Daily Market Reports | Mar 11 2022
This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: FLT
The company is included in ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7093.00 | – 38.00 | – 0.53% |
| S&P ASX 200 | 7130.80 | + 77.80 | 1.10% |
| S&P500 | 4259.52 | – 18.36 | – 0.43% |
| Nasdaq Comp | 13129.96 | – 125.58 | – 0.95% |
| DJIA | 33174.07 | – 112.18 | – 0.34% |
| S&P500 VIX | 30.23 | – 2.22 | – 6.84% |
| US 10-year yield | 2.01 | + 0.06 | 3.23% |
| USD Index | 98.52 | + 0.55 | 0.56% |
| FTSE100 | 7099.09 | – 91.63 | – 1.27% |
| DAX30 | 13442.10 | – 405.83 | – 2.93% |
By Greg Peel
Oil’s Well
The ASX200 surged from the open yesterday, peaking at over 100 points up at lunchtime before settling back in the afternoon. It was all about the -12% fall overnight in oil prices.
The S&P500 had closed up 2.6%, and in energy-impacted Europe, the German market had jumped 7.9%, all because two OPEC members suggested they might be able to increase their production. There has been no actual confirmation, but oil prices were again down last night – slightly by comparison.
The impact was, of course, negative for the energy sector (-2.5%), and utilities ticked lower (-0.1%), while metals prices have continued to slip back, particularly gold on Wednesday night, hence materials also dropped (-1.8%).
For most other sectors, it was off to the races.
Consumer discretionary is clearly a beneficiary of lower fuel costs (+2.9%), and this spilt over to property (+2.5%). Healthcare and industrials were also in the 2%-plus club but while technology rose 3.3%, the standout was financials, up 2.8%.
It’s a bit of a double-whammy for banks if household budget stress eases on lower oil prices, and bond yields head back up again, as they did in the US overnight and here yesterday. The Aussie ten-year yield rose 5 points to 2.36%.
Telcos had posted a solid gain on Wednesday so it was a straggler yesterday (+0.7%), while staples have to date been the greatest beneficiary of war so that sector rose only 0.2%.
The jump in consumer discretionary was led by the travel agents, with heavily shorted Flight Centre ((FLT)) gaining 6.6% and Webjet ((WEB)) 5.8%, while Qantas ((QAN)) led industrials up 2.7% with a 5.8% gain.
Technology was all about Block ((SQ2)), which is irrelevant (US shares down last night), while talk of sanctions regarding a Russian uranium company had Paladin Energy ((PDN)) topping the boards with an 11.0% jump.
On the flipside, Nickel Mines’ ((NIC)) woes continue (-13.2%) as uncertainty remains over its major Chinese shareholder, which was caught short nickel (nickel still suspended on the LME).
Rio Tinto ((RIO)) fell -7.7% but only after going ex. Oil & gas companies and gold miners otherwise filled out the lower places.
It was an unfamiliar “risk-on” session overall yesterday, as usually resources are a big driver of risk-on but yesterday it was all about resource weakness being cheered.
Wall Street nonetheless took a big tumble last night in its CPI numbers before recovering the bulk of the loss. Our futures are down -38 this morning.
Just the Support Act
The latest talks between Russia and the Ukraine ended with no agreement last night. I doubt anyone is surprised.
It should not have come as any great surprise either that the US February CPI rose 0.8% in the month (forecasts were for 0.7%) to a 7.9% annual rate – the highest since 1982. The bulk of the increase came from energy and food, which are not counted in the core CPI, but it rose 0.5% to 6.4% annual – again the highest level since 1982.
The inflation numbers were supposed to start easing by now, but the war will make things much, much worse. Russia invaded Ukraine four days before the end of February. The March numbers will be the real indicator, as Wall Street knows full well.
Yet this didn’t stop the US ten-year yield from rising 6 points last night to 2.1%, with the 2% level being somewhat of a sentimental line in the sand. The Dow smartly dropped -460 points from the open, having risen 650 on Wednesday night.
The initial falls were to a great extent recovered by the close, but rising yields again hit the growth stocks that had surged on Wednesday night. The Nasdaq fell -1.0% having jumped 3.6% the night before.
The fall is more notable given Amazon announced a 20-for-1 stock split last night and rose 5.4%, despite a stock split having no net effect on valuation. Stock splits tend to be psychologically positive as a share price of US$146.80, which is one twentieth of last night’s Amazon closing price of US$2936, seems much more accessible to retail investors (even though it makes no difference whatsoever, and one can buy fractions of shares anyway).
What it does mean, nonetheless, is Amazon would now be eligible for inclusion in the Dow.
In other news, the ECB met last night and left its cash rate unchanged but called Russia’s invasion of Ukraine “a watershed for Europe”, and said it will speed up the tapering of its asset-buying program (QE) in response to rising inflationary pressures.
This despite Christine Lagarde noting “The Russian invasion of Ukraine will negatively affect the euro-area economy”. Having risen 7.9% on Wednesday night, the German stock market fell back -2.9% last night.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 2002.50 | + 13.00 | 0.65% |
| Silver (oz) | 25.93 | + 0.32 | 1.25% |
| Copper (lb) | 4.60 | – 0.00 | – 0.07% |
| Aluminium (lb) | 1.66 | + 0.06 | 3.70% |
| Lead (lb) | 1.09 | + 0.00 | 0.14% |
| Nickel (lb) | 17.32 | 0.00 | 0.00% |
| Zinc (lb) | 1.80 | – 0.02 | – 0.90% |
| West Texas Crude | 106.48 | – 3.13 | – 2.86% |
| Brent Crude | 109.73 | – 2.37 | – 2.11% |
| Iron Ore (t) | 156.35 | – 1.20 | – 0.76% |
Metals traders are anticipating a likely ban on Russian aluminium exports with the war continuing, as Russia represents 12% of global aluminium exports, mostly to Europe.
Otherwise, it looks a bit “rabbit in the headlights” in other metals at present.
Gold managed to regain some of the ground lost on Wednesday night, despite the rise in US yields.
The Aussie doesn’t seem to know whether it’s Arthur or Martha right now either, gaining another 0.5% to US$0.7364 even as the greenback bounced back 0.6%.
Today
The SPI Overnight closed down -38 points or -0.5%.
Given yesterday’s solid rally, it’s a fair bet the ASX200 will pull back today given traders will not want to carry positions over the weekend, when anything could happen.
The US will see the latest consumer sentiment data tonight.
Note that the US will go on to summer time this weekend, meaning as of Tuesday morning Wall Street will close at 7am Sydney time, as will the SPI Overnight.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BPT | Beach Energy | Downgrade to Underperform from Neutral | Macquarie |
| IPL | Incitec Pivot | Upgrade to Outperform from Neutral | Credit Suisse |
| MIN | Mineral Resources | Upgrade to Buy from Neutral | Citi |
| NIC | Nickel Mines | Downgrade to Neutral from Outperform | Credit Suisse |
| Downgrade to Hold from Accumulate | Ord Minnett | ||
| PAR | Paradigm Biopharmaceuticals | Downgrade to Reduce from Hold | Morgans |
| RIO | Rio Tinto | Downgrade to Neutral from Buy | Citi |
| SHL | Sonic Healthcare | Upgrade to Buy from Hold | Ord Minnett |
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CHARTS
For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED
For more info SHARE ANALYSIS: NIC - NICKEL INDUSTRIES LIMITED
For more info SHARE ANALYSIS: PDN - PALADIN ENERGY LIMITED
For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED
For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED
For more info SHARE ANALYSIS: WEB - WEB TRAVEL GROUP LIMITED