Overnight: Roam If You Want To

World Overnight
SPI Overnight (Sep) 5986.00 – 15.00 – 0.25%
S&P ASX 200 6042.20 + 40.90 0.68%
S&P500 3349.16 + 21.39 0.64%
Nasdaq Comp 11108.07 + 109.67 1.00%
DJIA 27386.98 + 185.46 0.68%
S&P500 VIX 22.65 – 0.34 – 1.48%
US 10-year yield 0.54 – 0.01 – 1.29%
USD Index 92.79 – 0.04 – 0.04%
FTSE100 6026.94 – 77.78 – 1.27%
DAX30 12591.68 – 68.57 – 0.54%

By Greg Peel

Well Resourced

The ASX200 opened up 48 points in the first half hour yesterday and held that level through to late morning, until the Aussie crossed US72c. By 2pm the index was up 8 points.

Then in came the slower moving buyers and the index almost returned to initial gains.

It was all about the resource sectors. All others received certificates of participation. Price jumps in iron ore, copper and oil had BHP Group ((BHP)) surging 4.9%. Rio Tinto ((RIO)) rose 1.5% despite going ex-dividend, while pure-play Fortescue Metals ((FMG)) also managed 1.5%. The big oil & gas companies had good sessions. Santos ((STO)) rose 3.8%.

This took the materials sector to a standout 2.5% with energy gaining 1.9%.

Next best was industrials (+0.8%), with Qantas ((QAN)) rising 2.2% after a new-look Virgin was outlined. Consumer discretionary rose 0.6% on a 7.5% jump for Harvey Norman ((HVN)), the result of non-200 stock Nick Scali ((NCK)) jumping 14.9% on its earnings result, and 6%-plus moves up for both Webjet ((WEB)) and Corporate Travel Management ((CTD)) just as state borders slam shut all over the place.

Supposedly the travel agents rose on “positive vaccine news”. They are both heavily shorted, as is Harvey Norman.

Moves in other sectors were mixed and less influential but healthcare fell furthest (-0.6%), on ongoing Aussie strength and an index-topping -7.5% fall for ResMed ((RMD)) on its result release. Property also fell -0.6% led down by the two big retail landlords as Scentre Group ((SCG)) warned of property value write-downs we all knew were coming.

Wall Street is up again overnight, and last night the government announced an extension of the scope of JobKeeper, which should both be positive for our market today, but the futures are down -15 this morning.

An Aussie now up at US$0.7231 is beginning to become a notable headwind, even as commodity prices soar.

One is reminded of the post-GFC years when Wall Street kept forging ahead while we struggled to go anywhere with an Aussie at parity (and beyond). We’re far from parity, but in the current climate of global monetary and fiscal stimulus we come across as a least-worse, which unfortunately doesn’t help.

Anything you can do

Facebook rose 6.5% last night after rolling out a new app called Reels, which, whaddya know, looks remarkably like TikTok. Were it not for Trump’s desire to ban TikTok or let Microsoft buy its US business, Facebook would really be poking the antitrust bear.

Facebook pushed the Nasdaq to yet another session of outperformance and yet another all-time high, with Apple chiming in with 3.5% after not rolling out anything or even providing new news.

Wall Street was doing a whole lot of nothing all morning until the US State Department announced it was lifting its Global Level 4 Health Advisory put in place on March 19, which advised US citizens not to travel to anywhere outside the country. Instead, the government will rate countries on a 1 (high risk) to 4 (low risk) scale in terms of the virus.

Now, am I missing something? Or does an obvious question arise: Where the hell would they go? Not to Australia. Irrespective of whether we cop a 4, our border is slammed shut. As are all the borders of anywhere one might want to travel, particularly to Americans, unless you’ve always longed to see Burkina Faso.

Notwithstanding the order to date has only been “advisory”, not an outright ban. Yet on US airline passenger numbers, almost no one has gone anywhere up to now.

And I’d give America a 4. Just ask the good folk of Kansas and Idaho – the latest hotspots.

But, Wall Street loved it, and loved the fact both Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi said last night they remained optimistic on an agreement on stimulus. Never mind that the Democrats want US$3trn, the Republicans want US$1trn, and all evidence is they’re still nowhere near any middle ground.

Might I suggest US$2trn?

Speaking of airlines, one thing Congress did agree on last night was to grant US airlines another US$25bn in support to keep staff on until March, sending airline stocks on a run, and prompting questions from other industries as to why airlines are so special when everyone else is suffering too.

There were some glass-half-full responses around another 1.2m Americans filing for unemployment last week, because it’s down from the 1.4m-plus numbers of the prior two weeks. The trend may be down, but the numbers keep going up, not down.

Which leads us to tonight’s non-farm payrolls release.

Job addition forecasts among economists have never been so wide, ranging from one million additions down to an actual decline. This suggests that when the number comes out, no one will quite know what to do. But a good number will be good, and a bad number would imply more stimulus needed, which would be good.

If anyone can agree on an amount.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 2063.20 + 23.70 1.16%
Silver (oz) 28.89 + 1.94 7.20%
Copper (lb) 2.93 – 0.01 – 0.24%
Aluminium (lb) 0.78 + 0.00 0.30%
Lead (lb) 0.87 + 0.02 2.11%
Nickel (lb) 6.51 + 0.05 0.73%
Zinc (lb) 1.08 + 0.01 0.70%
West Texas Crude 41.97 – 0.23 – 0.55%
Brent Crude 45.08 – 0.17 – 0.38%
Iron Ore (t) futures 121.40 + 2.95 2.49%

Gold, silver and iron ore. Nuff said.

Except of course for the Aussie, up yet another 0.5% despite a flat greenback.

Today

The SPI Overnight closed down -15 points.

Australia will see June private sector credit numbers today, and the RBA will release its quarterly Statement on Monetary Policy, which is sure to be a best seller.

China reports July trade numbers.

US jobs tonight.

Earnings reporters today include Insurance Australia Group ((IAG)), REA Group ((REA)), News Corp ((NWS)) and Charter Hall Social Infrastructure REIT ((CQE)), being a fancy name for childcare centres.

James Hardie ((JHX)) holds its AGM.

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
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
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
VUK Virgin Money Uk Downgrade to Reduce from Hold Morgans
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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