Overnight: Samo, Samo

By Greg Peel

And Back Again

Yesterday’s trade on the ASX was mostly a reversal of Wednesday’s trade. On Wednesday we were worried about the virus but yesterday we followed five US mega-caps.

There was some good news on the virus front yesterday, with eight out of nine Melbourne plague towers easing back from full lockdown restrictions, albeit the case-count is rising fast in the ninth.

On Wednesday consumer staples was the only sector to close in the green. Yesterday it was one of only two sectors to close in the red, if we call the banks flat. Property fell -2.4% on Wednesday and -0.5% yesterday to be the only sector not to reverse.

Demand for new housing loans fell -11.6% in May having fallen -4.8% in April, with high unemployment, curtailed immigration and falling rents sure to lead to ongoing weakness.

The banks, consumer discretionary, healthcare and utilities all fell sharply on Wednesday, and all closed flat yesterday.

Materials gained 1.7% on strong gold and iron ore prices, energy rose 2.4% on an insubstantial move up in oil prices, which have reversed overnight, and telcos are back in favour, rising 2.0% supposedly on the 5G theme.

The big winner on the day was IT, up 3.1%, or specifically BNPL.

Afterpay ((APT)) came back on the boards after its capital raising and – never mind the dilution – rose 11.4% to win the day in the ASX200. Did I say ASX200? Afterpay now qualifies for the ASX20. It’s bigger than Woodside.

The Ausdaq is a Kraken waking.

Afterpay’s jump had all BNPL names jumping alongside, including a 10.4% gain for Zip Co ((Z1P)).

In another “sign of the times”, wealth management platform Netwealth ((NWL)) rose 9.2% on strong funds under management numbers. Outside the index, platform peer Praemium ((PPS)) announced a takeover of Powerwrap ((PWL)), which was worth 23% for the suitor and 66% for the target.

And yet another SOTT, PointsBet Holdings ((PBH)) rose 11.3%.

But ho hum, Wall Street is down overnight (the non tech bit anyway) and our futures are down -24 points this morning. So we’re back to the up-down, up-down pattern again, a la late June.

Two Way Street

Guess what? The Nasdaq hit a new all-time high last night, again, as did the share prices of Facebook, Apple, Amazon and Microsoft.

The Dow fell -1.4% and the S&P -0.6%. If you take Apple and Microsoft out of the Dow and all the Big Techs out of the S&P, imagine how they’d look. The Russell 2000 small cap index fell -2.0%. But worry not. If you add the market cap of Amazon with half the market cap of Apple you get the entire market cap of the Russell 2000.

Helping the Dow to underperform was pharmacy chain Walgreens Boots, which doesn’t sell boots, after a big miss on earnings. It fell -7.8%.

Earnings season unofficially kicks off on Tuesday with the first of the big banks.

Florida posted a record number of hospitalisations and deaths on Wednesday. Disney plans to reopen Disney World in Florida next week. “We have never gotten out of the first wave,” said Dr Fauci. “So I wish we would stop talking about waves and just look at the reality of where we are right now”.

Only 1.3m Americans filed for the dole last week. The trend of new claims over the past fifteen weeks has been gradually down, which is glass half full for some investors, but still not turning to the positive despite re-openings, which is clearly glass half empty.

The Treasury Secretary last night informed that the White House backs an extension of the PPP (JobKeeper) program beyond this month, but at a lower rate. I think I’ve heard that somewhere else.

And president-in-waiting Joe Biden last night vowed to put an end to “shareholder capitalism”, and raise corporate taxes. He would have been pleased to learn the news the US Supreme Court ruled that a New York prosecutor could have access to President Donald Trump’s tax returns.

The WTI crude price fell back under US$40/bbl last night, with traders citing increasing virus concerns.

Put it altogether and it was not a great day on Wall Street. Compounding the issue is that the traditional defensive plays of REITs and utilities are actually virus victims, so no longer safe havens. Staples are another defensive – see Walgreens Boots.

So where can one hide? Mega-cap growth stocks, aka Big Tech. Valuations? Who cares?

Commodities

The balance of increasing Chinese demand and supply curtailments in Chile has copper continuing on its run. Much is made of increased demand for nickel from EV producers, but there’s a helluva lot more copper in an EV than an internal combustion vehicle.

It was a fair bet that gold would sit back a bit after crossing 1800.

Is this the start of a fresh oil price pullback?

The Aussie is down -0.3% at US$0.6962.

Today

The SPI Overnight closed down -24 points -0.4%.

The US releases wholesale inflation numbers tonight.

The Australian share market over the past thirty days…