World Overnight | |||
SPI Overnight (Sep) | 6073.00 | – 65.00 | – 1.06% |
S&P ASX 200 | 6156.30 | + 154.70 | 2.58% |
S&P500 | 3257.30 | + 5.46 | 0.17% |
Nasdaq Comp | 10680.36 | – 86.73 | – 0.81% |
DJIA | 26840.40 | + 159.53 | 0.60% |
S&P500 VIX | 24.84 | + 0.38 | 1.55% |
US 10-year yield | 0.61 | – 0.01 | – 2.10% |
USD Index | 95.17 | – 0.65 | – 0.68% |
FTSE100 | 6269.73 | + 8.21 | 0.13% |
DAX30 | 13171.83 | + 124.91 | 0.96% |
By Greg Peel
Stimulated
And on the fifth day of the two-day meeting between all 27 members of the European Union, chaired by Douglas Adams, agreement was reached on a coordinated E750bn virus rescue fund, roughly half grants and half loans, and an EU fiscal budget of E1trn each year to 2027.
And all saw that it was good. Including the Australian stock market, given the news came through during yesterday’s session.
This came on top of confirmation from the Australian government of an extension to JobKeeper/Seeker through to the end of the year, with an option to carry on further if necessary. That was pretty good too.
Plus the RBA governor reiterating that economic conditions had stabilised and the downturn had been less severe than earlier expected.
Throw in a positive session overnight on Wall Street, at least for half a dozen mega-caps — most everything else fell and the ASX200 posted its biggest daily rally since the last big one, leaving 6000 support well behind. The tenth consecutive session of up-down-up-down was a cracker.
But alas, Wall Street disappointed last night by not getting so excited, so our futures are down -65 points this morning, suggesting day eleven is upon us.
It’s of no surprise the huge jump in the Nasdaq overnight (2.5%) provided the catalyst for a 5.7% jump in the Ausdaq. The Nasdaq fell -0.8% last night. Thanks for playing.
Investors rediscovered CSL ((CSL)) yesterday, leading healthcare up 3.7%. Consumer discretionary rose 3.1%, as if we’re all going to rush out and spend the extended handouts shopping while Victorians drop like flies. Financials rose 2.9% to provide the real clout, with extended stimulus relieving loan loss fears.
Energy gained 2.6% on a more global theme, while everything else rose 1-2%.
Given the ASX200 tracked a 45 degree line straight up throughout the session, the momentum algos had a field day. The last hour brought some selling, but Johnny-come-lately buying ensured a close on the high.
Nearmap ((NEA)) topped the index with an 11.2% jump by saying nothing. It is over 8% shorted. Or was. Mesoblast ((MSB)) did have positive news regarding FDA approval, and rose 10.4%. Corporate Travel Management ((CTD)) rose 9.8%, bizarrely. It’s 5% shorted.
Downside moves were nothing worth mentioning.
It is worth mentioning that almost every stock index across the world, from Asia to Europe, posted solid gains yesterday and overnight, although none as great as 2.6%. Our move was Europe stimulus plus domestic stimulus. European sentiment carried into Wall Street from the open.
And then died.
One Day Wonder
It is of no surprise that while Australia’s extended stimulus has opposition support, and while the EU took a long time to bang out agreement but got there in five days, that the US Congress is split down the middle on the next tranche of fiscal stimulus along party lines, and in the case of the Republicans, within party lines.
Wall Street is patiently awaiting the finalisation of the next tranche, but the clock is ticking. Tranche one ends in nine days.
This was not the reason a 345 points opening rally in the Dow faded during the session to 159 points by the close, or that the S&P500 actually went negative briefly in the last hour. It was all about the Nasdaq, again.
But this time, in the other direction. Having shot up 2.5% on Monday night, the Nasdaq fell -0.8% last night. There was no trigger. It simply appears that on Monday night the rubber band finally stretched too far.
Having said that, each time there has been a rotation out of Big Tech and into value/cyclicals in the rally from April it has not lasted very long. But can that theme continue ad infinitum? Or will value/cyclicals finally have a proper run?
