|SPI Overnight (Sep)||5922.00||– 5.00||– 0.08%|
|S&P ASX 200||5936.50||– 55.30||– 0.92%|
|Nasdaq Comp||9943.05||+ 32.52||0.33%|
|DJIA||26080.10||– 39.51||– 0.15%|
|S&P500 VIX||32.94||– 0.53||– 1.58%|
|US 10-year yield||0.69||– 0.04||– 5.32%|
|USD Index||97.46||+ 0.40||0.41%|
|FTSE100||6224.07||– 29.18||– 0.47%|
|DAX30||12281.53||– 100.61||– 0.81%|
By Greg Peel
The Job Maze
Back in ancient times – January and before – to receive the dole in this country you had to be actively seeking work, or “participating”. Given the lockdowns effectively meant no work available across many sectors, JobSeeker recipients have not been obliged to participate. However, the ABS still measures “unemployment” as those seeking work but not able to find it.
228,000 Australians lost their jobs in May, to make 835,000 over two months. The unemployment rate rose to 7.1% — up from 6.4% in April and slightly higher than forecast. This seems like a pretty good outcome nonetheless, given the US unemployment rate is over 14%, but in the US the figure is measured differently.
The participation rate fell to 62.9% in May from 63.6% in April, as more “unemployed” stopped trying to find work. Doesn’t seem like much, but it does have a big impact. If participation had remained steady in May, notes the ABS, the unemployment rate would be 11%.
If you add in JobKeeper recipients as currently “unemployed”, that number’s more like 25%. In theory, JobKeepers are set to get their jobs back as soon as their businesses get back to normal. But is this guaranteed? JobKeeper, and Seeker, are due to expire in September.
The ASX200 had opened lower yesterday but when the jobs numbers were released, fell into a hole, to be down over -100 points. Presumably the market was assuming the first re-openings in May would lead to a turnaround process. Yet after an hour of mulling over the numbers, the market shot back up again, ultimately halving the loss.
Let’s face it, the ABS numbers are not misleading as such, they’re just not really matching the anecdotal picture. The RBA has warned unemployment will remain elevated for some time, as has the Fed in the US, because the economy will simply not bounce back to where it was in any hurry, and as noted, September looms.
Consumer discretionary was the hardest hit sector yesterday (-2.0%), which reflects the sector being a large employer. Telcos were next worst (-1.6%), and otherwise every sector fell in a range from -0.3% to -1.3%, bar utilities, which rose 0.3%.
Materials fell -1.3% on news some iron ore production is coming back on line in Brazil.
There was nothing particularly remarkable among individual index stock moves yesterday, but there was a bit happening outside the index.
On Wednesday it was Beacon Lighting, and yesterday it was Shaver Shop ((SSG)). That company reported 23% sales growth in the second half to date, including 164% online growth. The shares jumped 15.3%.
Who was shaving during the lockdown?
Australian Finance Group ((AFG)), which provides mortgage broking and small business lending solutions, rose 18.8% after the ACCC approved the acquisition of Connective Group.
Splitit Payments ((SPL)), which provides credit card services for merchants, has signed a partnership deal with Mastercard. It ticked up 108%. Oy vey.
The other point to note yesterday was that on falling on the jobs numbers release, the ASX200 dropped to 5900, before springing back. There was likely a concentration of options positions at that strike, which expired yesterday, that would have heightened volatility.
Not so today. Wall Street closed flat, our futures are down all of -5 points (September contract), and it’s Friday.
Tug of War
Another 1.5m Americans filed for unemployment benefits last week, more than expected. It was the tenth consecutive weekly fall, to a total now of 48m. The good news is it was less than the 1.6m of new claims the week before. The bad news is the number of continuing claims – those remaining on the dole – were largely unchanged at 20.5m.
That figure peaked at 23m mid-May but economists had assumed that given the re-openings, it would be coming down faster. The results were thus considered disappointing.
The Dow fell -270 points from the open.
As has become the trend this week, it was soon back to square, then down-up-down-up to a loss of -0.15%, with the S&P as good as flat and the Nasdaq once again outperforming on +0.3%.
