Daily Market Reports | Jul 05 2021
This story features QANTAS AIRWAYS LIMITED, and other companies. For more info SHARE ANALYSIS: QAN
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7230.00 | 0.00 | 0.00% |
| S&P ASX 200 | 7308.60 | + 43.00 | 0.59% |
| S&P500 | 4352.34 | + 32.40 | 0.75% |
| Nasdaq Comp | 14639.33 | + 116.95 | 0.81% |
| DJIA | 34786.35 | + 152.82 | 0.44% |
| S&P500 VIX | 15.07 | – 0.41 | – 2.65% |
| US 10-year yield | 1.43 | – 0.05 | – 3.31% |
| USD Index | 92.23 | – 0.31 | – 0.33% |
| FTSE100 | 7123.27 | – 1.89 | – 0.03% |
| DAX30 | 15650.09 | + 46.28 | 0.30% |
By Greg Peel
A Cunning Plan
Amidst what must have been a lot of wailing and gnashing of teeth at Friday’s National Cabinet meeting emerged a four-phase reopening plan from the prime minister. Each phase requires a milestone to be hit in the vaccine stroll-out, but those milestones, and hence a timeline, are yet to be determined.
But the fact the prime minister now has a plan is a novelty in itself.
Meanwhile, back in Stalinglad, the daily case count for Thursday announced on Friday morning jumped ominously to 31, having been running in the low twenties to that point. This was countered by signs of the outbreak being controlled in other states, so there was some trade-off, but as far as the market was concerned, it appears the “plan” was all that mattered.
Friday’s case-count in Sydney came in at 35, but Saturday’s dropped to 16. We’ll learn yesterday’s at 11am this morning. With a week to go Sydney remains locked down and isolated as interstate borders begin to reopen elsewhere, and the bubble inflates once more.
This news was unknown when the futures closed dead flat on Saturday morning – seemingly cautious in the face of another rally on Wall Street.
The ASX200 closed the week pretty much where it started, but with a few ups and downs in between. In fact the index remains about where it was in early June.
On Friday, all sectors rallied but for staples, down a tick, and technology, down -0.1%. Energy was the standout performer (+1.8%) on a jump in oil prices, with OPEC still undecided on its production quotas.
Industrials gained 1.3% with some help from Qantas ((QAN)), which rose 3.5% on “plan” excitement. Sydney Airport ((SYD)) gained 1.0%.
Consumer discretionary rose 1.3%, led out by a 20.3% leap for IDP Education ((IEL)) after the company announced it will acquire 100% of the British Council’s Indian International English Language Testing System.
The banks made a comeback (+0.8%) having been knocked down earlier by delta fears while telcos gained 0.8% as investors continue to reward Telstra’s ((TLS)) quick-fire sale of its towers business at a healthy price, implying nice goodie bags to be handed out.
Speaking of comebacks, a2 Milk ((A2M)) is on the move, rising another 5.2% on Friday. It’s a long way back to the $19 share price seen one year ago.
Wall Street clearly liked Friday night’s jobs report but as noted, our futures likely reflected covid caution on Saturday morning in closing unch. We’ll see how the latest news is interpreted this morning.
Triple-Header
After a couple of months of surprising misses, June’s US jobs addition of 850,000 beat estimates of 706,000. Enough to rekindle inflation fears?
No. Despite no change in the participation rate, the unemployment rate ticked back up to 5.9% from 5.8%. And as far as beats go, it was not as substantial as the earlier misses. Most importantly, the pace of wage growth in June was less of that in May, which was less than that in April.
Not exactly inflationary.
The bulk of new jobs were in the leisure/hospitality sectors as vaccinations drive re-openings. There were virtually no restrictions for vaccinated Americans over the holiday weekend, other than “recommendations” in the like of California to continue to wear masks in indoor public places.
When the jobs data were fully analysed, Wall Street saw a Goldilocks result. A positive result economically but not enough to give the Fed pause for thought.
