Overnight: Fly Me To The Moon

World Overnight
SPI Overnight (Sep) 6095.00 + 15.00 0.25%
S&P ASX 200 6116.40 – 45.00 – 0.73%
S&P500 3478.73 + 35.11 1.02%
Nasdaq Comp 11665.06 + 198.59 1.73%
DJIA 28331.92 + 83.48 0.30%
S&P500 VIX 23.27 + 1.24 5.63%
US 10-year yield 0.69 + 0.01 0.73%
USD Index 92.89 – 0.12 – 0.13%
FTSE100 6045.60 + 8.59 0.14%
DAX30 13190.15 + 128.53 0.98%

By Greg Peel

And Back Again

As we face the peak of the local earnings result season today, the score for the ASX200 over the month of August is up 65 points as at yesterday. The S&P500 has outperformed over that time, but only because of US Big Tech, thus locally we’ve been able to concentrate almost entirely on daily results.

The fact the index has risen over the period, albeit modestly, is reflected in the FNArena Results Monitor’s beat/miss ratio running at 2.1, well over the average of 1.3. Only a modest index rise likely reflects the ongoing virus situation, which has again led many a company to withhold dividends and offer no guidance.

While the net move is modest, there have been plenty of up days and down days through the period, and yesterday happened to be a down, when Tuesday was an up. There were nevertheless some extraneous factors.

The banks ran hard on Tuesday, following the US banks, but on Tuesday night the US banks fell back again, so ours were down -1.2% yesterday, with some help from Suncorp ((SUN)) going ex.

Telstra ((TLS)) went ex, so telcos were down -2.0%, and AGL Energy ((AGL)) went ex, so utilities were down -1.9%, with some help from a -2.7% fall for APA Group ((APA)) on result.

Other big falls on result were Whitehaven Coal ((WHC)), now on the extinction watch list (-18.1%), software company Bravura Solutions ((BVS)), which fell -13.4%, and biotech Polynovo ((PNV)), down -8.5%.

The reversal-the-next-day trend also continued, with Bingo Industries ((BIN)) falling -6.6% having jumped 13.5% on result on Tuesday.

On the winners’ board, Cleanaway Waste Management ((CWY)) starred with 8.5% on result, Avita Medical ((AVH)) rose 8.1% on a trading update, and Worley ((WOR)) gained 6.4% on result.

Austal ((ASB)) shot up on Monday on its result, fell back on Tuesday, and yesterday rallied 6.6%. Go figure.

All sectors closed in the red bar healthcare and property, which posted small gains, while staples were flat.

Whitehaven Coal, and a weaker iron ore price had materials down -0.9%, while IT had a rare session in falling -0.9% despite a rally in the Nasdaq overnight. Afterpay’s ((APT)) run came to an end (-1.9%) ahead of its result today, and/or due to switching into rival Zip Co ((Z1P)), which rallied 27.5% after signing a deal with eBay. Zip is not in the index.

In economic news, yesterday’s June quarter construction work done result of a -0.7% fall shocked economists, who had predicted -7.0%. It came down to engineering construction offsetting falls in residential and commercial. While the news didn’t help the stock market much, the Aussie is up 0.6% as economists scramble to upgrade their GDP forecasts.

Wall Street was at it again last night, hitting new highs thanks only to Big Tech. Our futures are down -15 this morning. It is comforting to see the Australian market has made the disconnect and not rallied to dangerously overblown levels because of Wall Street, but the problem is if Wall Street rolls over, so will we anyway.

Say What?

Amazon rose 3% last night. Tesla rose 6%, Facebook 8% and Netflix 11%. Soon to be a Dow component, Salesforce, rose 26% on its earnings result, but for the others, there was no new news and no obvious impetus.

Other, perhaps, than the fact red-faced stock analysts have been rushing to upgrade their target prices on Big Tech stocks that have run away from them. Not because of anything new other than increased PEs. This is creating a positive feedback loop that fuels a momentum trade already raging and fires up FOMO even further.

One broker lifted its price target on Apple last night to US$600 – 20% above its current price.

