The Overnight Report: Tech Domination

Daily Market Reports | Jul 31 2020

World Overnight
SPI Overnight (Sep) 5986.00 – 28.00 – 0.47%
S&P ASX 200 6051.10 + 44.70 0.74%
S&P500 3246.22 – 12.22 – 0.38%
Nasdaq Comp 10587.81 + 44.87 0.43%
DJIA 26313.65 – 225.92 – 0.85%
S&P500 VIX 24.76 + 0.66 2.74%
US 10-year yield 0.54 – 0.04 – 6.56%
USD Index 92.99 – 0.32 – 0.34%
FTSE100 5989.99 – 141.47 – 2.31%
DAX30 12379.65 – 442.61 – 3.45%

By Greg Peel

None So Blind?

The Australian market followed Wall Street up from the open yesterday, and then added extra gusto to lunchtime when the ASX200 was up 60 points. At that point the daily virus stats were released.

The surge in Victoria’s daily case-count and death toll should have been disturbing. It was, but only to the tune of -20 odd points. A close of up 0.7% for the index suggests the growing virus threat, nationally, and further restrictions, are nothing to be too worried about.

It is now generally accepted the Melbourne lockdown will need to continue beyond its initial six week target. Restrictions are now being placed on Victorian regional centres. Queensland has banned Sydney. SA, WA and the NT are building a fortress. NSW is on the brink. Woolworths wants everyone to wear a mask, please.

Nonetheless, here we go again. The index fell on Wednesday, rallied yesterday and the futures are down -28 points this morning, which would have the ASX200 heading back towards 6000 once more. Complicating the issue for today’s trade were some very solid earnings reports this morning in the Wall Street aftermarket from FAAG.

We don’t have a FAAG.

We do have a WAAAX, and indeed WiseTech Global ((WTC)), the W, had a strong session yesterday following earlier weakness this week and rose 5.9%, because the Nasdaq went up overnight. Add in the others, and the Ausdaq rose 2.4% yesterday.

Staples was the next best sector performer in rising 1.5%, and here we do likely see a response to the threat of further re-lockdowns.

But the traditional “defensive” story has broken down in the Days of Covid, with utilities (-0.4%) and property (-0.3%) the only negative sectors on the day and industrials (+0.1%) as good as left behind. Here we see a struggle paying bills, falling rents and fewer cars and flights.

That said, energy rose 1.0% yesterday but this followed a very poor week to date. Materials rose 1.0% on a better iron ore price.

Among individual stocks, ALS Ltd ((ALQ)) has been on a tear in July, probably due to its life sciences (testing) division, and rose another 6.5% yesterday to top the index. Credit Corp ((CCP)) kicked on again from its earnings result the day before (+6.0%), while WiseTech Global took bronze.

IOOF Holdings ((IFL)) provided a quarterly funds under management update yesterday and promptly fell -7.8% to be the worst index performer. Sandfire Resources ((SFR)) posted a production report and fell -5.8%.

UR-Westfield ((URW)) released earnings and fell -5.3%, driving down local retail REIT Vicinity Centres ((VCX)) by -4.0%.

So, last night the Dow fell -0.9% but the S&P500 only -0.4% as it was balanced out by the Nasdaq, which rose 0.4% thanks to Big Tech. FAAMG is 20% of the S&P. This morning FAAG has reported between them blow-away numbers, which would imply, all things being equal, a big night ahead for the Nasdaq and a positive impact on the S&P.

Our futures are down -28 this morning, post those result releases, which this time suggests we’re not just going to blindly follow a sector we don’t have in such magnitude.


Facebook up 6%, Amazon up 5.5%, Apple up 6% and Google, well, only 0.8% in the aftermarket. But what puts the “wow” in these moves is the fact US Big Tech stocks are all up 40-80% from their March lows.

And the fact they were all already rallying into this morning’s aftermarket result releases. Microsoft’s pullback last week despite a strong result suggested we might be in for “sell the fact” on all these names, but clearly not.

Wall Street opened weaker last night, with the Dow down -550. European selling was influential, given some weak German data had the DAX down -3.5%.

The US June quarter GDP number came out at -32.9%, which was actually a little “better” than expected, but nevertheless the worst result in history. But hey, anything between -30-40% would not have surprised anyone.

More disturbing were the weekly jobless claims numbers.

New weekly jobless claims rose by 1.43 million and continuing claims rose to 17 million to imply the trend has now swung back up. Despite re-openings, claims never managed to turn negative, and now re-lockdowns are having their impact.

Wall Street has taken some solace in signs the case-count in the so-called sun-belt states is plateauing, but the virus has now sent its troops in the mid-west. There cases are rising.

Meanwhile, there is no sign Congress is anywhere near agreeing on round two stimulus. Round one expires tonight.

It was the jobless claims that immediately bifurcated Wall Street once more. Cyclicals, value, and anything seen as a virus victim headed south, while stay-at-home winners headed north, which includes Big Tech. Hence the Dow underperformed, with banks and energy leading the way, while the Nasdaq outperformed, with you know who leading the way. The S&P split the difference.

The FAAG results after the bell confirm these names have not yet hit “overblown” territory.

A previously sleepy US ten-year bond rate, which has been stuck around 0.6% for weeks, has now fallen to 0.54%.

The US dollar continues to fall.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1957.20 – 13.70 – 0.70%
Silver (oz) 23.51 – 0.78 – 3.21%
Copper (lb) 2.91 – 0.01 – 0.27%
Aluminium (lb) 0.78 + 0.00 0.06%
Lead (lb) 0.84 + 0.01 0.88%
Nickel (lb) 6.21 + 0.01 0.21%
Zinc (lb) 1.03 + 0.00 0.42%
West Texas Crude 40.33 – 0.99 – 2.40%
Brent Crude 43.38 – 0.37 – 0.85%
Iron Ore (t) futures 111.45 + 0.55 0.50%

Which on any other day would have had gold rallying, but having rallied so far so fast recently, gold was due some profit-taking.

Silver has run even harder.

It was likely the jobless claims news that had WTI slipping back.

The US dollar index is down -0.3% but fortunately that only pushed the Aussie up a tick, to US$0.7189.


The SPI Overnight closed down -28 points or -0.5%.

The eurozone reports its GDP tonight.

China releases July PMIs.

The US will see personal income & spending numbers for June, which are largely redundant, along with up-to-date consumer sentiment.

Locally, the June quarter wholesale inflation numbers are due. Yesterday saw building approvals fall for the fourth straight month for the first time since the GFC.

Infigen Energy ((IFN)) posts a quarterly today.

The Australian share market over the past thirty days…

BUB Bubs Australia Downgrade to Neutral from Buy Citi
CTD Corporate Travel Upgrade to Buy from Accumulate Ord Minnett
CWY Cleanaway Waste Management Downgrade to Hold from Add Morgans
DMP Domino's Pizza Downgrade to Sell from Neutral UBS
GUD GUD Holdings Downgrade to Neutral from Buy Citi
HLS Healius Downgrade to Neutral from Buy Citi
NUF Nufarm Upgrade to Buy from Neutral UBS
PAR Paradigm Downgrade to Reduce from Hold Morgans
RIO Rio Tinto Downgrade to Hold from Add Morgans
RRL Regis Resources Downgrade to Neutral from Outperform Credit Suisse
SBM St Barbara Downgrade to Hold from Buy Ord Minnett

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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