The Monday Report – 22 November 2021

This story features ALS LIMITED, and other companies. For more info SHARE ANALYSIS: ALQ

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

World Overnight
SPI Overnight	7351.00	– 45.00	– 0.61%
S&P ASX 200	7396.50	+ 17.30	0.23%
S&P500	4697.96	– 6.58	– 0.14%
Nasdaq Comp	16057.44	+ 63.73	0.40%
DJIA	35601.98	– 268.97	– 0.75%
S&P500 VIX	17.91	+ 0.32	1.82%
US 10-year yield	1.54	– 0.05	– 3.34%
USD Index	96.03	+ 0.49	0.51%
FTSE100	7223.57	– 32.39	– 0.45%
DAX30	16159.97	– 61.76	– 0.38%

By Greg Peel

Meandering

The ASX200 closed positively on Friday after meandering in a 30 point range that showed little sign of commitment. It was all to naught as the futures were down -45 points on Saturday morning.

It was the first session in some time showing no sector move by 1% or more in either direction. Healthcare came close (+0.9%), likely supported by a certain virus that just won’t go away and with help from the weakening Aussie.

Staples continue to be favoured (+0.7%) and it was a positive session for the resource sectors – both up 0.6% — but oil took a tumble on Friday night so energy will be sold down today. Iron ore had a bit of a pop nonetheless.

Industrials was the worst performer (-0.6%) after ALS Ltd ((ALQ)) fell -3.9% having reported earnings last week. Financials were flat and other sectors moves were insignificant.

Crown Resorts ((CWN)) was the best performing stock on the day (+16.6%) after Blackstone came in with another bid at $12.50. It would require Jamie to sell his 37% stake, but I think that’s a requirement anyway.

Nanosonics ((NAN)) is in either the top five winners or losers most days and it was the worst performer in falling -4.9% post AGM.

Not much more to say really. We note the S&P500 closed up 0.3% on Thursday night and the ASX200 up 0.2% on Friday, while the S&P closed down -0.1% on Friday night and our futures suggest down -0.6% for the ASX200 today.

It’s a hard slog.

War in Europe

US covid hospitalisations fell -50% over the past two months which is perhaps one reason why the US has dithered over the question of booster shots. Before Friday night, it had recommended booster shots only for those over 60 or with pre-conditions.

But the alarming surge in cases in Europe, including hospitalisations for the double-dosed, has only served to prove what Israel warned the world about months ago – vaccine effectiveness wanes over time. Cases are out of control in Germany, the Netherlands and the Scandies and Austria has gone back into lockdown.

On Friday night the FDA voted to approve booster shots for all, suggesting anyone can get a shot if they want, and those over 50 should.

The latest wave is again playing havoc with the likes of airline and cruise line stocks and oil prices have subsequently tumbled.

On the flipside, outperformance in the Nasdaq on Friday night hints of both a shift to defensive growth and the possibility the “stay at home” trade will once again be back on. As at last week, the number of double-dosed Americans stood at less than 60%.

On Wednesday and Thursday last week, the US new case-count topped 100,000, with Midwest states and Chicago in particular facing new waves coming into one of the busiest US travel weeks of the year.

The return of rotation into growth was clearly evident not just on Friday but the week as a whole. Over that period the Dow fell -1.4% and the Nasdaq rose 1.4% to a new high.

The Democrats’ US$1.85trn social spending bill was passed in the House on Friday night but with little fanfare, as it now has to face the Senate.

Of more interest on Wall Street is the pending White House decision on whether Jerome Powell or Lael Brainard will be Fed chair next year. The fact an announcement was expected by week’s end but didn’t materialise may not look good for Powell, although Wall Street is backing the incumbent as he has led the US through the pandemic up to now.

Irrespective of who gets the nod, two Fed officials suggested on Friday night that due to persistent inflation, the Fed may have to speed up its planned tapering program, and announce such at next month’s meeting.

Despite the implication, Wall Street rotated into growth and the US ten-year yield fell -5 basis points to 1.54%, although we can point to Europe as the outside influence.

Similarly, the relentless rise of the US dollar reflects the expectation of a rate rise in the US far sooner than would be the case in the EU.

On the subject of inflation, Foot Locker reported earnings on Friday night, beat on every metric, raised guidance, and promptly fell -12%. Its mistake was to warn of ongoing supply shortages throughout the fourth quarter, albeit declared it was ready with sufficient inventory.

There may be some frantic action over the next two sessions and up to around lunchtime Wednesday ahead of Wall Street emptying to get home for Thanksgiving. Thursday is a holiday and Friday sees only a half-hearted half session.

A lot of US data releases will be crammed into those three days prior.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1845.00	– 12.60	– 0.68%
Silver (oz)	24.56	– 0.22	– 0.89%
Copper (lb)	4.35	+ 0.03	0.65%
Aluminium (lb)	1.20	+ 0.00	0.13%
Lead (lb)	1.02	– 0.01	– 0.57%
Nickel (lb)	8.95	+ 0.20	2.26%
Zinc (lb)	1.47	+ 0.02	1.30%
West Texas Crude	75.94	– 3.07	– 3.89%
Brent Crude	78.89	– 2.34	– 2.88%
Iron Ore (t)	91.30	+ 4.10	4.70%

The rising greenback continues to weigh on commodity prices but on the flipside is the demand/supply balance.

Tight supply meeting increased demand has driven oil prices higher this year, but if more European countries go back into lockdown, just as world leaders are discussing a coordinated release of Strategic Petroleum Reserves, then both demand and supply will play against prices.

Mind you, analysts agree SPR releases may hold prices down for a couple of months, but that’s all. Goldman Sachs pointed out the bleeding obvious on Friday night – if the US SPR is drained, it then has to later be refilled.

The Aussie has matched the greenback’s rise with a -0.5% fall to US$0.7238.

The SPI Overnight closed down -45 points or -0.6% on Saturday morning.

The Week Ahead

The US will see numbers for existing home sales tonight and then on Wednesday, new home sales, durable goods, consumer sentiment and PCE inflation, along with the minutes of the November Fed meeting and a revision of September quarter GDP, before the holiday Thursday.

The RBNZ meets on Wednesday. Japan is closed tomorrow.

In Australia we’ll see two important lead-in numbers ahead of next week’s GDP result, being construction work done on Wednesday and private sector capex on Thursday.

While not as extensive as the past two weeks, the list of AGMs is still sizeable this week before numbers fade to nothing much in December.

Mesoblast ((MSB)) reports earnings today, TechnologyOne ((TNE)) tomorrow, Virgin Money UK ((VUK)) and Webjet ((WEB)) on Wednesday and Fisher & Paykel Healthcare ((FPH)) on Thursday.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ALX	Atlas Arteria	Upgrade to Outperform from Neutral	Macquarie
APE	Eagers Automotive	Upgrade to Buy from Accumulate	Ord Minnett
CAJ	Capitol Health	Upgrade to Buy from Accumulate	Ord Minnett
EVN	Evolution Mining	Upgrade to Buy from Neutral	Citi
IPL	Incitec Pivot	Downgrade to Accumulate from Buy	Ord Minnett
SEK	Seek	Downgrade to Neutral from Buy	UBS

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

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