Overnight: Ring The Bell

World Overnight
SPI Overnight (Sep) 5892.00 – 45.00 – 0.76%
S&P ASX 200 5977.50 + 58.30 0.98%
S&P500 3155.22 – 29.82 – 0.94%
Nasdaq Comp 10390.84 – 226.60 – 2.13%
DJIA 26085.80 + 10.50 0.04%
S&P500 VIX 32.19 + 4.90 17.96%
US 10-year yield 0.64 + 0.01 1.11%
USD Index 96.55 – 0.10 – 0.10%
FTSE100 6176.19 + 80.78 1.33%
DAX30 12799.97 + 166.26 1.32%

By Greg Peel

Down to the Crossroads

The NSW premier last night rolled back previously lifted restrictions on NSW pubs and clubs given outbreaks in Casula in Sydney and Jindabyne in the Snowies, among others. It’s not back to full lockdown, but it may be a harbinger of things to come.

The move was anticipated yesterday, but seemingly unimportant to the local market. The ASX200 did not hold onto its early 80 point rally (which took the index back to 6000), but still closed up 58 points while playing follow the leader with Wall Street.

Wall Street had rallied on positive vaccine news, ignoring the rising US case count, but turned tail last night. So the Australian market fell on Friday but rallied yesterday and now the futures are showing down -45 points this morning, so sometimes writing this report is all a bit pointless.

For the record, the banks (+1.6%) followed US banks higher yesterday to be the biggest points contributor. Utilities posted the biggest percentage move (+2.7%). AGL Energy ((AGL)) rose 3.1% after announcing the appointment of a new head of cyber security.

Energy (+1.0%) rallied back after falling on Friday, yo-yoing on oil prices, which were down again last night.

Iron ore futures took off yesterday on news of more supply issues in Brazil, sending materials up 1.8%. Spot iron ore is up 4.5% overnight.

The consumer sectors both put on 0.7% despite increasing lockdowns, while healthcare fell -0.7% because it had risen on Friday.

IT was the worst performer, down -1.0%, after TechnologyOne ((TNE)) responded to a negative AFR article and fell -6.4%.

Among individual stock winners, it was all about the money. Platinum Asset Management ((PTM)) rose 6.8% on positive FUM news, Virgin Money UK ((VUK)) followed with 5.4%, and Zip Co ((Z1P)) is still playing catch up to Afterpay, up 5.4%.

Smaller BNPL aspirant Sezzle ((SZL)) came back on the boards after a capital raising and jumped 22%.

Beyond TechnologyOne, the biggest losers were biotechs.

Yet, as noted, the index will be heading the other way today.

You can check out any time you like

The governor of California last night ordered all bars, restaurants, theatres and other places of indoor gatherings to shut down again state-wide. In 30 counties, including LA and representing 80% of state population, the order is extended to all non-essential offices, malls, churches and so forth.

Not quite the full lockdown, but not far off. California is the most populous state, and produces 15% of national GDP.

Wall Street tanked on the news. However, Wall Street was already tanking when the news came out late in the session.

From the opening bell, the Dow jumped over 560 points on fresh vaccine news. The news was that two consortiums with vaccine hopefuls, led by Pfizer and AstraZeneca respectively, will have their candidates fast-tracked through testing FDA protocols.

The news is not fresh at all. The FDA has said all along it will fast-track vaccine candidates.

It mattered not in the end, given as soon as the S&P500 hit positive for the year, it turned and fled. There had to be some point at which profits would be taken on seemingly unstoppable Big Tech names, and this was the trigger. The Nasdaq swung from a new intraday high close down -2.1%.

The Californian news only served to speed up what had already begun.

Amazon hit a new high, and closed down -3%.

Tesla rallied 17% — mindboggling, but bad luck for the Johnny-come-latelies. It closed down -3%.

The damage was all done in the “growth stocks”. “Value” held its own, and once again the banks were the best performers on the day. Bank earnings reports begin to flow from tonight.

The experience so far since March has been that every time there’s a wobble in Big Tech, it doesn’t last long. Value (such as reopening story stocks) has a moment in the sun, but then the clouds return. Will this prove to be the case again, or is Wall Street finally succumbing to a bubble set-up?

Value may not be able to maintain its support if other states begin to follow California’s lead. If the country re-enters lockdowns, analysts can tear up their September and December quarter earnings forecasts, which currently predict a bounce out of a June quarter already written off.

It is possible that earnings season delivers a wealth of upside surprises, but only because analysts, lacking any guidance from companies themselves, have marked June quarter forecasts down so low. But now that the virus is reaccelerating, companies may have to throw up their arms with regard guidance once more.

The Great Unknown has not left the building.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1802.00 + 3.40 0.19%
Silver (oz) 19.01 + 0.33 1.77%
Copper (lb) 2.95 + 0.09 3.32%
Aluminium (lb) 0.77 + 0.01 1.83%
Lead (lb) 0.85 + 0.01 1.28%
Nickel (lb) 6.04 – 0.05 – 0.84%
Zinc (lb) 1.00 + 0.02 2.34%
West Texas Crude 39.60 – 0.95 – 2.34%
Brent Crude 42.16 – 1.08 – 2.50%
Iron Ore (t) futures 107.05 0.00 0.00%

Iron ore has taken the limelight, but a strike in Chile and floods in China, in an area where copper cathode production is centred, have sent the copper price soaring further.

The California news is not good news for summer driving, and thus for oil.

Gold is steady but that gold/silver ratio is beginning to close fast.

The Aussie is down -0.2% at US$0.6940.

Today

The SPI Overnight closed down -45 points or -0.8%.

The NAB business confidence survey for June is out today.

China reports June trade numbers.

The US reports June CPI.

Whitehaven Coal ((WHC)) posts a June quarter production report.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AGL AGL Energy Downgrade to Underperform from Neutral Macquarie
APT Afterpay Upgrade to Overweight from Equal-weight Morgan Stanley
AWC Alumina Downgrade to Neutral from Buy Citi
CGR CML Group Upgrade to Add from Hold Morgans
EVN Evolution Mining Downgrade to Sell from Neutral Citi
GMG Goodman Grp Downgrade to Neutral from Buy Citi
NCM Newcrest Mining Downgrade to Neutral from Buy Citi
PPC Peet & Company Downgrade to Neutral from Outperform Macquarie
PRU Perseus Mining Downgrade to Neutral from Buy Citi
SAR Saracen Mineral Downgrade to Neutral from Buy Citi
Downgrade to Underperform from Neutral Macquarie
Downgrade to Neutral from Buy UBS
TWE Treasury Wine Estates Upgrade to Neutral from Underperform Macquarie
Upgrade to Overweight from Equal-weight Morgan Stanley
Downgrade to Lighten from Hold Ord Minnett
Downgrade to Neutral from Buy UBS
VOC Vocus Group Upgrade to Buy from Neutral UBS
WAF West African Resources Upgrade to Neutral from Underperform Macquarie
WSP Whispir Downgrade to Hold from Buy Ord Minnett
WTC Wisetech Global Downgrade to Lighten from Hold Ord Minnett
Greg Peel

About Greg Peel

Greg Peel joined Macquarie Bank in 1986 and acquired trading experience in equities, currency, fixed income and commodities derivatives, ultimately being appointed director of equity derivatives trading. He later published In With The Smart Money (a plain English guide to the mysterious world of financial markets and derivatives) and acted as a consultant to boutique investment funds. In 2004 Greg joined FNArena as a contributing writer. He is now a director and principal of the company. Greg compliments the journalistic background of the FNArena team with lengthy experience as a financial markets proprietary trader.

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