With the S&P500 having returned to square for the year and remaining not far off it, Wall Street is unsure what to do next. On the one hand there is Fed support to go out and buy with one’s ears pinned back, on the other hand the case-count continues to rise, threatening re-lockdowns.
On that subject, everyone from the Treasury Secretary down to state governors have insisted re-lockdowns are not on the table. So good luck America.
OPEC-Plus held a meeting last night, the upshot of which is any members failing to comply with production cut quotas will be hit with a big stick. WTI rose 3% as a result, and the energy sector was the best performer on Wall Street, along with Big Tech.
Meanwhile the US bond market has settled down this week, seeing only minimal daily moves, which is another reason US stock markets don’t really have any lead.
Something will have to give. Earnings reports grow nearer.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1722.90||– 3.70||– 0.21%|
|Silver (oz)||17.36||– 0.14||– 0.80%|
|Copper (lb)||2.62||+ 0.04||1.43%|
|Aluminium (lb)||0.71||+ 0.00||0.28%|
|Lead (lb)||0.81||+ 0.01||1.37%|
|Nickel (lb)||5.79||+ 0.01||0.21%|
|Zinc (lb)||0.93||+ 0.02||1.66%|
|West Texas Crude||38.84||+ 1.14||3.02%|
|Brent Crude||41.48||+ 0.90||2.22%|
|Iron Ore (t) futures||103.00||– 0.60||– 0.58%|
Base metals remain in a positive trend, which is interesting in the face of renewed lockdowns in Beijing and a stronger US dollar overnight.
Gold remains asleep with US Treasuries.
The Aussie matched the greenback in falling -0.5% to US$0.6851.
The SPI Overnight closed down -5 points.
The ABS will release a first estimate of May retail sales today.
The S&P/ASX index rebalances come into effect.
Sydney Airport ((SYD)) will update on traffic numbers.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ANN||Ansell||Downgrade to Neutral from Buy||Citi|
|CAR||Carsales.Com||Downgrade to Neutral from Outperform||Macquarie|
|CGC||Costa Group||Upgrade to Neutral from Underperform||Macquarie|
|CWN||Crown Resorts||Upgrade to Overweight from Equal-weight||Morgan Stanley|
|FCT||Firstwave Cloud Technology||Upgrade to Add from Hold||Morgans|
|FMG||Fortescue||Downgrade to Hold from Accumulate||Ord Minnett|
|FPH||Fisher & Paykel Healthcare||Upgrade to Outperform from Neutral||Macquarie|
|GXY||Galaxy Resources||Downgrade to Hold from Accumulate||Ord Minnett|
|HLS||Healius||Upgrade to Outperform from Neutral||Credit Suisse|
|Downgrade to Hold from Add||Morgans|
|ILU||Iluka Resources||Downgrade to Hold from Accumulate||Ord Minnett|
|IVC||Invocare||Downgrade to Underperform from Outperform||Macquarie|
|MIN||Mineral Resources||Downgrade to Hold from Accumulate||Ord Minnett|
|MP1||Megaport||Downgrade to Hold from Add||Morgans|
|Downgrade to Neutral from Buy||UBS|
|MTS||Metcash||Upgrade to Overweight from Equal-weight||Morgan Stanley|
|NAB||National Australia Bank||Downgrade to Equal-weight from Overweight||Morgan Stanley|
|OPC||Opticomm||Downgrade to Hold from Buy||Ord Minnett|
|RRL||Regis Resources||Downgrade to Sell from Hold||Ord Minnett|
|SGR||Star Entertainment||Downgrade to Underweight from Overweight||Morgan Stanley|
|SUL||Super Retail||Upgrade to Add from Hold||Morgans|
|VEA||Viva Energy Group||Upgrade to Accumulate from Hold||Ord Minnett|
|WBC||Westpac Banking||Upgrade to Equal-weight from Underweight||Morgan Stanley|
|WSA||Western Areas||Downgrade to Hold from Accumulate||Ord Minnett|