The Monday Report – 16 August 2021

This story features BABY BUNTING GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BBN

The company is included in ALL-ORDS

World Overnight
SPI Overnight (Jun)	7536.00	– 9.00	– 0.12%
S&P ASX 200	7628.90	+ 40.70	0.54%
S&P500	4468.00	+ 7.17	0.16%
Nasdaq Comp	14822.90	+ 6.64	0.04%
DJIA	35515.38	+ 15.53	0.04%
S&P500 VIX	15.45	– 0.14	– 0.90%
US 10-year yield	1.30	– 0.07	– 5.12%
USD Index	92.52	– 0.49	– 0.53%
FTSE100	7218.71	+ 25.48	0.35%
DAX30	15977.44	+ 39.93	0.25%

By Greg Peel

Resistance Futile

As had been the case every day last week, Friday again saw the ASX200 shoot up from the open, to be around 40 points ahead by 11am. But as not been the case in any day previously, this time the index actually hung on to that level.

It didn’t go any further, but it did not this time pull back. If last week’s 11am sellers had covid on their minds, they must have finally given up on Friday, as a step-jump to a new record case-count in NSW did nothing to spook the market.

On Saturday afternoon, just as restaurants and bistros around regional NSW were prepping for Saturday night service, Gladys provided a two-hour warning of a full-state lockdown. Only for a week though.

Yeah sure.

As to whether that news will have any impact on market sentiment today we’ll have to wait and see. And overnight we have seen the Taliban, who said they wouldn’t immediately move into Kabul, immediately move into Kabul. Could this be cause for market concern?

The futures closed down -9 points on Saturday morning, ahead of the above news, after a lacklustre Wall Street session. Every day last week the futures had opened notably higher. Friday saw the 7600 level apparently conquered, but another consolidation period may be required.

It will likely come down to earnings reports, all things being equal, which significantly ramp up in number this week.

It was a quiet session for earnings reports on Friday, with the only reporter of note being Baby Bunting ((BBN)). The retailer posted solid numbers, but disappointed the market in warning delta could provide for significant disruption, and hence no guidance was offered.

Why do I feel like I’ve been here before?

The main movers among individual stocks to the upside were those reporting on Thursday. Downer EDI ((DOW)) topped the charts with a 5.2% gain, and AMP ((AMP)) added another 3.6%. AGL Energy ((AGL)), which had tanked on its report, bounced back 4.0%.

Among the losers, profits were taken, Friday-style, in high-flying lithium names.

Moves were mostly solid across all sectors, led by healthcare (+2.0%), which may come under pressure today on a bounce for the Aussie. The banks did not much join in (+0.2%), as investors sell their Commonwealth Bank ((CBA)) shares post result and buy the other three.

Materials is also a mixed bag at present, with strength and weakness across different commodities leading to a net flat session. Telcos similarly took a breather, after the dust settled on Telstra’s ((TLS)) well-received result.

Summer Friday

It must have been a cracker of a summer’s day in the US on Friday because no one was much interested in Wall Street. Volume was summer-minimal.

It didn’t stop the Dow and S&P500 again marking new highs, but without much fanfare. The Dow had been stronger early in the session on the back of a 4.6% jump for Disney, on its earnings result, but that move faded to 1.0% by the close.

There was no reaction to the latest Michigan Uni consumer sentiment index, which plunged to 70.2 from 81.2 at the end of July to mark the lowest level since 2011. Economists had forecast 80.3. This is a 100-neutral index, suggesting sentiment has dropped well into pessimism.

Despair has been put down to delta, which is driving fears that covid will simply never go away. There was also a rise in inflation expectations.

On that subject, supposed transitory inflation looks to remain transitory for a long time with the shutdown of the world’s third largest cargo terminal in China due to delta, leading to bottlenecks at other major Chinese ports.

The cost of importing goods from China to the US has risen from a standard US$1200 per container pre-pandemic to a current US$20,000, in case you wanted to know where inflation is coming from. And this latest shutdown will only serve to make matters worse.

Do your Christmas shopping now, Americans have been warned, because by Thanksgiving you wont be able to afford it.

The longer inflation pressure persists, the more it is likely the Fed will have to start tapering, unless Powell can hang on to his insistence that inflation is transitory because port shutdowns don’t last forever. The beginning of tapering is still being put forward by many as the trigger for a long overdue Wall Street correction.

But tapering speculation has been rife for months now, with August or at least September touted as when the announcement will come. Yet this has not stopped the S&P500 grafting its way higher every week.

And corrections are almost never triggered by factors that have been foreseen.

So for now, Wall Street looks like playing out the last of summer on a resilient note, ahead of September – historically the worst month of the year.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1779.70	+ 25.80	1.47%
Silver (oz)	23.73	+ 0.58	2.51%
Copper (lb)	4.31	+ 0.02	0.56%
Aluminium (lb)	1.19	+ 0.02	1.52%
Lead (lb)	1.09	+ 0.03	2.62%
Nickel (lb)	8.85	+ 0.04	0.45%
Zinc (lb)	1.36	– 0.01	– 0.51%
West Texas Crude	68.44	– 0.65	– 0.94%
Brent Crude	70.59	– 0.56	– 0.79%
Iron Ore (t)	160.85	– 0.60	– 0.37%

If consumer sentiment had no effect on stock markets, it appeared to knock the US dollar, which fell -0.5%. Having jumped up earlier in the week on inflation results, the US ten-year yield dropped back a full -7 basis points to 1.30%.

The weaker dollar appears to have propped up base metals, and sent gold back towards the US$1800/oz mark from where it last fell.

The Aussie is up 0.4% at US$0.7371, as it continues to bang around aggressively but within the 73 bound.

The SPI Overnight closed down -9 points on Saturday morning.

The Week Ahead

China will report July industrial production, retail sales and fixed asset investment numbers today.

The US will also report industrial production and retail sales numbers this week, along with housing market sentiment and housing starts, and the Empire State and Philly Fed indices.

Jerome Powell will speak tomorrow night ahead of the release of the Fed minutes on Wednesday.

The minutes of the August RBA meeting are out tomorrow. On Wednesday we’ll see the June quarter wage price index, and on Thursday the July jobs report, which will only catch some of the lockdown impact.

The local earnings season shits into top gear this week, and reports will flood in overwhelmingly for the next fortnight.

A reporting calendar and summaries of analyst responses to the day’s results are available on the FNArena Corporate Results Monitor.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AGL	AGL Energy	Upgrade to Neutral from Underperform	Credit Suisse
AX1	Accent Group	Downgrade to Sell from Neutral	Citi
CBA	CommBank	Downgrade to Sell from Neutral	Citi
		Downgrade to Underperform from Neutral	Credit Suisse
DOW	Downer EDI	Upgrade to Hold from Lighten	Ord Minnett
GMG	Goodman Group	Downgrade to Accumulate from Buy	Ord Minnett
		Downgrade to Neutral from Buy	UBS
JHX	James Hardie Industries	Upgrade to Buy from Neutral	Citi
KPG	Kelly Partners	Downgrade to Hold from Add	Morgans
MP1	Megaport	Downgrade to Sell from Hold	Ord Minnett
NAB	National Australia Bank	Downgrade to Hold from Add	Morgans
SPK	Spark New Zealand	Downgrade to Neutral from Outperform	Credit Suisse

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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