The Monday Report – 23 August 2021

This story features TREASURY WINE ESTATES LIMITED, and other companies. For more info SHARE ANALYSIS: TWE

The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

World Overnight
SPI Overnight (Jun)	7423.00	+ 35.00	0.47%
S&P ASX 200	7460.90	– 3.70	– 0.05%
S&P500	4441.67	+ 35.87	0.81%
Nasdaq Comp	14714.66	+ 172.88	1.19%
DJIA	35120.08	+ 225.96	0.65%
S&P500 VIX	18.56	– 3.11	– 14.35%
US 10-year yield	1.26	+ 0.02	1.45%
USD Index	93.50	– 0.06	– 0.06%
FTSE100	7087.90	+ 29.04	0.41%
DAX30	15808.04	+ 42.23	0.27%

By Greg Peel

In for the Long Haul

A fightback on Wall Street on Thursday night had the ASX200 up 48 points from the open on Friday, before peaking out at 10.45am. At 11am, Gladys announced the inevitable of a month-long extension to the Sydney lockdown, before new cases hit the 800s over the weekend.

Why can’t she just say “until further notice”? These incremental extensions only serve to raise the hopes of small businesses, only to dash them again.

It was a fairly swift move thereafter back to square, before not much action through to the close. Earnings were nonetheless in focus again, underscoring sector moves.

The comeback in the US was defensively led, and then mimicked here on Friday. Utilities (1.5%), staples (+1.2%) and property (+1.0%) were the best performers.

Staples were boosted by result responses for Treasury Wine Estates  ((TWE)), which gained 5.6% and Inghams Group ((ING)), up 4.6%.

Healthcare should have been in the mix as a defensive as well, but was weighed down by Cochlear ((COH)) falling -7.4% on result, thus only managed a 0.2% sector gain.

Materials (-1.0%) succumbed to another big iron ore price plunge, more selling in the volatile lithium miners, and ongoing selling in Lynas Rare Earths ((LYC)) on Malaysian political disruption. Lynas fell -6.9% (new president confirmed over the weekend), while Orocobre ((ORE)) and Pilbara Minerals ((PLS)) led down the battery squad with -5%-plus falls.

Index winner on the day was Redbubble ((RBL)), up 15.7%, and has become so ridiculously volatile we might as well call it a meme stock.

Wall Street put on a more widespread comeback rally on Friday night, and our futures closed up 35 points on Saturday morning. Whether the 800-plus NSW case numbers over the weekend will impact the market today is unclear, given a lockdown extension has already been announced, and given the market only responds to delta on the odd day.

The other overriding factor this week – Wall Street notwithstanding – is the fact that while we might be in Week 4 of the August result season, we still have two-thirds of companies left to report. As it stood last week, beats were running at a ratio of 39% to 19% misses, which both are indicative of a good season.

But two themes have become apparent up to now – a return to the theme of the season one year ago of few companies being confident enough to issue guidance in the face of covid, and result misses being hammered a lot harder than beats are rewarded. “Misses” include responses to companies pointing out a poor start to FY22 and uncertain outlook given delta’s grip on Australia.

Can’t keep a good market down

Having tumbled for a couple of sessions last week, on both delta and Fed tapering concerns, Wall Street staged a half-hearted comeback on Thursday night in which defensive sectors led but cyclicals remained weak. This seemed to be good enough for the dip-buyers to remerge on Friday night.

All sectors closed in the green. All three major indices closed lower for the week, but within the S&P500, healthcare closed the week up 1.8%, utilities up 1.8%, and staples 0.4%. Among the cyclicals, energy fell -7.3% and banks -2.3%.

It was a solid comeback for the Nasdaq. Microsoft made a new high, but with well-established “old tech” being classed as defensive, had made new highs all week. The bounce-back was more apparent in growth stocks among the tech world, which are more exposed to monetary policy.

On Friday night Dallas Fed president Robert Kaplan said he may reconsider his call for the Fed to start tapering immediately if it looks like the spread of delta is slowing economic growth. The seven-day average of new cases across the US rose to over 140,000 last week, up 44% since February.

Can’t see how that can boost economic growth.

We must remember that what set Wall Street off last week were the minutes of the Fed meeting held in late July, and August has not exactly raised any hopes on the covid front.

So we might say Friday night was another sign of Wall Street’s tendency to play the “bad news is good” card when it comes to Fed support. In this case, not removing support too soon.

