Daily Market Reports | Jun 07 2022
This story features WOODSIDE ENERGY GROUP LIMITED. For more info SHARE ANALYSIS: WDS
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7207.00 | – 5.00 | – 0.07% |
| S&P ASX 200 | 7206.30 | – 32.50 | – 0.45% |
| S&P500 | 4121.43 | + 12.89 | 0.31% |
| Nasdaq Comp | 12061.37 | + 48.64 | 0.40% |
| DJIA | 32915.78 | + 16.08 | 0.05% |
| S&P500 VIX | 25.07 | + 0.28 | 1.13% |
| US 10-year yield | 3.04 | + 0.08 | 2.74% |
| USD Index | 102.39 | + 0.25 | 0.24% |
| FTSE100 | 7608.22 | + 75.27 | 1.00% |
| DAX30 | 14653.81 | + 193.72 | 1.34% |
By Greg Peel
Energetic
The futures said down -32 yesterday morning and sure enough the ASX200 closed down -32 points yesterday, but only with a little help from Morgan Stanley. Otherwise it would have been worse.
The broker had been on restriction pending the completion of the Woodside-BHP Petroleum merger, and has resumed coverage of the new Woodside Energy ((WDS)) with a glowing outlook, an Overweight rating and a database-topping $40 price target. This compares to a consensus target from the seven brokers in the FNArena database of $32.90, or $31.48 ex-Morgan Stanley.
Morgan Stanley calls the merger transformational and sees potential for a multi-year re-rate, considering the company one of the best global plays on gas.
Woodside shares rose 3.2% yesterday to be fourth best index performer, with rival Santos up 2.0% to come in fifth. Woodside was a top 20 stock before the merger and is now a mega-cap, while Santos’ recent merger with Oil Search puts the two well ahead of the oil & gas pack.
The energy sector rose a standout 2.1% yesterday, and utilities were dragged along by 0.7%. Aside from a 0.2% gain for healthcare, all other sectors closed in the red.
Materials took a backward step (-0.9%) after Friday’s rally, while tech fell -1.6%, telcos -1.1% and industrials -1.0%.
A generally soggy mood after Friday’s rally likely reflected a weak session on Friday night on Wall Street driven by a strong US jobs report leading to fear of even greater Fed aggression – a fear backed up by two FOMC members dismissing a September pause in policy aggression.
That said, the Aussie ten-year bond yield remained unchanged yesterday but at 3.48%, is already suggesting similar RBA aggression, particularly when one compares to the US equivalent at 3%. Our two-year yield, which is more closely tied to the cash rate, is at 2.58%, which implies a lot of RBA rate hikes.
The next one comes this afternoon. Following on from March quarter data, 50% of surveyed economists are forecasting a 40 point hike to 0.75% today. The bulk of the other half assumes 25 points while a few outliers can see a full 50 points.
Given the two-yield is already implicitly forecasting 2.5% ahead from 0.35% today, does it matter that much how we get there? We’ll find out this afternoon when the market responds.
Following a flattish session on Wall Street overnight, and with our futures down only -5 points this morning, the market will likely be quiet today ahead of 2.30pm.
Little Amazon
It appears greenhorn millennial traders have finally gotten the message that a stock split does not make you instantly wealthier by the multiple of the split, rather it makes absolutely no difference. In 2020 when Tesla split five to one retail investors sent the stock soaring, leading to much eye-rolling from the veterans.
Last night Amazon split twenty to one, taking its share price from US$2447 at Friday night’s close to US$124.79 at last night’s close, which is effectively a 2% gain. While the impact is zero-sum, it is indeed true lower priced shares are more accessible to younger investors and for what it’s worth, Amazon should now be eligible to be included in the Dow.
Either the millennials have learned their lesson or have all now run away, having been badly burnt in 2022 if not beforehand. Data suggest a big drop-off in young retail participation since lockdowns ended.
Amazon’s gain on the night, along with a 1.6% rebound for Tesla following Friday night’s big fall (and on further evidence Musk may pull out of the Twitter deal), led to a winning session for the S&P consumer discretionary sector (+1.0%). But it could have been a lot better on Wall Street all round.
The Dow was up 300 points early in the day, following Friday night’s jobs-driven weakness, but the US ten-year bond yield was also on the rise and when it crossed 3% once more, it was game over. The Dow fell back to the flatline and the other indices pared gains.
The ten-year closed up 8 points at 3.04%, and in recent times this line in the sand has tipped over growth stocks and led to Nasdaq underperformance. Yet last night the Nasdaq outperformed in what was otherwise a modest session.
Apple held its annual software developer gathering last night and used it to unveil the new MacBook Air and MacBook Pro laptops, which were worth only a 0.5% gain of the day.
For once there were no Fedheads out and about to spoil the party.
What the rest of the week will bring is unknown, but we do know Friday night’s May CPI release will be in focus.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1841.40 | – 9.90 | – 0.53% |
| Silver (oz) | 22.03 | + 0.13 | 0.59% |
| Copper (lb) | 4.37 | + 0.10 | 2.27% |
| Aluminium (lb) | 1.35 | – 0.01 | – 0.68% |
| Lead (lb) | 0.98 | + 0.00 | 0.08% |
| Nickel (lb) | 13.26 | + 0.90 | 7.28% |
| Zinc (lb) | 1.77 | – 0.01 | – 0.69% |
| West Texas Crude | 118.50 | – 0.37 | – 0.31% |
| Brent Crude | 120.10 | + 0.38 | 0.32% |
| Iron Ore (t) | 145.24 | + 0.84 | 0.58% |
The lights came back on at the LME last night and it appears some catching up was required following Chinese re-openings.
Gold was hit again by higher bond yields.
The oils had a quieter day for once.
The Aussie is down -0.3% at US$0.7197. Right now it appears the ASX200 is stuck in a range around 7200 and the Aussie around 72.
Today
The SPI Overnight closed down -5 points.
Over to you Phil.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AKE | Allkem | Downgrade to Neutral from Outperform | Credit Suisse |
| ANN | Ansell | Downgrade to Underperform from Neutral | Credit Suisse |
| APX | Appen | Downgrade to Neutral from Buy | Citi |
| COE | Cooper Energy | Upgrade to Neutral from Underperform | Macquarie |
| CPU | Computershare | Upgrade to Hold from Lighten | Ord Minnett |
| HLS | Healius | Upgrade to Buy from Neutral | Citi |
| PLS | Pilbara Minerals | Downgrade to Neutral from Outperform | Credit Suisse |
| SLR | Silver Lake Resources | Upgrade to Outperform from Neutral | Macquarie |
| TAH | Tabcorp | Downgrade to Hold from Add | Morgans |
| TCL | Transurban Group | Downgrade to Neutral from Outperform | Credit Suisse |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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For more info SHARE ANALYSIS: WDS - WOODSIDE ENERGY GROUP LIMITED
