Daily Market Reports | Jul 19 2021
This story features MICHAEL HILL INTERNATIONAL LIMITED, and other companies. For more info SHARE ANALYSIS: MHJ
The company is included in ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7232.00 | – 37.00 | – 0.51% |
| S&P ASX 200 | 7348.10 | + 12.20 | 0.17% |
| S&P500 | 4327.16 | – 32.87 | – 0.75% |
| Nasdaq Comp | 14427.24 | – 115.90 | – 0.80% |
| DJIA | 34687.85 | – 299.17 | – 0.86% |
| S&P500 VIX | 18.45 | + 1.44 | 8.47% |
| US 10-year yield | 1.30 | + 0.00 | 0.23% |
| USD Index | 92.69 | + 0.11 | 0.12% |
| FTSE100 | 7008.09 | – 3.93 | – 0.06% |
| DAX30 | 15540.31 | – 89.35 | – 0.57% |
By Greg Peel
No Conviction
In a lacklustre Friday session the ASX200 was actually square at 4pm so it was only the market-on-close orders that provided the ultimate 12 point gain.
The index did recover from an early dip but rebounded at 11am on the latest update, which at that point contained nothing material. But over the weekend the situation changed as stricter rules were applied in SW Sydney and for all of greater Sydney with regard the forced closure of construction activity and non-essential retail.
Seems handbag shops aren’t essential after all. Who knew?
Melbourne cases remain nowhere near the level of Sydney but enough, including one reginal case, to evoke the possibility of that lockdown being extended today.
More vaccines are on the way – the good gear – so it’s a balance. For the stock market, it’s a case of not enough incentive to buy but no great conviction to sell either. The ASX200 opened the week at 7345 and closed at 7348, with little interday volatility.
Perversely, the best performing sector on Friday was consumer discretionary (+0.7%). There were no standouts within index names but outside the index Michael Hill International ((MHJ)) provided a trading update that was worth 11.7%, so perhaps sentiment carried through.
And through to REITs? They rose 0.5%.
It used to be Telstra that was the daily coin toss but currently it's healthcare, with CSL ((CSL)) up and down every other day. On Friday it rose 0.9% and the sector 0.7%.
Both the banks and materials closed flat on the day and there was nothing much to report in other sectors.
Materials was a mixed bag, with Whitehaven Coal ((WHC)) topping the index board with a 4.3% gain on ever rising thermal coal prices while Evolution Mining ((EVN)) topped the losers’ board in having missed FY production guidance, falling -5.3%.
Speaking of gold, it was down quite heavily on Friday night. Wall Street saw a profit-taking session and our futures were down -37 points on Saturday morning.
The weekly new case rate has jumped 67% in the US, the UK is back to peak level daily case-counts ahead of Freedom Day, and the number of cases among Olympians in Tokyo continues to grow.
Overnight, OPEC-Plus agreed to increase production by 400,000 barrels per day beginning next month. Production levels will continue to increase over 2022 with the original 5.8mbpd production cut to be wound down by September next year.
The reasons given were a clear sign of improving demand (economies reopening) meeting diminishing OECD stocks. The Brent crude price had recovered 60% year on year.
Not Waiting Around
After an extraordinary run to ever new highs for all major US indices, investors appear to have decided to take profits now and not wait for any sell-the-fact opportunities as earnings season ramps up.
Results in the first week have been solid but outlooks have been cautious, with CEOs citing delta as a source of uncertainty. This week sees a big jump in the number of reporting companies – including a lot of Big Tech, and the following week sees the peak before a long tail-off.
Economic data releases were mixed on Friday night. June retail sales surprised with a 0.6% jump when analysts had expected a -0.4% fall, on the basis of a pull-forward of spending thanks to the earlier stimulus cheques. Not so, apparently.
But Michigan Uni’s fortnightly consumer sentiment survey showed a big drop to 80.8 from 85.5 at the end of June when economists had forecast an increase to 86.3. That’s back to February levels. The greatest concern of the US consumer at present? Inflation.
It has been long held on Wall Street that the bond market is “smarter” than the stock market and tends to be ahead of the curve, and even the Fed. There has been much debate as to why the ten-year bond yield, which a few months ago looked like it was on its way to 2%, is back at 1.30%.
