Overnight: Cheques & Balances

By Greg Peel

Red Sea

After a seven-day winning streak, the ASX200 turned tail yesterday and consolidated profits, with every sector closing in the red. Yesterday wiped out Wednesday’s gains, so we could call it a six-day rally.

The technology sector led the way with a -2.1% fall, as investors bailed out of Australia’s equivalents to Facebook, Google and Co after falls on Wall Street. Okay, they did actually bail out of Appen ((APX)) after the AI company cut guidance due to covid disruption, particularly in California. The stock was the worst index performer with a -12.4% drop.

Property (-0.03%) was the best performer, probably because it was the worst against the trend on Wednesday, and utilities (-0.2%) tried to be a bit defensive, but falls across other sectors were relatively uniform. It was just a day to sell.

Materials fell -0.8% as the surging iron ore price balanced out a big fall in the gold price overnight. Three of the top five index losers were gold miners, along with rare earth miner Lynas Rare Earths ((LYC)), the company formerly known as Lynas Corp, making up the five.

Surging iron ore price? It’s up another 5% overnight.

Fortescue Metals ((FMG)) made its way into the top five winners (+3.3%) as the pure-play pin-up, but was pipped by a 5.8% gain for Perpetual ((PPT)) and 3.6% for Credit Corp ((CCP)).

We’ll see how the miners fare today, particularly BHP Group ((BHP)) given the oils are up 3% overnight as well, with the gold price steady.

The counter factor, nonetheless, is a swiftly rising Aussie. It’s up a full percent over 24 hours, well into the 75s. This not only provides a headwind for the resource sectors but for any company with foreign exposure – healthcare being one of the biggies.

An Australian Treasury auction of $2bn of three-month notes yesterday was more than five times oversubscribed. The average yield achieved by the buyers (lenders to the government) was 0.01%. The highest price paid (lowest yield) was -0.01%.

For the first time in history, some fool’s paying the government to take his money.

The Nasdaq bounced back last night, so our Facebooks might get a reprieve today.  It was an otherwise lacklustre session on Wall Street but our futures are suggesting down -36 this morning so there still might be some selling to come.

Rarefied Air

On Wednesday night US food delivery service DoorDash IPO-ed for a 70% pop on listing. Last night it was Airbnb’s turn. It jumped 112%.

That values the company at close to US$100bn. You’d need to put together around half a dozen of the world’s major hotel chains to reach that sort of market cap.

DoorDash was valued at US$39bn. All it needs to do now is make a profit.

It was an otherwise lacklustre session on Wall Street last night as investors traded off hopes and nightmares. Wednesday’s single-day death rate exceeded that of 9/11, and last night’s weekly new jobless claims showed a big jump to 853,000 from 716,000 the week before.

Both were anticipated. Last night marked two weeks from Thanksgiving – the point from which Dr Fauci warned would herald a big jump in cases and deaths due to family gatherings. And unemployment is expected to turn back up again as lockdowns are reinstated.

But as we speak, the FDA is considering the approval of the Pfizer vaccine. The trucks are on the gird with their engines running, waiting for the green flag.

Pelosi and Mnuchin both provided upbeat updates on stimulus progress last night. They’ve been upbeat for six months. No actual deal yet though. Republican senators still won’t pass any package that includes support for state governments.

Meanwhile across The Pond, the ECB last night boosted the size of the pandemic emergency purchase program by E500bn and extend its targeted longer-term refinancing operation for banks.

Brexit trade talks have been extended through to Sunday, given no agreement has been reached. Boris is warning a “no deal” Brexit is looking more likely.

The question is are global markets generally bored with the whole Brexit saga, and thus disinterested, or would “no deal” actually strike some nerves?

Commodities

The latest US weekly crude inventory data showed a bigger than expected increase, yet oil prices jumped 3% last night. Strength has been put down to vaccine excitement, and signs of increased refinery demand in China. Brent hit US$50/bbl for the first time in nine months.

China is also behind iron ore’s explosion, on the demand side, while doing its bit is Brazil, where supply is constrained. How far can it go?

The Aussie is up 1.0% at US$0.7539. See: iron ore.

Today

This may well explain why the SPI Overnight closed down -36 points or -0.5% to the S&P500’s -0.1%.

Westpac ((WBC)) holds its AGM today, as does Pendal Group ((PDL)).

Today the quarterly promotions and relegations to/from the S&P/ASX indices will be announced, before becoming effective next Friday.

The Australian share market over the past thirty days…