World Overnight | |||
SPI Overnight (Sep) | 5972.00 | + 84.00 | 1.43% |
S&P ASX 200 | 5926.10 | – 1.70 | – 0.03% |
S&P500 | 3294.61 | + 23.49 | 0.72% |
Nasdaq Comp | 10902.80 | + 157.52 | 1.47% |
DJIA | 26664.40 | + 236.08 | 0.89% |
S&P500 VIX | 24.28 | – 0.18 | – 0.74% |
US 10-year yield | 0.56 | + 0.03 | 5.04% |
USD Index | 93.53 | + 0.18 | 0.19% |
FTSE100 | 6032.85 | + 135.09 | 2.29% |
DAX30 | 12646.98 | + 333.62 | 2.71% |
By Greg Peel
A Tale of Two Markets
The ASX200 fell -67 points in the first twenty minutes yesterday. By lunchtime it was up 20. By the close it was flat.
The feature of the Australian market all last month was of elevated day-to-day volatility (while ultimately going nowhere) but yesterday saw a rare case of intraday volatility.
The plunge on the open can clearly be put down to the stage 4, “hard” lockdown measures announced in Melbourne over the weekend. It seemed, nonetheless, that by lunchtime this was shrugged off. But in fact it was a case of picking one’s sectors.
Which sectors rely on Victoria? Banks (-2.1%) through loan risk, consumer discretionary (-1.6%) through shuttered shops and property (-0.7%) through retail tenants. These were the only three sectors to close in the red yesterday, and in market cap terms negated gains in every other sector.
Industrials (+0.1%) and IT (+0.1%) weren’t quite sure what to do, so it was left to healthcare (+2.3%) to provide the bulk of the counter. One might argue that pandemics are good for healthcare stocks, but for the likes of your CSLs ((CSL)), Cochlears ((COH)) and ResMeds ((RMD)) more critical at this point is that the Aussie has stopped rising.
For now. One might put that down to Victoria’s impact on the economy but the US dollar has only managed a couple of small up-days in an otherwise downward trend. You reckon the Vics have problems? The US clocked up 100,000 new daily cases on Sunday and continues to account for one quarter of all cases and one quarter of all deaths globally with 4% of the global population.
Materials (+1.5%) came in second yesterday on gold and iron ore price strength and on miners not being at all Victoria exposed, except at their HQs. Utilities (+1.0%), telcos (+0.6%) and staples (+0.7%) played the defensive game.
Rather astonishingly, the futures are suggesting up 84 points this morning, or 1.4%. The S&P only rose 0.7% overnight, and that was all down to two stocks. Were this to be the case, the ASX200 would hit 6000 again, and probably a brick wall.
Among individual stocks, Netwealth ((NWL)) won the day in the index with 5.3%. Does this reflect AMP’s ((AMP)) profit warning? Viva Energy ((VEA)) noted it sells 25% of its petrol in Victoria, and overall sales are running at -25% below last year, and rose 5.0%, dragging Ampol (ALD)), with it (4.8%). Not as bad as feared presumably.
Train crash on the day was Monadelphous ((MND)), down -10.3% as Rio Tinto launches a law suit relating to a fire, while Credit Corp ((CCP)) fell -8.7% and NRW Holdings ((NRW)) -7.9% because they both just have to be in the top five winners or losers every day.
Webjet ((WEB)) fell -7.1% and AP Eagers ((APE)) -6.8%. See: Victoria.
Me too!
One of the notable features of the recent Congressional antitrust hearings from Big Tech was that while Facebook, Apple, Amazon and Google were called upon, Microsoft was not. Feeling left out, Microsoft has decided it could join in by buying TikTok US.
Wall Street likes the idea, sending Microsoft up 6%. Trump likes the idea too, as it saves him having to ban TikTok in the US.
Apple announced it had acquired an online payments start-up that could turn an iPhone into an EFTPOS. It rose 2.5%.
Together the two represented around 140 of the Dow’s 240 point gain, a good chunk of the S&P’s 0.7%, and helped take the Nasdaq to a new all-time high.
The S&P broke out of its recent trading range, and is now within 3% of its all-time high.
Just to confuse the issue, the Russell small cap index rose 1.8%. This was not a growth versus value session, but more of a buy everything. Yet still the virus spreads. Massachusetts, Rhode Island and Hawaii are currently seeing the biggest surges. Note that the first two bring the virus back to the north east.
So why does Wall Street keep rising?
Reality and optimism. Fed stimulus is the reality, and despite negotiations still going nowhere in Congress, Wall Street remains optimistic a fiscal package will be agreed upon. Hey, they’re only a trillion apart. And Wall Street is ever optimistic a vaccine will soon be found.
The other reality is of course what else are you going to buy? Bonds at an all-time high, gold at an all-time high? It’s still a case of TINA.
Wall Street was also buoyed by the US July manufacturing PMI released last night, which rose to 54.2 from 52.6 when 53.6 was forecast. Good numbers were also reported in China and Europe (and Australia for that matter).
Let’s put that into perspective. Imagine you fell down a deep well, which happened to have a ladder. These PMI results are equivalent to you now being a couple of rungs back up the ladder.
“Although readings over 50% indicate growth, the index doesn’t measure the actual amount of production or tell how much it has improved. The survey basically asks executives if their businesses are doing better or worse compared to the prior month.” – Dow Jones
Meanwhile, investors are heartened that as earnings season reaches around half way in terms of reporting companies, 78% have beaten earnings estimates – well above the historical average.
From a very low base of analyst expectations which analysts themselves admit were a complete guess in the absence of guidance.
Commodities
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 1977.70 | + 1.60 | 0.08% |
Silver (oz) | 24.33 | – 0.14 | – 0.57% |
Copper (lb) | 2.90 | + 0.01 | 0.27% |
Aluminium (lb) | 0.76 | – 0.00 | – 0.26% |
Lead (lb) | 0.84 | + 0.00 | 0.46% |
Nickel (lb) | 6.52 | + 0.31 | 4.92% |
Zinc (lb) | 1.04 | + 0.00 | 0.07% |
West Texas Crude | 40.77 | + 0.50 | 1.24% |
Brent Crude | 43.85 | + 0.33 | 0.76% |
Iron Ore (t) futures | 116.35 | + 4.90 | 4.40% |
We can perhaps put the iron ore price down to a positive Chinese manufacturing PMI.
Nickel joined in.
Manufacturing consumes oil.
The Aussie is down -0.2% at US$0.7125 in line with US dollar strength.
Today
The SPI Overnight closed up 84 points or 1.4%. What lockdown?
The RBA meets today.
We’ll see numbers for June retail sales and trade but the ABS has already released preliminaries.
BWP Trust ((BWP)) and Pinnacle Investments ((PNI)) report earnings.
The Australian share market over the past thirty days…
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
DMP | Domino’s Pizza | Downgrade to Sell from Neutral | UBS |
GWA | GWA Group | Upgrade to Outperform from Neutral | Credit Suisse |
MQG | Macquarie Group | Downgrade to Accumulate from Buy | Ord Minnett |
OGC | Oceanagold | Upgrade to Outperform from Neutral | Credit Suisse |
ORE | Orocobre | Downgrade to Sell from Hold | Ord Minnett |
ORG | Origin Energy | Upgrade to Add from Hold | Morgans |
PAR | Paradigm | Downgrade to Reduce from Hold | Morgans |
RIO | Rio Tinto | Downgrade to Hold from Add | Morgans |
SBM | St Barbara | Downgrade to Hold from Buy | Ord Minnett |
SFR | Sandfire | Downgrade to Neutral from Outperform | Macquarie |