|SPI Overnight (Sep)||5989.00||+ 27.00||0.45%|
|S&P ASX 200||6001.30||– 36.30||– 0.60%|
|Nasdaq Comp||10998.40||+ 57.23||0.52%|
|S&P500 VIX||22.99||– 0.77||– 3.24%|
|US 10-year yield||0.54||+ 0.03||5.44%|
|USD Index||92.83||– 0.44||– 0.47%|
By Greg Peel
As You Were
The ASX200 predictably opened lower and fell -70 points through the morning yesterday despite the futures only suggesting down -14. This ran against the trend on Wall Street, but then so did Tuesday’s huge rally. The fall was predictable if Tuesday did indeed involve one big buy order, and sellers backing off.
A few buyers nonetheless appeared at lunchtime yesterday and the index plateaued through the afternoon. And where did it close? You guessed it – right on 6000.
The futures are up 27 this morning, suggesting 6000 will hold once more, despite Victoria recording its worst ever virus day yesterday in both cases and deaths. No sign of any improvement. Hospitals filling up.
We can dismiss selling in all bar one sector yesterday as a pullback from Tuesday’s surge and dismiss both sessions as noise. We recall that the ASX200 first recovered to 6000 two months ago.
Materials (+0.7%) was the one sector to rise yesterday, again predictably, on more big gains in iron ore and precious metals prices. Gold is getting all the attention but silver is far outperforming. Silver is mostly a by-product of other mining (Broken Hill Proprietary began as a silver-lead-zinc miner) but for those interested, Adriatic Metals ((ADT)) and Silver Mines ((SVL)) are pure-plays. They rose 17% and 18% respectively yesterday.
In a case of the one-you-don’t-think-of, Incitec Pivot ((IPL)) topped the index yesterday with a 6.0% gain following a trading update that drew ratings upgrades from brokers. It’s in the materials sector.
Consumer discretionary only fell -0.2% to outperform other sectors, without any big names appearing on the podium. Presumably the stay-at-home winners are now seen as leaders, offsetting the shops-closed losers in stage 4 lockdowns.
Healthcare (-1.7%) was the worst performer as it battles against a frustratingly strong Aussie, all down to ongoing abandonment of the global reserve currency.
In economic news, lending for housing bounced back 6.2% in June after falling -11.6% in May, as auctions returned from cyberspace back to kerbside. But net net, financing remains lower and June numbers pre-date Melbourne lockdowns.
Not much more to note. We’re back at 6000, so let’s start again. It’s a reasonable springboard as results season ramps up next week.
Wish Upon a Star
Disney reported after the bell on Tuesday night and last night jumped 9%, on better than expected streaming service subscriptions and a big drop in costs from not making any movies. Disney led the Dow to outperformance.
While the Nasdaq hit yet another all-time high, the S&P managed to outperform led by gains in industrials, materials, financials and consumer discretionary – cyclicals all. Note that in the S&P, materials is inconsequential by market weight, while industrials includes a lot of the Dow.
The S&P is now within -2% of its all-time high.
While more states grapple with rising case-counts, the good news is the earlier hotspot states of Florida, Texas and Arizona are now seeing downward trends in new cases. Deaths are still rising, but run on a lag. Wall Street is heartened by this news.
There was also greater optimism last night from news Trump administration officials and congressional Democratic leaders are working to reach a coronavirus aid bill deal by the end of the week even if the parties still remain far apart on the issues.
Not sure how that works. There has been a suggestion Trump could just use executive powers to extend unemployment support while Congress battles it out, but legally anything to do with money must be approved by Congress. Trump may, however, be able to unilaterally extend the federal moratorium on tenant evictions which expired last month.
So quick, kick ‘em out now.
Wall Street continues to accentuate the positive, which at present includes more beats on earnings results, while eliminating the negative. Last night’s private sector employment report showed a mere 167,000 jobs added in July when economists had forecast 1.9m.
Friday brings non-farm payrolls.
The US services PMI rose to 58.1 in July from 57.1 in June, beating expectations of 55. In isolation, this looks like a great number, except it’s a comeback from near death in April and it’s a very long road back.
Another sign of the times? Online dating service Match smashed forecasts and rose 12% on its June quarter result last night. No doubt it benefited from locked down bars.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||2039.50||+ 20.10||1.00%|
|Silver (oz)||26.95||+ 0.93||3.57%|
|Copper (lb)||2.94||+ 0.02||0.61%|
|Aluminium (lb)||0.78||– 0.00||– 0.03%|
|Lead (lb)||0.85||+ 0.02||2.79%|
|Nickel (lb)||6.47||+ 0.19||3.04%|
|Zinc (lb)||1.07||+ 0.03||3.26%|
|West Texas Crude||42.20||+ 0.67||1.61%|
|Brent Crude||45.25||+ 0.88||1.98%|
|Iron Ore (t) futures||118.45||+ 0.45||0.38%|
More of the same for gold, silver and iron ore.
The sliding US dollar is supporting all commodities but falling LME inventories appear to be behind big base metal moves.
Falling weekly inventories all supported oil prices last night. WTI is now at a five-month high.
The greenback is down -0.5% so the Aussie is up 0.4% at US$0.7193.
The SPI Overnight closed up 27 points or 0.5%.
The Bank of England meets tonight.
Note that Rio Tinto ((RIO)) goes ex today to the tune of $2.16, fully franked.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|AMP||AMP Ltd||Downgrade to Underperform from Neutral||Macquarie|
|ANZ||ANZ Banking Group||Upgrade to Neutral from Underperform||Macquarie|
|BEN||Bendigo And Adelaide Bank||Downgrade to Underperform from Neutral||Macquarie|
|CTD||Corporate Travel||Upgrade to Add from Hold||Morgans|
|GOR||Gold Road Resources||Buy||Ord Minnett|
|IPL||Incitec Pivot||Upgrade to Add from Hold||Morgans|
|JBH||JB Hi-Fi||Downgrade to Hold from Accumulate||Ord Minnett|
|MND||Monadelphous Group||Downgrade to Neutral from Buy||UBS|
|NAB||National Australia Bank||Downgrade to Underperform from Outperform||Macquarie|
|OGC||Oceanagold||Upgrade to Outperform from Neutral||Credit Suisse|
|ORG||Origin Energy||Upgrade to Add from Hold||Morgans|
|PAN||Panoramic Resources||Upgrade to Neutral from Underperform||Macquarie|
|RRL||Regis Resources||Downgrade to Hold from Add||Morgans|
|SAR||Saracen Mineral||Downgrade to Lighten from Hold||Ord Minnett|
|SBM||St Barbara||Upgrade to Accumulate from Hold||Ord Minnett|
|TAH||Tabcorp Holdings||Downgrade to Neutral from Outperform||Macquarie|
|VRL||Village Roadshow||Downgrade to Neutral from Buy||Citi|