Daily Market Reports | Jul 12 2021
This story features COMPUTERSHARE LIMITED, and other companies. For more info SHARE ANALYSIS: CPU
The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH
| World Overnight | |||
| SPI Overnight (Jun) | 7262.00 | + 76.00 | 1.06% |
| S&P ASX 200 | 7273.30 | – 68.10 | – 0.93% |
| S&P500 | 4369.55 | + 48.73 | 1.13% |
| Nasdaq Comp | 14701.92 | + 142.13 | 0.98% |
| DJIA | 34870.16 | + 448.23 | 1.30% |
| S&P500 VIX | 16.18 | – 2.82 | – 14.84% |
| US 10-year yield | 1.36 | + 0.07 | 5.28% |
| USD Index | 92.13 | – 0.25 | – 0.27% |
| FTSE100 | 7121.88 | + 91.22 | 1.30% |
| DAX30 | 15687.93 | + 267.29 | 1.73% |
By Greg Peel
Of Yields and Illness
On Friday the ASX200 was sold off on the back of a Wall Street sell-off sparked by another sharp drop in US yields. But there is also the local covid factor at play. The index bottomed out down -115 points mid-afternoon before some buying emerged, and a 20 point market-on-close kicker saved the day to a modest extent.
We could spend time dissecting Friday but given Wall Street completely reversed on Friday night, on a rebound in bond yields, and our futures closed up 76 points on Saturday morning, that would be unnecessary.
However…
Following the Saturday futures close came news of 50 cases reported in Sydney on Friday, 77 on Saturday, and one death, and a prediction of triple digits from Gladys for yesterday’s numbers, due this morning.
It seems a lay-down misere the Sydney lockdown will be again extended – the only question is to whether by only the one week. Sydney 2021 is beginning to look a lot like Melbourne 2020. That lockdown last 112 days, or around three and a half months.
Briefly, Friday was a bit of a mixed bag on the back of the two driving forces.
Technology was thumped -2.8% despite low yields supposedly being positive but then being now dominated in market cap terms by BNPL, along with Computershare ((CPU)) which likes rising rates, the sector is very retail-dependent. Consumer discretionary fell -1.6% to be the next worst performer.
That would be your virus.
Property, inclusive of retail REITs, fell -0.9%.
Banks like neither low yields nor heightened bankruptcy/mortgage foreclosure risk and insurance companies like rising rates. Financials fell -0.9%. Cap-wise industrials are influenced by the “mobility” toll road and airport stocks and fell -1.2%. Within the sector CSR ((CSR)) was the worst index performer in falling -6.6%. Construction lockdown?
Energy was the only sector to close in the green (+0.1%) but only thanks to Viva Energy’s ((VEA)) 5.1% pop on a guidance upgrade.
All other sectors closed lower by degrees although utilities only by a whisker, remembering that lower bond yields are actually positive for plodding yield payers.
One little point to make: US bonds yields caused a scare on Friday night, while our ten-year rose 4 basis points to 1.35%.
So that was Friday, but we move into today on a balance of risks that does not make a Wall Street-following rebound a certainty.
Blink and you’ll miss it
The pundits on Wall Street were still arguing as to why US bonds yields had tanked over the week when blow me down if the ten-year didn’t jump back 7 basis points to 1.36% — 11 points above Thursday night’s 1.25% low.
Stock indices all opened higher and continued to rise all session, with all three closing at new record highs.
Anyone feeling Wall Street was due a correction would ultimately have been disappointed with the mere -1% pullback on Thursday night. Only once in the last five years has the S&P500 run this long without a -5% pullback, being the 2017-18 Trump tax cut rally.
So all was forgiven on Friday night. Yet Sydney’s extended lockdown has not gone unnoticed by Wall Street, nor Japan’s state of emergency, South Korea moving to the highest alert level, the Netherlands tightening restrictions, and France warning against travel to Portugal and Spain.
If bond yield fears have been eased for now, delta fears have not.
The next test for yields comes tomorrow night, when the US June CPI numbers are released.
Meanwhile, fears of a slowdown in China have prompted a cut to the bank reserve requirement ratio by the PBoC, which implies monetary policy easing.
In other news, Biden signed an executive order last night outlining 72 steps towards monitoring anti-competitive practices across all US sectors – not just Big Tech. The order requires a dozen different federal agencies that work independently of government to keep an eye out.
Apple hit a new all-time high on Friday night.
Tuesday night brings the first of the US big bank earnings reports, and by next week the floods open. Current forecasts have a net 63.6% year on year earnings increase – yes, 63.6% — but that is cycling the depths of the pandemic impact.
Richard Branson this morning was sitting in a tin can far above the world while watching England lose to Italy. In a penalty shoot-out of all things.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1807.90 | + 4.80 | 0.27% |
| Silver (oz) | 26.07 | + 0.19 | 0.73% |
| Copper (lb) | 4.30 | + 0.04 | 0.94% |
| Aluminium (lb) | 1.13 | + 0.01 | 1.12% |
| Lead (lb) | 1.06 | + 0.01 | 1.17% |
| Nickel (lb) | 8.49 | + 0.18 | 2.21% |
| Zinc (lb) | 1.34 | + 0.01 | 0.81% |
| West Texas Crude | 74.56 | + 1.62 | 2.22% |
| Brent Crude | 75.55 | + 1.24 | 1.67% |
| Iron Ore (t) | 216.50 | – 1.70 | – 0.78% |
Any concerns of a slowdown in China, or another global pandemic-led slowdown, are not apparent in metal prices. A dip in the US dollar helped.
The oils have recovered their prior OPEC-fear losses.
The Aussie has bounced back 0.8% to US$0.7492.
The SPI Overnight closed up 76 points or 1.0% on Saturday morning.
The Week Ahead
Amidst US bank earnings reports, Tuesday night’s US CPI and Wednesday night’s PPI will take centre stage. These will be followed by industrial production and retail sales data, along with consumer sentiment.
On Thursday China will release June industrial production, retail sales and fixed asset investment numbers, and the June quarter GDP result.
The RBNZ and Bank of Japan hold policy meetings this week.
Locally we’ll see the NAB business confidence survey tomorrow, Westpac consumer confidence on Wednesday and the June jobs numbers on Thursday.
More resource sector production reports are due this week, including those of Woodside Petroleum ((WPL)) and Rio Tinto ((RIO)), while AusNet Services ((AST)) holds its AGM.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ABP | Abacus Property | Downgrade to Hold from Accumulate | Ord Minnett |
| ASX | ASX | Downgrade to Sell from Neutral | Citi |
| BLD | Boral | Downgrade to Neutral from Outperform | Macquarie |
| BSL | Bluescope Steel | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| COF | Centuria Office REIT | Downgrade to Hold from Add | Morgans |
| SVW | Seven Group | Upgrade to Buy from Accumulate | Ord Minnett |
| SXY | Senex Energy | Downgrade to Neutral from Outperform | Macquarie |
| SYD | Sydney Airport | Upgrade to Neutral from Underperform | Credit Suisse |
| WSA | Western Areas | Downgrade to Neutral from Outperform | Macquarie |
| WTC | Wisetech Global | Downgrade to Neutral from Outperform | Macquarie |
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: CPU - COMPUTERSHARE LIMITED
For more info SHARE ANALYSIS: CSR - CSR LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED
For more info SHARE ANALYSIS: VEA - VIVA ENERGY GROUP LIMITED