The Overnight Report: Back In Black

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

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

World Overnight
SPI Overnight (Jun)	7440.00	+ 10.00	0.13%
S&P ASX 200	7489.90	+ 29.00	0.39%
S&P500	4479.53	+ 37.86	0.85%
Nasdaq Comp	14942.65	+ 227.99	1.55%
DJIA	35335.71	+ 215.63	0.61%
S&P500 VIX	17.15	– 1.41	– 7.60%
US 10-year yield	1.26	– 0.01	– 0.40%
USD Index	93.00	– 0.50	– 0.53%
FTSE100	7109.02	+ 21.12	0.30%
DAX30	15852.79	+ 44.75	0.28%

By Greg Peel

Bargain Hunters Appear

On the back of Wall Street’s (defensive) rebound on Friday our futures had suggested up 35 yesterday morning and the ASX200 duly added 31 points in the first ten minutes. At 11.20am it was back to square.

Another 800-plus cases in NSW and 60-odd in Victoria did little for sentiment, but a sudden turnaround had the index back up 36 points by 1pm, before drifting to the close.

The embattled materials sector led the gains in index clout terms, rising 0.6% on an iron ore price bounce, supported by 0.3% gains for the banks and healthcare and 0.5% for consumer discretionary.

The ever volatile lithium sub-sector was boosted by a chart-topping 11.4% rebound for Pilbara Minerals ((PLS)), having fallen -5.6% on Friday.

Technology topped the percentages (+1.7%) on the Nasdaq bounce, along with a 7.1% jump for Appen ((APX)) ahead of its result this week and a 6.9% gain for Nearmap ((NEA)) on what appears a delayed reaction after reporting last week.

Property (+0.9%) and utilities (+0.3%) followed the Wall Street defensive charge but staples (-0.4%) was the day’s worst performer, along with energy (-0.3%). Watch out for energy today.

Among the day’s reporting stocks, nib Holdings ((NHF)) was the train wreck of the session, falling -11.0%. Note that health insurers are insurers (financials sector) and not healthcare.

G8 Education ((GEM)) was another reporting victim (-5.7%), while TPG Telecom ((TPG)) fell -5.8%, having reported on Friday. Ampol ((ALD)) fell -4.8% on a report which included the announcement of a takeover bid for a Kiwi lookalike.

Charter Hall Group ((CHC)) was the only reporter on the day to make the top five index winners (+6.5%). Outside the index, Prospa Group ((PGL)) rose 14.6% on its result.

There are close to twice as many companies reporting today as reported yesterday so plenty more action ahead on that front. Oil prices have bounced hard overnight, base metals saw strength across the board, but iron ore has dipped back again.

And the Aussie’s shot back up 1.1%.

The rally that began mid-session on Thursday night on Wall Street kicked on last night, but with a complete switch of sentiment. Cyclicals were front and centre while defensives were left behind.

Yet on a 0.9% gain for the S&P500, our futures are up only 10 points this morning, which in recent experience seems a bit muted.

Cases Count

China reported zero cases yesterday. Gladys take note: Rapid results can be achieved if you don’t fanny about and just slam the place shut.

Having shot up exponentially, case numbers in the recalcitrant southern US states appear to now be rolling over, notably in hardest hit Florida.

The FDA officially approved Pfizer’s vaccine last night. Just as well.

To the latter, the point here is much of US vaccine “hesitancy” has been not among the true anti-vaxxers or political nutters but among those fearful the vaccines were simply approved for emergency use too hastily in historical terms. Full approval requires months of trials to ensure no dangerous side-effects emerge, and to see if the vaccines are indeed efficacious.

Full approval – and Moderna is expected to follow swiftly – implies these people will now be rolling up their sleeves.

If China has delta now under control, it removes a significant headwind for the global economy. As for the US situation, experts have long been drawing on the experiences of India and the UK: just when it appeared delta was running out of control, it burnt itself out.

Just like SARS did earlier this century. A vaccine for SARS was never found.

Put all of this together and Wall Street went back into full rally mode last night. The energy sector led the S&P with a 3.8% gain thanks to a solid bounce in the WTI price, while the cyclical stocks and sectors that dominated last week’s pullback all got a new lease of life.

The Nasdaq hit a new all-time high. The S&P500 fell a point short.

Renewed enthusiasm saw the investors switch out of the defensive sectors that had begun the rebound on Thursday night – staples, REITs, utilities – and back into the “reopening” play.

Adding to confidence is the increasing belief Jerome Powell will not use his Friday night speech at Jackson Hole to announce a taper plan, given delta remains a drag on economic recovery. He may not even touch on the subject.

So it’s as you were on Wall Street – onward ever upward.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1805.50	+ 24.80	1.39%
Silver (oz)	23.63	+ 0.61	2.65%
Copper (lb)	4.10	+ 0.02	0.58%
Aluminium (lb)	1.18	+ 0.02	1.52%
Lead (lb)	1.13	+ 0.01	1.01%
Nickel (lb)	8.57	+ 0.19	2.22%
Zinc (lb)	1.34	+ 0.00	0.20%
West Texas Crude	65.64	+ 3.50	5.63%
Brent Crude	68.76	+ 0.58	0.85%
Iron Ore (t)	136.50	– 2.60	– 1.87%

The news out of China was enough to spur on base metals once more, although not iron ore. Aside from Beijing’s crackdown on steel production, floods in China have halted production so analysts expect a rebound may be on the cards once these recede.

After a seven-day losing streak – the first since 2019 – WTI crude shot up thanks to China and a likely short-covering scramble.

On a combination of commodity price recovery, and a US dollar down -0.5% as the flight to safety trade eases, the Aussie is up 1.1% at US$0.7214.

Today

The SPI Overnight closed up 10 points.

The list of today’s reporting companies is too long to identify highlights but I should point out that the lagging round of ex-dividends notably picks up pace from this week and through September.

So keep an eye out.

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
ADH	Adairs	Upgrade to Add from Hold	Morgans
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
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
CWY	Cleanaway Waste Management	Upgrade to Neutral from Underperform	Credit Suisse
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
ING	Inghams Group	Downgrade to Hold from Add	Morgans
NCM	Newcrest Mining	Downgrade to Neutral from Buy	Citi
		Downgrade to Neutral from Outperform	Macquarie
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
S32	South32	Upgrade to Add from Hold	Morgans
SGM	Sims	Downgrade to Neutral from Buy	UBS
SGP	Stockland	Upgrade to Hold from Lighten	Ord Minnett
SIQ	Smartgroup Corp	Upgrade to Add from Hold	Morgans
SXL	Southern Cross Media	Upgrade to Outperform from Neutral	Macquarie
TPG	TPG Telecom	Downgrade to Hold from Buy	Ord Minnett
VCX	Vicinity Centres	Downgrade to Neutral from Outperform	Macquarie
VVA	Viva Leisure	Downgrade to Neutral from Buy	Citi

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms