Daily Market Reports | Feb 14 2020
This story features AGL ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: AGL
| World Overnight | |||
| SPI Overnight (Mar) | 7029.00 | 0.00 | 0.00% |
| S&P ASX 200 | 7103.20 | + 15.00 | 0.21% |
| S&P500 | 3373.94 | – 5.51 | – 0.16% |
| Nasdaq Comp | 9711.97 | – 13.99 | – 0.14% |
| DJIA | 29423.31 | – 128.11 | – 0.43% |
| S&P500 VIX | 14.15 | + 0.41 | 2.98% |
| US 10-year yield | 1.62 | – 0.01 | – 0.80% |
| USD Index | 99.07 | + 0.04 | 0.04% |
| FTSE100 | 7452.03 | – 82.34 | – 1.09% |
| DAX30 | 13745.43 | – 4.35 | – 0.03% |
By Greg Peel
How Many?!
On Wednesday night Wall Street took heart from the news out of Beijing that the pace of daily new cases of the virus was easing. There were nevertheless questions raised. Beijing also announced it had changed its count methodology. Was it this “change” that resulted in a slower pace, and could it be relied upon?
The Australian market wasn’t waiting to find out yesterday morning. The ASX200 opened up 57 points. But then the news came through that China’s “new methodology” had led to the biggest jump in daily new cases to date – some 15,000 – taking the case count to 60,000, and that the number of deaths had jumped by the greatest single day amount.
The ASX200 closed up only 15 points. The world is now completely confused. This “new methodology” simply reflects the fact China has run out of virus test kits, and thus has turned to CT scans as the means of identification. Many have assumed all along Beijing had been hiding the true numbers, but maybe China was just incapable of keeping up. Yesterday’s news, coming so quickly off the back of a declaration the case count is slowing, suggests perhaps Beijing is not trying to hide the truth at all.
But who knows?
At least, given a comparatively flattish close for the local index, we were able to assess the day’s long list of earnings results on their merit.
Utilities (+1.6%) was the winning sector on the day after AGL Energy’s ((AGL)) result was well received. AGL’s 3.6% gain was nevertheless dwarfed elsewhere.
Consumer discretionary posted the second best move (+0.8%) after toasted sandwich maker company Breville Group ((BRG)) jumped 27.6% on its numbers.
Consumer staples (-0.8%) went the other way thanks to Treasury Wine Estates ((TWE)), which fell -5.7% on its result despite having pre-warned just recently. Greater detail of Chinese exposure was provided, plus the CEO announced he was off.
An unchanged dividend from Telstra ((TLS)) should have on any other day been a positive, but the telco’s release was blindsided by news the ACCC will not block the merger of TPG Telecom ((TPM)) and Vodafone, which will create a third genuine player in mobile. TPG shares jumped 11.5%, Telstra shares fell -1.6%, and the telco sector fell -0.5%.
Amidst all the noise, probably the most significant result release on the day was that of logistics REIT Goodman Group ((GMG)) – for many an investor “the one that got away”. It rose 5.8%. REITs aren’t supposed to rise 5.8%.
National Bank ((NAB)) also snuck in a quarterly update yesterday, which was worth 1.4%. Financials rose 0.3%.
The rebound in the oil price had energy up 0.6%.
The Dow futures had begun to fall in our session yesterday afternoon, underscoring the change of heart with regard the virus. However, Wall Street recovered from its initial fall, and our futures are flat this morning.
What’s in a number?
The Dow fell -200 points on the open last night. By 2pm it was back to square. The question is as to whether the big jump in case count reflected a surge in the spread of the virus, or whether under the new methodology the numbers were simply catching up to reality.
Given the vast bulk of cases and deaths is confined to a locked-down Hubei Province, investors are not as fearful as they otherwise might be. Until ex-China cases start to accelerate.
The Dow was always going to underperform the other indices thanks to a weak earnings result from Cisco Systems, which fell -5%.
But just as it appeared Wall Street was taking this new virus news in its stride, nervousness flared once more, leading to a soft close.
While US December quarter earnings reports to date have been net positive, one by one US companies are warning of a virus impact in the March quarter – an impact most cannot reliably quantify at this stage, rendering guidance somewhat moot.
In economic news, the US headline CPI rose 0.1% in January, shy of 0.2% forecasts, but sending the annual rate up to 2.5% from 2.3% in December. The core rate rose 0.2% but the annual core rate remained unchanged at 2.3% for the fifth month in a row.
No impediment here for the Fed to cut if the virus situation worsens.