Also of note is that cloud-based software companies are now queuing up to launch their IPOs, no doubt attempting to capitalise on tech euphoria. We’ve never seen this happen before, have we?

Some more statistics from last night:

A modest 0.3% gain for the Dow was led by Microsoft (+2%). Declining volumes on the NYSE exceeded advancing volumes and stocks lower on the day exceeded stocks higher.

The S&P500 gained 1.0%. Five sectors closed in the red. Two closed flat. Consumer discretionary (Amazon) rose 1.5%, technology (Microsoft, Google) rose 2.0% and communication services (Facebook, Netflix) rose 3.7%.

The S&P500 equal-weighted index fell on the day. The Russell small cap index fell -0.7%.

When a market’s rally goes on and on, the VIX volatility index on the S&P tends to gradually fall, to below 20, and even down to 11 in recent history. Last night the VIX rose 5.6% to 23.

Some concern creeping in?

September and October are on average the seasonally worst months on Wall Street, although one might argue 2020 is a unique case. November brings the election.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1954.70 + 26.30 1.36%
Silver (oz) 27.54 + 1.01 3.81%
Copper (lb) 2.99 + 0.01 0.26%
Aluminium (lb) 0.77 + 0.00 0.29%
Lead (lb) 0.89 – 0.00 – 0.52%
Nickel (lb) 6.85 + 0.08 1.24%
Zinc (lb) 1.11 – 0.01 – 0.55%
West Texas Crude 43.41 + 0.01 0.02%
Brent Crude 45.78 – 0.21 – 0.46%
Iron Ore (t) 123.25 + 1.75 1.44%

We might also note, apropos the VIX, gold is back up again. The US dollar is weak again but the the US ten-year yield ticked up to 0.69%.

I told you iron ore pullbacks never last very long.

Hurricane Laura will make landfall today, our time, with ground zero featuring the greatest concentration of US refineries, now all shuttered. Oil prices are not moving nonetheless, as low demand means plenty of inventories.

The Aussie is up 0.6% at US$0.7235.


The SPI Overnight closed down -15 points.

The annual Jackson Hole central bankers’ symposium begins tonight with a speech from the Fed chair. Except it won’t be at Jackson Hole. It will be in cyberspace.

Following on from yesterday’s construction numbers, today brings another GDP component – private sector capex.

The earnings season peaks today.

Ex-divs today include Coles ((COL)), JB Hi-Fi ((JBH)) and REA Group ((REA)).

The Australian share market over the past thirty days…

AVN Aventus Group Upgrade to Buy from Neutral UBS
BIN Bingo Industries Downgrade to Neutral from Outperform Credit Suisse
CHC Charter Hall Downgrade to Neutral from Outperform Credit Suisse
ENN Elanor Investors Upgrade to Buy from Accumulate Ord Minnett
FMG Fortescue Upgrade to Neutral from Sell Citi
Downgrade to Underperform from Neutral Credit Suisse
IDX Integral Diagnostics Upgrade to Outperform from Neutral Credit Suisse
MHJ Michael Hill Downgrade to Neutral from Buy Citi
NEW New Energy Solar Downgrade to Equal-weight from Overweight Morgan Stanley
NHF nib Holdings Upgrade to Outperform from Neutral Macquarie
OML oOh!media Downgrade to Hold from Accumulate Ord Minnett
OSH Oil Search Upgrade to Buy from Neutral Citi
Upgrade to Add from Hold Morgans
PTB PTB GROUP Upgrade to Add from Hold Morgans
RBL Redbubble Upgrade to Add from Reduce Morgans
SGP Stockland Downgrade to Neutral from Outperform Credit Suisse
SOM Somnomed Upgrade to Add from Hold Morgans
SUN Suncorp Upgrade to Neutral from Underperform Credit Suisse
Upgrade to Equal-weight from Underweight Morgan Stanley
TPG TPG Telecom Upgrade to Neutral from Underperform Credit Suisse
Upgrade to Outperform from Neutral Macquarie
Downgrade to Hold from Accumulate Ord Minnett
WGN Wagners Holding Upgrade to Neutral from Underperform Macquarie
WSA Western Areas Upgrade to Outperform from Neutral Credit Suisse

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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