sector -0.9%.
Credit Suisse became the third FNArena database broker in a week to downgrade CSL ((CSL)) to Hold from Buy equivalents, citing a stretched valuation given issues of lower US collection volumes prompting higher donor fees. CSL fell -0.5% and healthcare -0.3%.
On the flipside, materials regained leadership of the index with a 1.0% gain, having struggled recently with a fall in gold and Beijing’s interference in commodity markets. Iron ore appears on the rise again, but volatility is only ever a day away.
Technology fell -0.7% despite a 0.7% gain for the Nasdaq overnight, led down by the same BNPL stocks that had led gains most of the week.
The biggest individual mover on the day was Boral ((BLD)), which rose 6.1% after Seven Group ((SVW)) lifted its takeover offer. Seven Group fell -2.6%.
But no point in dwelling, as all will be forgotten today no doubt. News is 19 new cases were recorded overnight, related to the Bondi cluster, which will be added to today’s official 24 hour count.
Friday night did nevertheless see a strong session for most commodities, which should provide some support.
Transitory?
Judging by the split of +0.7% for the Dow on Friday night and a slight negative for the Nasdaq, with the S&P500’s +0.3% taking it to yet another new high, one would assume investors went piling back into value/cyclicals and avoided growth.
However, a 15% jump for Nike was worth around 130 of the 230 Dow points. Analysts had expected the athleisure boom would be fading by now, with the back-to-work trend, but not according to Nike’s earnings result and guidance.
The big news of the day was a 3.9% year on year increase for the May US personal consumption & expenditure (PCE) inflation measure – up from 3.5% in April to the the highest level since 2008, and the core PCE at 3.4%, up from 3.1% to the highest level since 1992.
But if this looks like another reason to call inflation structural, there are three factors to consider.
Firstly, the numbers were slightly short of economist forecasts. Secondly, the month on month increases to May from April were lower than to April from March, remembering that April last year was the first full month of lockdown.
Thirdly, high inflation readings no longer surprise nor scare. Both the transitory and structural camps expect numbers like these to continue for a while yet, the difference being the question of for how long after that.
Bank of America issued a note on Friday suggesting inflation above Fed forecasts for another four years. But for every BofA, there is a countering transitory opinion.
We might assume Wall Street leaned to the transitory side on Friday night given the S&P’s new record, while a 4 basis point gain in the US ten-year yield to 1.53% may have kept growth investors at bay.
Alongside the PCE numbers were numbers for consumer spending, which was flat in May from April when economists had forecast +0.4%, and consumer incomes, which fell -2.0% when -2.7% was forecast.
Both numbers reflect the end of the impact of earlier government stimulus cheques. The “miss” on incomes may nonetheless been seen as inflationary.
I noted on Friday morning the announcement after the bell on Thursday night that all US banks on watch had passed their Fed stress tests comfortably, leading to the lifting of dividend and buyback restrictions. The bank sector did indeed have a solid session on Friday night.
But nothing too spectacular, and explainable by the increase in bond yields anyway. Wall Street had been anticipating a buyback bonanza in the sector for some time.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1781.50 | + 7.00 | 0.39% |
| Silver (oz) | 26.10 | + 0.18 | 0.69% |
| Copper (lb) | 4.25 | + 0.01 | 0.17% |
| Aluminium (lb) | 1.11 | + 0.02 | 2.28% |
| Lead (lb) | 1.01 | + 0.01 | 1.10% |
| Nickel (lb) | 8.36 | + 0.14 | 1.75% |
| Zinc (lb) | 1.30 | – 0.00 | – 0.22% |
| West Texas Crude | 74.05 | + 0.75 | 1.02% |
| Brent Crude | 76.18 | + 0.58 | 0.77% |
| Iron Ore (t) | 218.70 | + 3.80 | 1.77% |
There was relief on the LME on Friday night when volumes of copper and aluminium released from the Chinese government’s stockpiles – an attempt by Beijing to curb commodity price surges – were on the light side. While it was the first such release in a decade, volumes of commodities held in stockpiles by the government are unknown.
So metals markets responded as if having been beaten over the head with a wet newspaper.
Meanwhile, the oils press merrily on, ahead of Thursday night’s OPEC meeting.
The Aussie is steady at US$0.7587.
The SPI Overnight closed up 5 points early Saturday morning.
The Week Ahead
With the financial year ending on Wednesday, the next three sessions locally could be volatile and devoid of fundamentals. That said, a two-week Sydney lockdown is pretty fundamental.
Just two weeks? The case-count pace looks ominous, and we remember Melbourne 2020.
Economically, we’ll see data for private sector credit and the RBA governor will speak on Wednesday, while next year (from Thursday) we’ll see house prices, a final revision of May trade numbers, and housing finance.
China will report June PMIs on Wednesday and everybody else will report manufacturing PMIs on Thursday.
For the US, it’s private sector jobs for June on the Wednesday and non-farm payrolls on the Friday, with consumer confidence, house prices, pending home sales, construction spending, trade and factory orders data spread across the week.
OPEC-Plus meets to discuss production quotas on Thursday.
On the local stock front, Metcash ((MTS)) reports earnings today and Collins Foods ((CKF)) tomorrow.
UR Westfield ((URW)) holds its AGM tomorrow.
Tomorrow also sees the bulk of all property developers, REITs and similar funds go ex-dividend together, which will provide for an opening drag on the index.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ABP | Abacus Property | Downgrade to Neutral from Outperform | Credit Suisse |
| ADH | Adairs | Downgrade to Hold from Add | Morgans |
| Downgrade to Hold from Accumulate | Ord Minnett | ||
| CSL | CSL | Downgrade to Neutral from Buy | Citi |
| Downgrade to Neutral from Outperform | Credit Suisse | ||
| EBO | EBOS | Downgrade to Hold from Add | Morgans |
| PME | Pro Medicus | Downgrade to Reduce from Hold | Morgans |
| RMD | Resmed | Upgrade to Outperform from Neutral | Macquarie |
| S32 | South32 | Upgrade to Outperform from Neutral | Credit Suisse |
| WOW | Woolworths | Upgrade to Neutral from Underperform | Credit Suisse |
| WSA | Western Areas | Downgrade to Equal-weight from Overweight | Morgan Stanley |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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