In other news, what do you do if your share price has gone parabolic? Raise new capital, of course. Last night Tesla announced a US$2bn raising in the wake of the stock’s 80% 2020 surge. Mind you, that’s US$2bn on a market cap of US$140bn.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1575.40 | + 9.50 | 0.61% |
| Silver (oz) | 17.62 | + 0.17 | 0.97% |
| Copper (lb) | 2.61 | + 0.00 | 0.12% |
| Aluminium (lb) | 0.79 | + 0.00 | 0.01% |
| Lead (lb) | 0.86 | + 0.01 | 1.60% |
| Nickel (lb) | 5.98 | + 0.06 | 1.00% |
| Zinc (lb) | 0.98 | + 0.01 | 0.88% |
| West Texas Crude | 51.60 | + 0.14 | 0.27% |
| Brent Crude | 56.52 | + 0.48 | 0.86% |
| Iron Ore (t) futures | 88.20 | + 0.20 | 0.23% |
Pretty much as case of nothing to see here. Commodity markets are just as confused as everyone else.
We might note a fear element is again creeping into gold.
The Aussie is off -0.2% at US$0.6719.
Today
The SPI Overnight closed unchanged.
US retail sales numbers will be closely watched tonight.
The local earnings season takes a bit of a breather today, ahead of next week’s fifty shades of hell. Baby Bunting ((BBN)) is in the frame nonetheless, along with a couple of others.
For a full list of earnings results due today please refer to the FNArena Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/).
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| A2M | A2 MILK | Upgrade to Buy from Sell | Citi |
| AMC | AMCOR | Upgrade to Add from Hold | Morgans |
| Downgrade to Neutral from Outperform | Credit Suisse | ||
| BLD | BORAL | Upgrade to Hold from Lighten | Ord Minnett |
| CAR | CARSALES.COM | Downgrade to Neutral from Outperform | Credit Suisse |
| Downgrade to Hold from Accumulate | Ord Minnett | ||
| Downgrade to Sell from Neutral | UBS | ||
| CBA | COMMBANK | Downgrade to Reduce from Hold | Morgans |
| CGF | CHALLENGER | Downgrade to Neutral from Outperform | Macquarie |
| Downgrade to Sell from Lighten | Ord Minnett | ||
| CNI | CENTURIA CAPITAL GROUP | Upgrade to Accumulate from Hold | Ord Minnett |
| CPU | COMPUTERSHARE | Upgrade to Outperform from Neutral | Credit Suisse |
| Downgrade to Lighten from Hold | Ord Minnett | ||
| CSL | CSL | Downgrade to Neutral from Outperform | Macquarie |
| DOW | DOWNER EDI | Downgrade to Hold from Accumulate | Ord Minnett |
| EVN | EVOLUTION MINING | Upgrade to Buy from Neutral | UBS |
| IEL | IDP EDUCATION | Upgrade to Accumulate from Hold | Ord Minnett |
| JBH | JB HI-FI | Upgrade to Outperform from Neutral | Macquarie |
| Downgrade to Sell from Neutral | Citi | ||
| KMD | KATHMANDU | Downgrade to Neutral from Outperform | Credit Suisse |
| NST | NORTHERN STAR | Downgrade to Neutral from Buy | UBS |
| ORA | ORORA | Downgrade to Hold from Add | Morgans |
| OSH | OIL SEARCH | Upgrade to Hold from Lighten | Ord Minnett |
| Upgrade to Buy from Neutral | UBS | ||
| REA | REA GROUP | Downgrade to Underperform from Neutral | Macquarie |
| SM1 | SYNLAIT MILK | Upgrade to Neutral from Underperform | Credit Suisse |
| Upgrade to Neutral from Underperform | Macquarie | ||
| SUN | SUNCORP | Downgrade to Hold from Add | Morgans |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website. Click here. (Subscribers can access prices on the website.)
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CHARTS
For more info SHARE ANALYSIS: AGL - AGL ENERGY LIMITED
For more info SHARE ANALYSIS: BBN - BABY BUNTING GROUP LIMITED
For more info SHARE ANALYSIS: BRG - BREVILLE GROUP LIMITED
For more info SHARE ANALYSIS: GMG - GOODMAN GROUP
For more info SHARE ANALYSIS: NAB - NATIONAL AUSTRALIA BANK LIMITED
For more info SHARE ANALYSIS: TLS - TELSTRA GROUP LIMITED
For more info SHARE ANALYSIS: TWE - TREASURY WINE ESTATES LIMITED