Daily Market Reports | Mar 15 2022
This story features ELDERS LIMITED, and other companies. For more info SHARE ANALYSIS: ELD
The company is included in ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7087.00 | – 61.00 | – 0.85% |
| S&P ASX 200 | 7149.40 | + 85.80 | 1.21% |
| S&P500 | 4173.11 | – 31.20 | – 0.74% |
| Nasdaq Comp | 12581.22 | – 262.59 | – 2.04% |
| DJIA | 32945.24 | + 1.05 | 0.00% |
| S&P500 VIX | 31.77 | + 1.02 | 3.32% |
| US 10-year yield | 2.14 | + 0.14 | 6.79% |
| USD Index | 99.07 | – 0.05 | – 0.05% |
| FTSE100 | 7193.47 | + 37.83 | 0.53% |
| DAX30 | 13929.11 | + 301.00 | 2.21% |
By Greg Peel
Flip-Flop
The ASX200 was down -67 points on Friday and up 85 yesterday, and this morning the futures are down -61. It’s barely worth trying to pin an explanation on each day’s move at present.
Friday’s fall appeared to flow from yet another spike in US inflation, with all sectors bar resources being sold down on what could be labelled a “household financial stress” theme. Yesterday, all the same sectors rallied strongly, with only the materials sector closing in the red (-0.3%).
Yesterday’s session lasted all of half an hour. That’s how long it took to get to the day’s high, before not moving for the rest of the session. The banks were the primary driver – up 2.5%, having fallen -0.6% on Friday. What changed?
US futures were showing positive signs throughout our session, as Ukraine and Russia entered another round of talks. Given the three rounds beforehand had yielded nothing, why another round was going to make any difference is anyone’s guess. What’s that definition of insanity?
Still, you do not want to be left behind if the world is startled by a ceasefire, unlikely as that seems.
Not at all impacting on the market yesterday was news the Chinese manufacturing hub of Shenzhen has been locked down due to covid. This implies further supply disruption, and as one example two suppliers of parts to Apple have been forced to shut down. More supply issues, more inflation.
Except for the counter-influence. Base metals all fell in London last night (except nickel, still halted), with aluminium down -3.6%. Iron ore fell -6.2% yesterday. West Texas crude is down -6.7% overnight. All are reflections of assumed lower demand from China, due to the lockdown (as well as another driver for oil, see below).
US and Chinese officials met last night. During seven hours of “intense” discussion, China was warned it would be next on the sanction list if it provides assistance to Russia. According to reports, it is. If the US sanctions China, will Australia follow?
Every stock on the index top five winners’ board on Friday was a mining stock. Four of the five stocks on the losers’ board yesterday were mining stocks.
The top five yesterday was a hotch-potch, led out by Elders ((ELD)), which gained 11.0% on a trading update.
US bond yields surged last night, sending the Nasdaq plunging yet again. Block was down -7%. As noted, our futures are down -61 this morning. At least that’s not a surprise.
Clutching at Straws
Hopes regarding the aforementioned Ukraine-Russia talks had the Dow up 450 points from the open last night, and the US ten-year bond yield up 14 points to 2.14%, ahead of this week’s Fed meeting.
Why the ten-year would jump so fast is unclear, other than assuming the Shenzhen lockdown just means more inflation, given economists expect the war to possibly temper the Fed’s otherwise aggressive policy intentions. The feeling at present is four rates hikes in 2022 are now likely, rather than the seven being talked about before the invasion. But the interest rate markets are still pricing in seven.
The ten-year yield is now up 40 points from its invasion low.
The jump in yields was, of course, another knife in the back for the Nasdaq, which fell -2% last night when the Dow closed flat, and is now down -22% from its high. The S&P500 is down -13%.
Adding to that fall was another bad night for Chinese internet stocks, which are mostly based in Shenzhen. Add in Beijing’s clampdown on anything it can’t otherwise control, and US regulatory hurdles, and the Chinese tech ETF listed in New York is down -40% year to date.
While the Shenzhen lockdown is currently only planned for one week, the fear is Beijing’s futile “zero-covid” policy will lead to lockdowns in other major Chinese cities, as China, like everyone else, battles a more widespread omicron wave.
And let’s not mention possible sanctions on China if it is indeed found to be assisting Russia.
Back at the war, if there is any minute glimmer of hope stemming from last night’s Ukraine-Russia talks, it is they didn’t actually end this time. Nothing was agreed upon, other than to resume talking tonight, which may possibly be a positive sign.
Is Putin going to back down?
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1954.00 | – 37.10 | – 1.86% |
| Silver (oz) | 25.07 | – 0.88 | – 3.39% |
| Copper (lb) | 4.49 | – 0.10 | – 2.23% |
| Aluminium (lb) | 1.61 | – 0.06 | – 3.59% |
| Lead (lb) | 1.04 | – 0.02 | – 1.63% |
| Nickel (lb) | 17.32 | 0.00 | 0.00% |
| Zinc (lb) | 1.72 | – 0.02 | – 1.34% |
| West Texas Crude | 102.04 | – 7.29 | – 6.67% |
| Brent Crude | 106.07 | – 6.60 | – 5.86% |
| Iron Ore (t) | 144.90 | – 9.60 | – 6.21% |
Long before sanctions were slapped on Russia, the US had sanctioned oil producer and OPEC member Venezuela, banning oil imports. Reports suggest Biden is looking to offer Venezuela oil-for-debt swaps as a means of increasing US supply lost from the ban of Russian imports, in order to tackle consumer fuel prices.
Another reason oil fell back fairly hard last night.
Metals prices were down on the lockdown, while gold dropped sharply on the equally sharp jump in US bond yields.
Once again the Aussie is a commodity currency, so it’s down -1.4% at US$0.7202.
Today
The SPI Overnight closed down -61 points or -0.9%.
Australia will see numbers for December quarter house prices today, half way through March.
The US February PPI is out tonight, along with retail sales.
News Corp ((NWS)) is among those stocks going ex-dividend today.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| DCN | Dacian Gold | Downgrade to Underperform from Outperform | Macquarie |
| EVN | Evolution Mining | Downgrade to Underperform from Neutral | Macquarie |
| GOR | Gold Road Resources | Downgrade to Underperform from Outperform | Macquarie |
| NIC | Nickel Mines | Downgrade to Neutral from Outperform | Credit Suisse |
| Downgrade to Neutral from Outperform | Macquarie | ||
| Downgrade to Hold from Accumulate | Ord Minnett | ||
| NST | Northern Star Resources | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| PRU | Perseus Mining | Downgrade to Neutral from Outperform | Macquarie |
| RRL | Regis Resources | Downgrade to Neutral from Outperform | Macquarie |
| Downgrade to Equal-weight from Overweight | Morgan Stanley | ||
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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