If the reason is an easing off of the pace of the reopening recovery, and the threat of delta derailing that recovery, then equity investors can only question how more new highs can be hit on the back of already stretched valuations.
Wall Street has not seen a -5% pullback all year. Will earnings results be enough to keep this record intact? The two sectors that have led in 2021 – banks and energy – have recently been under pressure due to lower bond yields on the one hand and an oil price pullback on the other. The energy sector has now reached correction territory, down -12% from the peak, and increased OPEC production is not likely to help.
Nor would any renewed lockdowns, anywhere in the world.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1812.00 | – 17.40 | – 0.95% |
| Silver (oz) | 25.64 | – 0.68 | – 2.58% |
| Copper (lb) | 4.27 | – 0.01 | – 0.31% |
| Aluminium (lb) | 1.12 | – 0.01 | – 0.49% |
| Lead (lb) | 1.05 | – 0.00 | – 0.38% |
| Nickel (lb) | 8.58 | + 0.10 | 1.14% |
| Zinc (lb) | 1.35 | + 0.01 | 0.70% |
| West Texas Crude | 71.81 | + 0.16 | 0.22% |
| Brent Crude | 73.59 | + 0.26 | 0.35% |
| Iron Ore (t) | 221.10 | – 1.20 | – 0.54% |
It appears gold bugs have become frustrated that the initial pop on inflation results has not come with a follow-through, despite lower yields. The greenback ticking higher is not helping.
Oil prices will respond tonight to the OPEC-Plus news.
The Aussie is down -0.3% at US$0.7405.
The SPI Overnight closed down -37 points or -0.5% on Saturday morning.
The Week Ahead
The US housing market will be the focus this week with numbers due for housing market sentiment, housing starts and existing home sales.
Friday brings global flash estimates of July PMIs.
The ECB meets on Thursday.
Japan is closed on Thursday and Friday.
Locally the economic highlight will be a preliminary read on June retail sales on Wednesday.
On the stock market, quarterly updates and production reports flow freely, with updates due from Ampol ((ALD)), Sydney Airport ((SYD)), Atlas Arteria ((ALX)) and Megaport ((MP1)).
Several production reports are due, including those from BHP Group ((BHP)), South32 ((S32)), Newcrest Mining ((NCM)) and Santos ((STO)).
Cimic Group ((CIM)) jumps the gun and reports earnings on Wednesday.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| ABC | ADBRI | Upgrade to Equal-weight from Underweight | Morgan Stanley |
| BLD | Boral | Downgrade to Underweight from Equal-weight | Morgan Stanley |
| CSR | CSR | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| DCN | Dacian Gold | Downgrade to Underperform from Outperform | Macquarie |
| GXY | Galaxy Resources | Upgrade to Buy from Accumulate | Ord Minnett |
| MGH | MAAS Group | Upgrade to Add from Hold | Morgans |
| OGC | OceanaGold | Upgrade to Neutral from Underperform | Macquarie |
| ORE | Orocobre | Upgrade to Buy from Accumulate | Ord Minnett |
| PLS | Pilbara Minerals | Upgrade to Hold from Lighten | Ord Minnett |
| PNV | Polynovo | Downgrade to Hold from Accumulate | Ord Minnett |
| SKI | Spark Infrastructure | Downgrade to Hold from Add | Morgans |
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: ALD - AMPOL LIMITED
For more info SHARE ANALYSIS: ALX - ATLAS ARTERIA
For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED
For more info SHARE ANALYSIS: CSL - CSL LIMITED
For more info SHARE ANALYSIS: EVN - EVOLUTION MINING LIMITED
For more info SHARE ANALYSIS: MHJ - MICHAEL HILL INTERNATIONAL LIMITED
For more info SHARE ANALYSIS: MP1 - MEGAPORT LIMITED
For more info SHARE ANALYSIS: NCM - NEWCREST MINING LIMITED
For more info SHARE ANALYSIS: S32 - SOUTH32 LIMITED
For more info SHARE ANALYSIS: STO - SANTOS LIMITED
For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED