Daily Market Reports | Mar 18 2022
| World Overnight | |||
| SPI Overnight | 7255.00 | + 37.00 | 0.51% |
| S&P ASX 200 | 7250.80 | + 75.60 | 1.05% |
| S&P500 | 4411.67 | + 53.81 | 1.23% |
| Nasdaq Comp | 13614.78 | + 178.23 | 1.33% |
| DJIA | 34480.76 | + 417.66 | 1.23% |
| S&P500 VIX | 25.67 | – 1.00 | – 3.75% |
| US 10-year yield | 2.19 | + 0.00 | 0.18% |
| USD Index | 98.02 | – 0.36 | – 0.37% |
| FTSE100 | 7385.34 | + 93.66 | 1.28% |
| DAX30 | 14388.06 | – 52.68 | – 0.36% |
By Greg Peel
On the Bandwagon
Following the mostly China-driven rally on Wednesday, yesterday’s rally on the ASX was Wall Street driven, as investors cheered the Fed’s hawkish policy. Not only do we have the world’s two largest economies in juxtaposition – Chinese stimulus versus Fed tightening – both are currently seen as positive.
Chinese stimulus is obvious but for Wall Street, confirmation from the Fed that it is now in lock-step with the market removes uncertainty at a time the stock market had become oversold.
The ASX200 shot up 120 points in the first half hour, which was a bit much, and probably reflected the March quarter derivatives expiry. The release of the jobs numbers sparked some more buying from a morning dip but eventually the index settled back to the close.
The bottom line on the February jobs numbers is that basically every metric beat expectation. The fall in unemployment to 4.0% from 4.2% was more than forecast, the increase in participation more than forecast, and ditto the actual number of jobs created. Apparently it was all about Girl Power. And hours worked flipped back from omicron-driven losses in January.
The biggest percentage mover on the stock market yesterday was again technology (+3.6%), as the Nasdaq rally continued into a second day. The usual suspects finished atop the index leaders’ board, with the BNPLs front and centre.
But once again it were the banks providing the clout (+1.0%), with the Aussie two-year yield rising 5 points to 1.32% and the tens 2 points to 2.51%. The RBA might be insisting it will be patient, but a seven-hike Fed policy is a little hard to ignore.
Most other sectors posted gains around the 1% mark as well, with only staples (-0.2%) and utilities (-0.6%) falling back. Energy rose only 0.3% but today could be its day.
The ASX200 is now up 3.9% from its early March low with the banks largely leading the way as the resource sectors flip and flop. Today is Friday, and while Wall Street posted yet another strong session, and our futures are up 37 points this morning, the current “don’t take risk home over the weekend” theme may yet play out this afternoon.
We Like
One typically has to wait for the Thursday following a Fed meeting to ascertain exactly what Wall Street thinks of any policy changes, given time to assess more deeply. This week’s meeting brought not specifically a policy change but a policy confirmation that while more hawkish than expected, moved into line with market expectations.
It’s not every day Wall Street rallies on the prospect of seven consecutive rates hikes, but it’s all about where we’ve come from – correction territory. This also comes into play when we consider big jumps in oil prices have spooked Wall Street this month, but not last night, despite a 9% gain.
The Dow did open lower last night after Wednesday night’s big rally, but from mid-morning momentum begat momentum towards an accelerating move up to the close. The S&P500 is now up 6% from its early March low.
The jump back up in oil prices came as the International Energy Agency warned a greater number of barrels of oil could be lost from Russian exports than the market is assuming. There is nonetheless much uncertainty, as Goldman Sachs has gone the other way and suggested fewer, although Goldman did add the recent pullback in oil prices had been overdone on demand/supply balance.
In other news, Russia made good last night on two interest payments on its sovereign debt for a total of US$117m. Failure to do so would have sent Russia on track to default.
But it’s early days.
The Bank of England announced its third consecutive rate hike last night, to 0.75% from 0.50%.
Congress is set to pass a bill that would strip Russia and Belarus of permanent normalised trade status. It’s a bit of a gimme, as Biden has already “signed off” on the bill, if not literally.
China is next, if it doesn’t play nice.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1941.60 | + 18.30 | 0.95% |
| Silver (oz) | 25.37 | + 0.34 | 1.36% |
| Copper (lb) | 4.59 | + 0.04 | 0.89% |
| Aluminium (lb) | 1.63 | + 0.03 | 1.66% |
| Lead (lb) | 1.01 | – 0.01 | – 0.58% |
| Nickel (lb) | 16.69 | 0.00 | 0.00% |
| Zinc (lb) | 1.73 | + 0.01 | 0.74% |
| West Texas Crude | 103.61 | + 8.86 | 9.35% |
| Brent Crude | 106.90 | + 9.32 | 9.55% |
| Iron Ore (t) | 146.90 | + 1.45 | 1.00% |
There is trouble again for nickel traded on the LME. The removal of the trading halt was beset by technical glitches related to the exchange’s new limit system. Suffice to say last night nickel went “limit down”, and was halted again.
Other metals prices remain positive, with Chinese stimulus behind them.
Gold continues to creep back.
For the second session in a row, the Aussie has jumped over 1%, this time to US$0.7378. The Fed’s tightening cycle is expected to influence the RBA eventually, and the jobs numbers only underscore that expectation.
Today
The SPI Overnight (now June quarter contract) closed up 37 points or 0.5%.
The Bank for Japan meets today.
Changes to ASX index components, announced two weeks ago, become effective today.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BEN | Bendigo & Adelaide Bank | Upgrade to Outperform from Neutral | Credit Suisse |
| CBA | CommBank | Upgrade to Neutral from Underperform | Credit Suisse |
| CLV | Clover | Downgrade to Neutral from Buy | UBS |
| ELD | Elders | Downgrade to Neutral from Buy | Citi |
| PRU | Perseus Mining | Downgrade to Neutral from Buy | Citi |
| UWL | Uniti Group | Downgrade to Hold from Buy | Ord Minnett |
| XRO | Xero | Upgrade to Accumulate from Hold | Ord Minnett |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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