Daily Market Reports | Apr 04 2022
This story features AVZ MINERALS LIMITED, and other companies. For more info SHARE ANALYSIS: AVZ
The company is included in
| World Overnight | |||
| SPI Overnight | 7488.00 | + 19.00 | 0.25% |
| S&P ASX 200 | 7493.80 | – 5.80 | – 0.08% |
| S&P500 | 4545.86 | + 15.45 | 0.34% |
| Nasdaq Comp | 14261.50 | + 40.98 | 0.29% |
| DJIA | 34818.27 | + 139.92 | 0.40% |
| S&P500 VIX | 19.63 | – 0.93 | – 4.52% |
| US 10-year yield | 2.38 | + 0.05 | 2.15% |
| USD Index | 98.63 | + 0.28 | 0.28% |
| FTSE100 | 7537.90 | + 22.22 | 0.30% |
| DAX30 | 14446.48 | + 31.73 | 0.22% |
By Greg Peel
Soft Start
The last session of the March quarter on Thursday was weak on the local market but unsurprisingly so, as investors locked in profits following a 6.4% rally for the ASX200 in the month of March. It would have been safe to assume the first day of the next quarter would, ceteris paribus, see investors step back in.
But not so. The only saving grace for the index on Friday were rallies for energy (+1.2%) and materials (+1.3%), with utilities (+0.4%) and real estate (+0.1%) the only other sectors to close in the green.
The Australian economy enjoys a hedge via its resource sector size against the inflation driven by covid and exacerbated by the war. Energy and materials each rallied 10% in March to drive the 6.4% index gain.
On Friday it was all about lithium, and to a lesser extent iron ore. Every one of the top five index winners on the day was a lithium stock, led out by Allkem ((AKE)), up 8.5%, down to Novonix on 3.4%.
Lesser known AVZ Minerals ((AVZ)) rallied 5.3% and is now up over 1000% in a year.
Lithium stocks have enjoyed a renewed surge after the White House signalled its intention to shore up US supplies of battery materials and rare earths. Lynas Rare Earths ((LYC)) rallied 3.1%.
Meanwhile, Beijing’s new push to stimulate the Chinese economy (while at the same time locking the place down) has Chinese steelmakers moving to restock their iron ore supplies. Iron ore rose 6% on Friday. BHP Group ((BHP)) rose 1.2% and is nearing its all-time high of last year.
On the flipside, it seems the excitement has faded after the initial response to the Josh’s show bag of goodies, with consumer discretionary the second worst performer on Friday with a -1.4% fall, pipped only by communication services on -1.5%. Perhaps the market has come to realise that it’s not Australia’s economy that needs saving, rather the Coalition, and hand-outs only fuel further inflation.
The banks continue to come off their highs as well (-0.6%), following down US banks, while all of healthcare, industrials and technology suffered similar falls.
We begin the new week with oil prices off a bit, and metal prices mixed outside iron ore. With Wall Street closing higher, our futures closed up 19 points on Saturday morning.
It’s Official
US bond yields shot up again on Thursday night following the release of PCE inflation data, and once again on Friday night following the March jobs report. But the two-year shot up more than the ten-year.
The two-year closed at 2.46% and the ten-year at 2.39%, for a -7 point inversion. The thirty-year fell to 2.44%.
The US added 431,000 jobs in March which, while shy of 490,000 forecasts, it was still a very strong result. Add in revisions, and job additions have averaged 572,000 per month in the three months of 2022. The unemployment rate fell to 3.6% from 3.8% on increased participation, and hours worked rose.
Yet there remain 11 million job vacancies. Hence hourly pay is up 5.6% year on year, to the highest level since the 1980s.
While commentators continue to shrug off yield curve inversion, reiterating that inversion in the three-month to ten-year curve is the true indicator (three-month 0.53% on Friday), Wall Street also began April cautiously despite also having seen an end of quarter sell-off on Thursday night.
Indeed, with five minutes to go, all three major indices were flat, before closing up 0.3-0.4% on the death as June quarter buyers finally emerged.
An index garnering a lot of attention on Friday night was the Dow Transports, which fell -4.7%. The Dow Transports is separate to the Dow Industrials and contains trucking companies, rail companies, airlines and the like.
We recall that when US inflation began to take off this time last year, it was not just about supply shortages but about soaring freight rates, which in covid-ravaged America had a lot to do with a big deficit of available truck drivers. Well, as the strong jobs numbers might suggest, the truckies are back, in force. Indeed there were more in March than there were pre-pandemic.
The result is plunging freight rates. Good for everyone else, and a likely a signal of inflation easing ahead, but not good for transport companies. Another positive sign of possibly easing inflation comes from the US March manufacturing PMI -it rose to 58.8 from 57.3 in February- suggesting supply issues might also be easing.
That said, auto-makers are still being forced to temporarily shut down production due to supply constraints, mostly in chips.
If we look to what was a flat opening to the new quarter for Wall Street, if we discard the final five minutes, the suggestion is the jobs numbers only serve to reinforce the notion the Fed is going to go big and go hard in May, and perhaps beyond.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1925.60 | – 11.50 | – 0.59% |
| Silver (oz) | 24.61 | – 0.15 | – 0.61% |
| Copper (lb) | 4.64 | – 0.06 | – 1.19% |
| Aluminium (lb) | 1.68 | – 0.00 | – 0.08% |
| Lead (lb) | 1.10 | + 0.01 | 0.89% |
| Nickel (lb) | 14.97 | + 0.29 | 1.99% |
| Zinc (lb) | 1.91 | + 0.00 | 0.12% |
| West Texas Crude | 99.27 | – 1.75 | – 1.73% |
| Brent Crude | 104.39 | – 3.52 | – 3.26% |
| Iron Ore (t) | 159.98 | + 9.14 | 6.06% |
Iron ore is the standout with its 6% gain.
Oil weakness continues to reflect the biggest ever release of crude from the US Strategic Reserve, at 1m barrels per day, offset by the OPEC-Plus decision not to further increase its production quotas, which no one thought would happen anyway.
The Aussie continues to hover around 75 at US$0.7496.
The SPI Overnight closed up 19 points or 0.3% on Saturday morning.
The Week Ahead
The highlights in a relatively quiet week on the economic and corporate front will be the RBA policy meeting tomorrow and the release of the minutes of the March Fed meeting on Wednesday.
While the RBA is not expected to follow the Fed into rate hikes until the second half of this year, whatever the governor has to say will be closely monitored.
The Fed minutes will also be scrutinised for any signal the FOMC is ready for 50 points in May.
ANZ Bank’s job ads series for March is out today and our February trade balance on Thursday.
The US will also see trade numbers, along with factory orders.
China is closed today and tomorrow.
The local ex-dividend season has now slowed to a negligible trickle.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BOQ | Bank of Queensland | Downgrade to Neutral from Outperform | Macquarie |
| SGM | Sims | Downgrade to Neutral from Buy | UBS |
| TAH | Tabcorp | Upgrade to Outperform from Neutral | Credit Suisse |
| UWL | Uniti Group | Upgrade to Accumulate from Hold | Ord Minnett |
| WPL | Woodside Petroleum | Downgrade to Neutral from Buy | UBS |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website. Click here. (Subscribers can access prices on the website.)
(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com
FNArena is proud about its track record and past achievements: Ten Years On
Click to view our Glossary of Financial Terms
CHARTS
For more info SHARE ANALYSIS: AVZ - AVZ MINERALS LIMITED
For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED
For more info SHARE ANALYSIS: LYC - LYNAS RARE EARTHS LIMITED