Commodities

Some reprieve in commodity land on Friday night. Copper halted its fall and iron ore bounced hard. Or at least we would have called 7% “hard” before this month, before the astonishing plunge.

Gold traders are all on holiday but the saga continues for the oils, which commentators suggest is about delta and nothing else.

The Aussie continues its drift back towards “fair value” (which for a long time has been considered to be US67c), falling another -0.2% to US$0.7133.

The SPI Overnight closed up 35 points or 0.5% on Saturday morning.

The Week Ahead

A deluge of local earnings reports.

Today brings flash estimates of August PMIs from across the globe.

The US will see numbers for new and existing home sales and durable goods orders. While a revision of June quarter GDP on Thursday will hardly be worth the effort, numbers for PCE inflation and consumer sentiment on Friday will be closely watched.

The Jackson Hole central banker’s meeting begins on Thursday and runs into the weekend.

Spot Metals,Minerals & Energy Futures
Gold (oz)	1780.70	+ 0.30	0.02%
Silver (oz)	23.02	– 0.22	– 0.95%
Copper (lb)	4.08	+ 0.04	1.00%
Aluminium (lb)	1.16	– 0.00	– 0.15%
Lead (lb)	1.12	+ 0.01	1.15%
Nickel (lb)	8.39	– 0.03	– 0.38%
Zinc (lb)	1.33	– 0.00	– 0.10%
West Texas Crude	62.14	– 1.55	– 2.43%
Brent Crude	68.18	+ 1.65	2.48%
Iron Ore (t)	139.10	+ 8.90	6.84%

Some reprieve in commodity land on Friday night. Copper halted its fall and iron ore bounced hard. Or at least we would have called 7% “hard” before this month, before the astonishing plunge.

Gold traders are all only holiday but the saga continues for the oils, which commentators suggest is about delta and nothing else.

The Aussie continues its drift back towards “fair value” (which for a long time has been considered to be US67c), falling another -0.2% to US$0.7133.

The SPI Overnight closed up 35 points or 0.5% on Saturday morning.

The Week Ahead

A deluge of local earnings reports.

Today brings flash estimates of August PMIs from across the globe.

The US will see numbers for new and existing home sales and durable goods orders. While a revision of June quarter GDP on Thursday will hardly be worth the effort, numbers for PCE inflation and consumer sentiment on Friday will be closely watched.

The Jackson Hole central banker’s meeting begins on Thursday and runs into the weekend.

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

(https://www.fnarena.com/index.php/reporting_season/)

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ARB	ARB Corp	Downgrade to Underperform from Neutral	Macquarie
		Downgrade to Hold from Accumulate	Ord Minnett
ASX	ASX	Downgrade to Sell from Neutral	UBS
AVN	Aventus Group	Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Neutral from Buy	UBS
BAP	Bapcor	Downgrade to Neutral from Buy	Citi
BLX	Beacon Lighting	Upgrade to Add from Hold	Morgans
BXB	Brambles	Downgrade to Equal-weight from Overweight	Morgan Stanley
		Downgrade to Hold from Add	Morgans
CDP	Carindale Property Trust	Upgrade to Buy from Hold	Ord Minnett
CNU	Chorus	Downgrade to Sell from Neutral	UBS
CTD	Corporate Travel Management	Downgrade to Neutral from Outperform	Macquarie
DHG	Domain Australia	Upgrade to Buy from Neutral	UBS
EBO	EBOS Group	Upgrade to Outperform from Neutral	Macquarie
		Upgrade to Add from Hold	Morgans
HDN	HomeCo Daily Needs REIT	Downgrade to Accumulate from Buy	Ord Minnett
NCM	Newcrest Mining	Downgrade to Neutral from Buy	Citi
NWL	Netwealth Group	Upgrade to Outperform from Underperform	Credit Suisse
		Upgrade to Buy from Hold	Ord Minnett
ORA	Orora	Downgrade to Neutral from Buy	Citi
OZL	OZ Minerals	Upgrade to Add from Hold	Morgans
PGH	Pact Group	Upgrade to Outperform from Neutral	Credit Suisse
RBL	Redbubble	Upgrade to Add from Hold	Morgans
SGF	SG Fleet	Downgrade to Neutral from Outperform	Macquarie
SGM	Sims	Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Neutral from Buy	UBS
SXL	Southern Cross Media	Upgrade to Outperform from Neutral	Macquarie
VCX	Vicinity Centres	Downgrade to Neutral from Outperform	Macquarie
WAF	West African Resources	Upgrade to Outperform from Neutral	Macquarie

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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