Daily Market Reports | Aug 06 2021
This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies. For more info SHARE ANALYSIS: CBA
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Jun) | 7423.00 | + 3.00 | 0.04% |
| S&P ASX 200 | 7511.10 | + 7.90 | 0.11% |
| S&P500 | 4429.10 | + 26.44 | 0.60% |
| Nasdaq Comp | 14895.12 | + 114.58 | 0.78% |
| DJIA | 35064.25 | + 271.58 | 0.78% |
| S&P500 VIX | 17.28 | – 0.69 | – 3.84% |
| US 10-year yield | 1.22 | + 0.03 | 2.79% |
| USD Index | 92.27 | – 0.01 | – 0.01% |
| FTSE100 | 7120.43 | – 3.43 | – 0.05% |
| DAX30 | 15744.67 | + 52.54 | 0.33% |
By Greg Peel
Hanging in there
The ASX200 dropped below the 7500 level from the open yesterday ahead of the 11am NSW announcement. Victoria had already announced lockdown number six and Gladys revealed a new record number of cases, five deaths and a week-long lockdown in Newcastle and the Hunter.
The ASX200 jumped 30 points on the news.
In another session of low volumes – focus is on Tokyo one presumes – it was also another day of offsetting sector moves. But they were mostly the reverse of Wednesday’s moves.
Wednesday saw the resource sectors lead the charge to 7500 and yesterday energy fell -1.2% on an oil price drop and materials fell -1.3% on lower metals prices across the board, and what was to become a full -7% plunge for iron ore.
That plunge is attributed to falling demand from Chinese steelmakers as Beijing continues to crack down on output – touted as emissions reduction but really another pathetic bully-boy tactic against Australia.
Australia registered a record trade surplus in June. Resource exports were up 2% in the month, driven by metals (+2%), coal (+5%) and rural 7%, split into wool (+15%) and cereal (+11%). Looks like Beijing’s got its work cut out. And we’re selling the coal elsewhere. And the barley.
Healthcare fell -0.5% on Wednesday and rose 0.5% yesterday, with no change of note to the currency.
Additional lockdowns are this year good news for the consumer sectors – staples was always a winner, and it rose 0.7% yesterday, while discretionary was originally trashed in the lockdowns last year, but the online explosion now implies the opposite. That sector rose 0.8%.
The banks continue to defy lockdown implications and low bond yields (+0.7%) as we head towards a result next week from Commonwealth Bank ((CBA)) and updates from the other three. Earnings don’t matter, but capital management does.
The winning sector on the day was property (+1.0%), which again seems incongruous amidst further lockdowns. REIT leader Goodman Group ((GMG)), REIT manager Centuria Capital ((CNI)) and European-focused UR Westfield ((URW)) all rose over 2%.
Index winner on the day was nib Holdings ((NHF)), up 3.1% for being a lockdown winner.
All bar one of the top five index losers were miners.
Wall Street has swung back to another new high overnight with the S&P500 up 0.6%, but our futures are only up 3 points this morning. The 7500 level will need further work, and being Friday, might just see what’s on the tele.
Buy Anyway
“It could all change tomorrow of course, as it often does. But for now, the earnings beats will probably keep rolling in but as to whether there’s more short-term index upside is looking less of a given.”
See? I was right yesterday. It did all change last night. All three major indices rallied strongly right from the open, to ensure another new high for both the S&P500 and Nasdaq.
On Wednesday night Wall Street was spooked by a big miss on the private sector jobs number, and a raft of reopening-winner stocks were hit with sell-the-fact.
Last night’s weekly new jobless claims number came in at 385,000, down -14,000, and continuing claims fell to under three million for the first time.
Not all sectors are being hit with sell-the-fact on earnings beats. Last night media companies were in focus, with ViacomCBS jumping 7% and Fox 5%.
The US also set a trade balance record in June, but in their case, a deficit. The US trade deficit did nothing but grow under Trump, despite all the ballyhoo of trade wars and Made in America. The market sees increased imports as a sign of economic strength, nonetheless.
Biden is sticking to Trump’s tariffs and Made in America drive. Last night he set a goal for 50% of all vehicles produced in the US to be electric by 2030, and a push to have the batteries – currently 80% produced in China – made domestically. The big automakers are right on side (but 50% seems a bit of a stretch, given recent data shows EV penetration in the US at just 2%).
The US ten-year bond yield last night rose 3 basis points to 1.22%, but it seems now the growth thematic has disconnected with rate fears, as evident in the Nasdaq’s 0.8% rally.
Last night Goldman Sachs cited low yields as one reason to lift its S&P year-end target to 4700 from a prior 4300 (a further 6% rally from here).
“Relative to consensus, we expect stronger revenue growth and more pre-tax profit margin expansion as firms successfully manage costs and as high-margin tech companies become a larger share of the index.”
But I’ve said it before so I’ll say it again, it could all change tomorrow. Tonight brings June non-farm payrolls, and earnings season rolls on.
August-light volumes will also continue, not because of the Games (US ratings disappointing so far) but because it’s summer.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1804.10 | – 7.50 | – 0.41% |
| Silver (oz) | 25.13 | – 0.24 | – 0.95% |
| Copper (lb) | 4.28 | – 0.04 | – 0.99% |
| Aluminium (lb) | 1.17 | + 0.00 | 0.36% |
| Lead (lb) | 1.10 | – 0.01 | – 1.12% |
| Nickel (lb) | 8.71 | – 0.06 | – 0.72% |
| Zinc (lb) | 1.35 | + 0.01 | 0.40% |
| West Texas Crude | 69.09 | + 0.94 | 1.38% |
| Brent Crude | 71.22 | + 1.00 | 1.42% |
| Iron Ore (t) | 170.05 | – 13.10 | – 7.15% |
Aside from the iron ore price plunge, base metals were yet again mostly weaker.
The oils bounced back, simply because they fell for three days straight, and every pullback since the November vaccine announcements has seen a buy-the-dip response.
Gold is again losing steam.
The strong trade numbers have the Aussie up 0.3% at US$0.7406 despite no movement in the greenback.
Today
The RBA will issue a Statement on Monetary Policy today and the governor will testify before parliament.
US jobs tonight.
Earnings results are due overnight from News Corp ((NWS)), REA Group ((REA)) and ResMed ((RMD)).
James Hardie ((JHX)) holds its AGM today.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BKW | Brickworks | Downgrade to Accumulate from Buy | Ord Minnett |
| LNK | Link Administration | Upgrade to Outperform from Neutral | Credit Suisse |
| OML | oOh!Media | Downgrade to Neutral from Outperform | Credit Suisse |
| RSG | Resolute Mining | Upgrade to Outperform from Neutral | Macquarie |
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CHARTS
For more info SHARE ANALYSIS: CBA - COMMONWEALTH BANK OF AUSTRALIA
For more info SHARE ANALYSIS: CNI - CENTURIA CAPITAL GROUP
For more info SHARE ANALYSIS: GMG - GOODMAN GROUP
For more info SHARE ANALYSIS: JHX - JAMES HARDIE INDUSTRIES PLC
For more info SHARE ANALYSIS: NHF - NIB HOLDINGS LIMITED
For more info SHARE ANALYSIS: NWS - NEWS CORPORATION
For more info SHARE ANALYSIS: REA - REA GROUP LIMITED
For more info SHARE ANALYSIS: RMD - RESMED INC
For more info SHARE ANALYSIS: URW - UNIBAIL-RODAMCO-WESTFIELD SE