World Overnight | |||
SPI Overnight (Sep) | 6067.00 | – 3.00 | – 0.05% |
S&P ASX 200 | 6110.20 | + 105.40 | 1.76% |
S&P500 | 3360.47 | + 9.19 | 0.27% |
Nasdaq Comp | 10968.36 | – 42.63 | – 0.39% |
DJIA | 27791.44 | + 357.96 | 1.30% |
S&P500 VIX | 22.13 | – 0.08 | – 0.36% |
US 10-year yield | 0.57 | + 0.01 | 2.14% |
USD Index | 93.60 | + 0.16 | 0.17% |
FTSE100 | 6050.59 | + 18.41 | 0.31% |
DAX30 | 12687.53 | + 12.65 | 0.10% |
By Greg Peel
Victorious?
The futures had suggested a 42 point gain for the ASX200 on Monday morning when they closed on Saturday morning. This seemed ambitious against a flat Wall Street, but was put down to hopes of executively-ordered stimulus in the US. Indeed, the index opened up around 42 points.
From there it went straight up to the close of up 110 in a nice straight line, feeding on itself as it went.
The impetus here is that over the weekend and into Monday, the case-count in Victoria is showing signs of plateauing. Earlier 700s have become 400s and 300s. The death toll continues to rise, but this runs on at least a two-week lag.
We might add in that despite what could have been, NSW has not seen major contagion from south of the border. It looked that way to begin with, but seems largely under control for now.
Meanwhile, having suffered drought, fire, pestilence and flood, the NSW south coast is now awaiting frogs and boils.
All sectors closed healthily in the green yesterday in a range from 0.8% for telcos to 2.6% for the banks. While the banks have lost some of their cap weighting in the index in the last couple of years, they are still the biggest clout. Commonwealth Bank ((CBA)) rose 3.4% ahead of its result tomorrow.
The banks rose on the implications of Victorian lockdowns not being needed to extended again, if that’s the case, suggesting reduced loan default risk. Utilities rose 2.4% on the implicit diminishment of can’t-pay-the-bill risk.
Consumer discretionary rose 2.0% on the same virus theme while staples rose 2.2%, which seems somewhat outside the theme, unless the implication is less austerity at the supermarket.
Materials rose 1.1% despite big falls in commodity prices overnight, albeit the sector was trashed on Friday, while energy managed 0.9%. China released very positive factory order data yesterday which had copper up 3% last night.
All other sectors were up around 1.5%.
Within the index, Mesoblast ((MSB)) won the day on 10.7% ahead of critical trial data releases while Credit Corp ((CCP)) rose 6.7% on some “insider” buying. News Corp ((NWS)) kicked on another 6.4% post result.
Outside the index, trading updates from Kogan ((KGN)) and Adairs ((ADH)) had those stocks up 9.8% and 11.3% while Lovisa Holdings ((LOV)) jumped 13.1% on speculation of a good result.
Worst index performer was oOh!media ((OML)), down -4.2% after revelations the company is offering discounts of up to -95%, so weak has demand been for billboard advertising at this time.
It’s not the first time recently the index has had this sudden pop up from 6000 support, but if Victorian risk really is on the wane, could this one hold? The ASX200 is still -14.5% below its February high. The S&P500 last night reached within -1%. The difference is half a dozen US stocks.
Delerious?
A 0.3% gain for the S&P500 took that index within -1% of its all-time high last night, and it had to be achieved as Big Tech dragged. Forget the Dow – outperformance was all down to distorted pricing for Boeing and Caterpillar. The Nasdaq underperformed on another session of rotation out of growth and into value/cyclicals.
These periods of rotation tend not to stretch beyond two sessions, so we’ll see. The impetus last night was a White House stimulus package and a plateauing of virus cases in the sun-belt.
On Saturday, Trump signed executive orders that aim to pause the collection of payroll taxes, provide help on rent, assist with student-loan payments and extend a portion of additional unemployment benefits that had lapsed at the end of last month.
The unemployment benefit would drop from US$600 to US$400 per week, 75% funded by the federal government and 25% funded by the states, unless they can’t afford it, in which case you’ll only get US$300.
The measures are “almost certain to face legal challenges and logistical hurdles”, Dow Jones suggests. The last president to attempt to bypass Congress with a spending program was Nixon, and it was overturned in court.
But for now, Wall Street is relieved.
The US topped 5 million cases last night as the global count closes in on 20 million. That would put the US at 40%, with 4% of the population. Of course we can’t be sure of accurate counts elsewhere.
The earlier hotspots of Florida, Texas and Arizona continue to see their weekly case trends decline, from which Wall Street is drawing a lot of hope. But Georgia has been forced to re-close schools not long after re-opening them, based on video evidence showing a crowded hallway of students without masks.
Few masks were in sight at the annual ten-day Sturgis motorcycle rally as it kicked off in South Dakota last night, without restrictions. The majority of town’s 7000 residents voted to cancel the event, but it went ahead anyway with 25,000 attendees. The numbers are lower than usual, but this is still considered to be the biggest organised gathering of people anywhere in the world to date in the Days of Covid.
South Dakota now has the fastest growing case-count, albeit off a low base, and that’s before this week. Give it another two weeks.
Meanwhile, China has placed sanctions on eleven US politicians and heads of organisations promoting democratic causes, arrested a Hong Kong media mogul under the new national security laws, and flown fighter jets inside Taiwanese territory.
Commodities
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 2027.90 | – 6.90 | – 0.34% |
Silver (oz) | 29.13 | + 0.81 | 2.86% |
Copper (lb) | 2.95 | + 0.09 | 2.99% |
Aluminium (lb) | 0.79 | 0.00 | 0.00% |
Lead (lb) | 0.86 | – 0.00 | – 0.36% |
Nickel (lb) | 6.41 | – 0.06 | – 0.88% |
Zinc (lb) | 1.08 | + 0.00 | 0.34% |
West Texas Crude | 41.99 | + 0.77 | 1.87% |
Brent Crude | 44.96 | + 0.56 | 1.26% |
Iron Ore (t) futures | 118.85 | 0.00 | 0.00% |
Customs data released on Friday showed China’s unwrought copper imports (anodes and cathodes) rose 81% in July from the same month last year — a full 16% above the previous monthly record set in only in June. Having plunged on Friday night on the US dollar bounce, the copper price bounced back last night.
It may just be smoke and mirrors, based on a London-Shanghai arbitrage window that has now closed, and not on increased demand.
Iron ore was unchanged due to a holiday in Singapore.
Oil prices recovered after Saudi Arabia reported increased demand from China.
The US dollar is up again slightly, but so is the Aussie at US$0.7169.
Today
After yesterday’s big rally, the SPI Overnight closed down -3 points this morning.
NAB’s business confidence survey for July is out today.
Challenger ((CGF)) and Shopping Centres Australasia ((SCP)) are among today’s earnings reporters.
The Australian share market over the past thirty days…
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
ALL | Aristocrat Leisure | Downgrade to Accumulate from Buy | Ord Minnett |
CLW | Charter Hall Long Wale Reit | Downgrade to Hold from Accumulate | Ord Minnett |
MIN | Mineral Resources | Downgrade to Lighten from Hold | Ord Minnett |
REA | REA Group | Downgrade to Hold from Accumulate | Ord Minnett |
RMD | Resmed | Downgrade to Equal-weight from Overweight | Morgan Stanley |
SKO | Serko | Upgrade to Buy from Hold | Ord Minnett |
TPG | TPG Telecom | Downgrade to Sell from Neutral | UBS |
VUK | Virgin Money Uk | Downgrade to Reduce from Hold | Morgans |