Overnight: Happy New Year

By Greg Peel

Yo Yo Yo

The ASX200 step-jumped over 100 points yesterday from the open suggesting those ready to window-dress (push up prices to improve annual returns on their funds) could perhaps just put their feet up. But no, at 3pm they gave it a red hot go, only to be met with profit-takers coming the other way.

End result: up 83 points on the day, up 2.6% in June, and up 16% in the quarter, to be down -13% year to date and down -17% from the February high.

To make the comparison, the S&P500 closed up 1.6% for the month, and 20% for the quarter, to be down -5% year to date and -8.5% off the high.

The difference? The S&P500 is around 25% weighted to Big Tech, while the ASX200 is around 25% weighted to Big Banks. Doesn’t stop us blindly following Wall Street around though.

Not so much today, however. The S&P closed up 1.5% last night and our futures are down -7 points this morning, suggesting yesterday can ultimately be dismissed as misleading, as end-of-quarter and particularly end-of-year sessions usually are. Indeed, we saw a whole five days of down-up-down-up-down which, despite a similar pattern on Wall Street, does imply a lot of argie-bargie that was not necessarily fundamentally based.

Take the energy sector yesterday for example. WTI was up a dollar overnight but energy jumped a stand-out 4.3%.

Otherwise, every sector closed up 1-2.5%, indicating no risk-on/risk-off split, except for healthcare, which dropped -0.1% after sleeping all week through the mayhem. Even materials rose 1.6%, despite iron ore falling -4.5%, again suggesting this was not a fundamental session.

There was some good news nonetheless. Queensland is finally set to reopen its border, to all bar Victorians of course. The EU is set to open its international borders to a number of countries other than the US but including Australia. At last! Somewhere to send Victorians.

At the individual stock level, Collins Foods ((CKF)), which owns the local KFC franchise, jumped 12.7% after reporting earnings. First comes the covid pandemic, then the obesity pandemic.

Otherwise, investors pushed NRW Holdings ((NWH)), which is a pure-play on mining contracting, up 10.0% and Afterpay ((APT)), stock of the year, up 7.2% to look good.

So after a wild end of year, will things settle down now? The futures are suggesting such this morning. We have school holidays underway and more to come across the country so it might all go a bit quieter now, at least until US earnings season begins in earnest in a couple of weeks.

Virus-Schmirus

After a slight tick down over the weekend, Florida once again marked a record number of new cases over 24 hours, as did Arizona and others. Dr Fauci has warned the US could see 100,000 new cases a day unless everyone steps up their game.

The tri-state area (New York, New Jersey, Connecticut) has extended the list of states from which residents must quarantine if they travel into the area. New York has joined New Jersey in moving to pause its reopening plans.

WHO has warned that globally, “the worst is yet to come”.

The Dow posted its best quarter since 1987 (bounce out of the crash), the S&P500 since 1998 (tech bubble) and the Nasdaq since 2001 (bounce out of tech wreck).

Last night featured a late window-dressing rally, but the S&P and Nasdaq had been positive all day. Boeing had the Dow outperforming on Monday night, as a 737 Max began re-certification test flights, but dragged the average down again last night after Norwegian Airlines cancelled its order for 97 planes, most of them Maxes.

I think I might have made this point yesterday.

Last night was not one in which Big Tech stood out, as banks and energy all had strong sessions, so ex of Boeing it was really a Buy Everything session to end the quarter.

Now comes earnings season. Realistically the season kicks off in two weeks but last night Fedex reported after the bell, and substantially beat forecasts. The stock is up 9% in the aftermarket.

Not such a surprise in the Days of Covid, when online shopping has surged, but the iconic delivery service had been Amazon-ed into submission prior to the pandemic so it’s still a long way back. Perhaps most notable was that earnings beat despite a big jump in costs, for worker PPE and other safety measures.

That will likely be a theme this season.

Commodities

Not much to see here – commodity funds were probably mucking about as well – other than to note iron ore has had a reprieve and gold keeps on keeping on.

We might put a 0.6% jump for the Aussie, to US$0.6902, down to the local tourism industry, now Queensland is reopening.

Today

The SPI Overnight closed down -7 points.

The first of the new month brings manufacturing PMIs from around the world. Yesterday China reported 50.9 for manufacturing, up from 50.6, and 54.2 for services, up from 53.6.

Australia will also see numbers for house prices and building approvals.

The US will see private sector jobs numbers for June tonight and the Fed will release the minutes of its last meeting.

In terms of local corporate reports, July is typically a blackout session as companies prepare their annual accounts. However, this year in particular will no doubt bring a weightier “confession session”, as all those companies which withdrew guidance early in the crisis start to provide some clarity ahead of August result season.

The Australian share market over the past thirty days…