The US ten-year bond yield fell -5 basis points to 1.43%. This was enough to spur the Nasdaq to outperformance, but there was no clear rotation. The S&P500 posted its seventh straight new high. The last time the S&P put in a seven-session winning streak was last August. The Nasdaq also hit a new high and for the first time since May, so did the Dow.
The longest winning streak the S&P has posted in the last five years is eight days – twice.
The bulk of gains in all three indices were driven by mega-cap tech. FAAMG accounts for 20% of the S&P and 40% of the Nasdaq, while Apple and Microsoft are Dow components.
Analysts continue to split stocks into value/cyclical and growth baskets, but as longstanding cash generators those Big Five are considered in a class of their own – growth, yes, but backed by actual earnings, unlike new tech companies trading on growth potential alone.
The latter are most susceptible to a Fed rate increase, whereas the Big Five are considered defensive.
With a jobs result considered to be indicative of progress, but not the “substantial further progress” the Fed tautologically is waiting to see, attention will now turn to the July jobs number. With many states now having withdrawn additional unemployment benefits, and the pool of job vacancies remaining large, expectations are new jobs could hit one million in the month.
And the debate continues as to whether Jerome Powell, with a nod to his predecessor Ben Bernanke, might use the August Jackson Hole central bankers meeting to set a timeline for tapering.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1787.30 | + 10.60 | 0.60% |
| Silver (oz) | 26.43 | + 0.40 | 1.54% |
| Copper (lb) | 4.21 | – 0.01 | – 0.16% |
| Aluminium (lb) | 1.14 | + 0.01 | 1.17% |
| Lead (lb) | 1.02 | – 0.01 | – 0.89% |
| Nickel (lb) | 8.31 | + 0.09 | 1.15% |
| Zinc (lb) | 1.32 | – 0.00 | – 0.10% |
| West Texas Crude | 75.16 | – 0.07 | – 0.09% |
| Brent Crude | 76.17 | + 0.50 | 0.66% |
| Iron Ore (t) | 217.30 | – 1.50 | – 0.69% |
OPEC-Plus has again delayed its decision on production quotas, failing for the second time on Friday to reach an agreement.
It was another solid session for gold, with bond yields down and the dollar up, but mixed for other metals.
After seemingly plunging into an abyss, the Aussie is back up 0.7% to US$0.7528.
The SPI Overnight closed unchanged on Saturday morning.
The Week Ahead
Speaking of central banks, the RBA meets tomorrow to decide what it will do with its own QE program. One might assume the delta variant may stymie any earlier thoughts of tapering. The RBA governor will then speak on Thursday.
Today we’ll see data for job ads and building approvals and a final revision of May retail sales numbers.
China releases June inflation data on Friday.
The Fed releases the minutes of its last meeting on Wednesday.
The US is closed tonight.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AIA | Auckland International Airport | Downgrade to Sell from Neutral | UBS |
| AMC | Amcor | Upgrade to Outperform from Neutral | Macquarie |
| CKF | Collins Foods | Downgrade to Hold from Add | Morgans |
| Downgrade to Neutral from Buy | UBS | ||
| ING | Inghams | Downgrade to Neutral from Outperform | Macquarie |
| NWL | Netwealth | Downgrade to Underperform from Neutral | Credit Suisse |
| PDL | Pendal | Upgrade to Outperform from Neutral | Credit Suisse |
| REH | Reece | Downgrade to Underperform from Neutral | Macquarie |
| RWC | Reliance Worldwide | Downgrade to Neutral from Outperform | Macquarie |
| TLS | Telstra | Upgrade to Add from Hold | Morgans |
| Downgrade to Neutral from Buy | UBS | ||
| WOW | Woolworths | Downgrade to Underperform from Neutral | Credit Suisse |
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CHARTS
For more info SHARE ANALYSIS: A2M - A2 MILK COMPANY LIMITED
For more info SHARE ANALYSIS: IEL - IDP EDUCATION LIMITED
For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED
For more info SHARE ANALYSIS: TLS - TELSTRA GROUP LIMITED