That will depend on the battle between an ever rising US case-count and newsflow on vaccine hopes. For now at least, the signs are Big Tech may have reached a near term peak.
Witness: Coca-Cola (Dow) reported before the opening bell last night and Snap reported after the closing bell. Coke rose 2.4% in the session and Snap is down -6.5% in the aftermarket. Most of FANG-Plus report tech week.
The three S&P500 sectors that led Monday night’s rally technology, communication services, discretionary all closed down last night, with only healthcare for company. All other sectors rose, having all fallen on Monday night, with a 6.5% gain for energy a glaring standout.
Most of the bigger-name stocks that reported earnings last night, including very beaten-down cyclicals, rallied on the session. Mind you it’s all about “less bad as feared”, but it does reinforce the assumption analysts did get too carried away to the downside heading into the season.
Australian earnings reports begin to trickle in next week.
Commodities
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 1841.40 | + 23.70 | 1.30% |
Silver (oz) | 21.32 | + 1.44 | 7.24% |
Copper (lb) | 2.95 | + 0.04 | 1.21% |
Aluminium (lb) | 0.75 | + 0.01 | 2.02% |
Lead (lb) | 0.83 | + 0.00 | 0.52% |
Nickel (lb) | 5.99 | + 0.02 | 0.38% |
Zinc (lb) | 0.99 | + 0.00 | 0.31% |
West Texas Crude | 41.96 | + 1.27 | 3.12% |
Brent Crude | 43.96 | + 0.78 | 1.81% |
Iron Ore (t) futures | 111.15 | + 1.65 | 1.51% |
For industrial commodities, see: EU stimulus.
For financials commodities (i.e. gold), see: the cost of EU stimulus.
For commodities both industrial and financial (i.e. silver), wow.
For the Aussie dollar, one might have expected the government’s plunge further into debt would be negative, but it’s all relative against an ever-falling US dollar, and notwithstanding the “economic rescue” aspect of ongoing stimulus. With the greenback down -0.7%, the Aussie is up 1.7% at US$0.7135.
Today
The SPI Overnight closed down -65 points or -1.1%, likely because the S&P only rallied 0.2%.
The ABS will deliver a preliminary read on June retail sales today.
OZ Minerals ((OZL)) posts its production report.
Boart Longyear ((BLY)) holds its AGM.
The Australian share market over the past thirty days
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
AWC | Alumina | Upgrade to Outperform from Neutral | Credit Suisse |
Upgrade to Accumulate from Hold | Ord Minnett | ||
BEN | Bendigo And Adelaide Bank | Downgrade to Neutral from Buy | Citi |
BLD | Boral | Downgrade to Lighten from Hold | Ord Minnett |
CBA | Commbank | Downgrade to Neutral from Buy | Citi |
CLW | Charter Hall Long Wale Reit | Downgrade to Accumulate from Buy | Ord Minnett |
COL | Coles Group | Downgrade to Neutral from Outperform | Credit Suisse |
CSR | CSR | Upgrade to Accumulate from Hold | Ord Minnett |
Downgrade to Underweight from Equal-weight | Morgan Stanley | ||
DXS | Dexus Property | Downgrade to Neutral from Outperform | Macquarie |
HLO | Helloworld | Upgrade to Add from Hold | Morgans |
Upgrade to Buy from Hold | Ord Minnett | ||
NSR | National Storage | Upgrade to Accumulate from Hold | Ord Minnett |
NWL | Netwealth Group | Downgrade to Sell from Hold | Ord Minnett |
OGC | Oceanagold | Upgrade to Outperform from Neutral | Macquarie |
Upgrade to Accumulate from Hold | Ord Minnett | ||
PPT | Perpetual | Upgrade to Neutral from Sell | Citi |
SGR | Star Entertainment | Upgrade to Equal-weight from Underweight | Morgan Stanley |
WHC | Whitehaven Coal | Downgrade to Sell from Hold | Ord Minnett |
WPR | WAYPOINT REIT | Upgrade to Buy from Hold | Ord Minnett |