Daily Market Reports | Mar 14 2022
This story features NICKEL INDUSTRIES LIMITED. For more info SHARE ANALYSIS: NIC
The company is included in ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7076.00 | + 25.00 | 0.35% |
| S&P ASX 200 | 7063.60 | – 67.20 | – 0.94% |
| S&P500 | 4204.31 | – 55.21 | – 1.30% |
| Nasdaq Comp | 12843.81 | – 286.16 | – 2.18% |
| DJIA | 32944.19 | – 229.88 | – 0.69% |
| S&P500 VIX | 30.75 | + 0.52 | 1.72% |
| US 10-year yield | 2.00 | – 0.01 | – 0.35% |
| USD Index | 99.12 | + 0.60 | 0.61% |
| FTSE100 | 7155.64 | + 56.55 | 0.80% |
| DAX30 | 13628.11 | + 186.01 | 1.38% |
By Greg Peel
Taking Cover
I suggested on Friday morning the local market would likely pull back in Friday’s session given no one wants to take risk home at such a time. Despite the futures suggesting a -38 point fall, the ASX200 opened up 21 points and hung there for around 40 minutes.
Then the inevitable set in.
While Australia is not seeing the magnitude of inflation being experienced in the US, which printed 7.9% on the CPI on Thursday night, no one expects anything other than rising inflation from here, tied specifically to the oil price. It has already been well noticed at the pump.
Hence only three sectors closed higher on Friday, being the “inflation sectors” themselves. Energy rose 0.3%, materials 0.1% and utilities 0.5%. Everything else was sold.
Consumer discretionary is one sector set to suffer as Australians cut back on spending. It fell -2.6%. But transport costs are a big factor for groceries, and here some frugality can also be exhibited. Staples fell -1.2%.
There follows a knock-on effect to landlords. Property fell -2.3%. Even spending on healthcare (-2.3%) could suffer.
Put it all together and strained household budgets are an issue for the banks (-0.6%), and more so if interest rates rise, despite the positive impact on margins.
The biggest fall was, of course, reserved for technology (-3.2%). That sector is now down over -20% from its high. While the threat of higher interest rates impacts on growth stocks, and the Nasdaq had fallen -2.2% overnight, the impact of strained household budgets on consumer spending will flow through to BNPL.
Zip Co ((Z1P)) was the worst index performer on Friday, falling -7.6%, to below its current share purchase plan (SPP) price.
Speaking of SPPs, Nickel Mines ((NIC)) has now suspended its own, due to uncertainty in the nickel market. Nickel trading on the LME remains suspended until Tsingshan’s big short position can be worked out.
Otherwise, the top five index winners on the day were all miners, representing a mix of lithium, iron ore, aluminium, and a spread of other metals and minerals.
Nothing specifically new emerged over the weekend, other than the war is ongoing.
The futures nevertheless closed up 25 points on Saturday morning, despite the S&P500 falling -1.3% on Friday night.
Week Five
Following the latest round of Russia-Ukraine talks, Putin told his Belarusian counterpart there’d been “positive shifts”. Despite the ludicrousness of this comment, other than to carry on the disinformation campaign aimed at the Russian people, the Dow opened up 300 points on Friday night.
Wall Street will jump on any little snippet.
When the Ukrainian foreign minister later noted that he hadn’t seen any progress, it was back to the current script.
The Dow ultimately booked its fifth straight down-week.
The move now, led by the US, is for an end to “normal trade relations” with Russia. What does this mean? No more Stollie and caviar. Biden acknowledged the economic hardship the world will endure as a result of making it even harder for Moscow to do business, but explained Western nations were showing restraint to avoid starting World War III.
On Friday night Goldman Sachs cut its US GDP growth forecast for 2022 to 1.75% from a prior 2.00%, with consensus sitting at 2.75%. Goldman increased its “chance of recession” odds to 35%.
The University of Michigan’s bi-monthly consumer sentiment index has fallen to 59.7 from 62.8 at the end of February. Bear in mind this is a 100-neutral index. The inflation expectation segment of the survey rose to a 40-year high.
“Personal finances were expected to worsen in the year ahead by the largest proportion since the surveys started in the mid-1940s,” noted UMich.
US-listed Chinese stocks were again under pressure on Friday night, after the US Securities & Exchange Commission gave Chinese companies three years to provide independently audited financials, or be de-listed. Given Beijing has banned Chinese companies from the disclosure of financials to foreigners, it’s a bit of a no-brainer unless Xi changes his tune.
The alternative is to list in Hong Kong, which said companies are considering, except for ride-share company Didi, which has been prohibited from doing so. Beijing does not support a “gig economy”.
Didi fell -44%.
Meanwhile, the Nasdaq is now firmly in “bear market” territory on a slide in excess of -20%. One could argue the value of semantics, but the reality is many of the tech superstars of the covid era have been in an undeniable bear market all year. The latest victim is Docusign, which fell -20% on its earnings report on Friday night and is down -52% year to date.
And that’s one of the lesser falls.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1991.10 | – 11.40 | – 0.57% |
| Silver (oz) | 25.95 | + 0.02 | 0.08% |
| Copper (lb) | 4.59 | – 0.00 | – 0.07% |
| Aluminium (lb) | 1.67 | + 0.01 | 0.86% |
| Lead (lb) | 1.05 | – 0.04 | – 3.56% |
| Nickel (lb) | 17.32 | 0.00 | 0.00% |
| Zinc (lb) | 1.74 | – 0.06 | – 3.30% |
| West Texas Crude | 109.33 | + 2.85 | 2.68% |
| Brent Crude | 112.67 | + 2.94 | 2.68% |
| Iron Ore (t) | 154.50 | – 1.85 | – 1.18% |
Until the Tsingshan situation is worked out, nickel trading cannot resume on the LME. Traders would simply attempt to blow Tsingshan up.
After their snap-back from panic highs last week, oil prices were on the move back up on Friday night.
The suggestion is that even if Saudi Arabia were to use its spare capacity to relieve the European energy crisis, it would never be anywhere like enough. And the Saudis are apparently determined not to pick a side in the conflict.
Gas is even more problematic, as without a pipeline, gas must first be converted to LNG for transport, making the price prohibitive anyway.
For the Aussie, it appears the benefit of strong commodity prices is overcome by the monetary policy imbalance of an eager Fed and a patient RBA. It’s down -0.9% at US$0.7295, with the greenback up 0.6%.
The SPI Overnight closed up 25 points or 0.4% on Saturday morning.
The Week Ahead
This week will be all about the Fed meeting, notwithstanding the war. A 25 point hike is baked in but Wall Street will want to know how the FOMC plans to manage its attack on inflation as the US economy slows.
All will be revealed on Thursday morning our time.
US February wholesale inflation data (PPI) are out tomorrow night, along with February retail sales.
The Banks of England and Japan hold policy meetings this week.
New Zealand reports December quarter GDP.
Locally we’ll see February jobs numbers on Thursday. Thursday also brings the expiry of March quarter ASX derivatives.
Previously announced changes to the ASX indices become effective on Friday.
Note that as snow fell across the US over the weekend, the clocks went forward for summer. As of tomorrow 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 |
| 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 |
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