The Monday Report – 14 September 2020

This story features CSL LIMITED, and other companies. For more info SHARE ANALYSIS: CSL

By Greg Peel

More of the Same

Wall Street had opened higher on Thursday night but this seemed only to provide an opportunity for slow movers to sell, leading to another down-session. The ASX200 thus dutifully dropped -70 points in the first ten minutes on Friday, as the algos led the way. But then a funny thing happened.

The index may have still closed down -50 points, with all bar one sector closing in the red, but it does suggest there is some tentative buying out there. A +0.5% gain for healthcare, led by market cap heavyweights CSL ((CSL)) and Cochlear ((COH)), provided a lonely but influential offset to the wider market. The banks, as usual, were the biggest drag (-1.2%).

Energy fell -1.8% on lower oil prices while in materials, BHP Group ((BHP)) was swept into the furore over Rio Tinto’s ((RIO)) lack of respect, leading to three director executions, as it scrambles to ensure it doesn’t make the same mistake. Materials fell -1.3%. Gold miners have gone a little quiet now.

IT of course fell with the Nasdaq (-2.0%) but is also now impacted by competition heating up in the BNPL space, taking the gloss of those previous high-flyers.

Other sectors all fell less than -1%.

There was no pattern in Friday’s top five index winners and losers among individual stocks.

National Bank’s ((NAB)) CEO told a parliamentary inquiry on Friday why it’s now too risky to invest in coal and the rewards are all in renewables, and then Whitehaven Coal ((WHC)) rallied 5.9% to win the day. Nearmap ((NEA)) came back on the boards after a capital raising and fell -14.9% to lose the day. Nearmap was as at last week 7.3% shorted.

Base metal/mineral miners appeared on both sides of the ledger.

Melbournians will now be allowed to stay out to 9pm! It’s like being 13 all over again.

The announcement had been expected, along with an hour’s extra exercise, so is unlikely to make any great impact on the market today, other than to suggest a small step in the right direction.

To that point, with Wall Street rocking and rolling on Friday night but the S&P500 ultimately closing flat, our futures were up a bold 4 points on Saturday morning.

Finding its Feet?

The Dow was up almost 300 points by late morning on Friday, down -90 points by early afternoon, and up 130 at the closing bell.

From the open to early afternoon, the story was playing out as a repeat performance of Thursday – buyers deciding the pullback had sufficiently run its course only to be again swamped by those either disagreeing, or simply fearing more to come in the notorious September-October period. But when Wall Street hit its lows for the day, two important technical events were marked.

Firstly, the S&P500 reached its 50-day moving average. Secondly, Apple’s pullback reached -20%. For some, it appeared this was now “enough”.

And that about sums up the session.

There was some economic news. The US CPI rose 0.4% in August, beating forecasts of 0.3%, but given the prior two months had seen 0.6% increases, inflation is still not an issue, and less so given the Fed doesn’t care anymore.

The wildfires in the Pacific states haven’t gone unnoticed, although despite being as devastating as those experienced here, do not receive much attention in market commentary.

The US weekly case-count continues to trend down, now into the mere 30,000s per day, leading presidential candidate Donald Trump to announce America has “turned the corner”. Medical experts, including Dr Fauci, have expressed their disagreement, warning the country cannot become complacent as it heads into “the fall”.

Evidence in other countries, now experiencing second waves and re-lockdowns, suggests no one can ever become complacent.

One story of interest last week on Wall Street is that of Nikola Tesla’s younger child, Nikola. The electric truck manufacturer, which is yet to produce a truck commercially but is worth US$12bn, has been accused by a short-selling hedge fund of being a fraud.

Nikola had announced it was preparing a lengthy rebuttal to the accusations, but on Friday night handed the matter over to the SEC. The stock fell a net -30% from Wednesday to Friday, having jumped 30% on Tuesday after General Motors announced it had taken a major stake.

Hope GM did their due diligence.

Commodities

Commodity prices returned to the upside on Friday night. The US dollar returned to falling, but only by less than -0.1%.

Iron ore has had another growth spurt up to US$129/t.

Morgan Stanley is now forecasting an average price of US$63/t by 2025.

The Aussie continues to bounce around in the 72s, rising 0.3% to US$0.7282.

The SPI Overnight closed up 4 points.

The Week Ahead

The minutes of the September RBA meeting are out tomorrow while all of the Fed, Bank of Japan and Bank of England hold policy meetings this week.

China releases August industrial production, retail sales and fixed asset investment numbers tomorrow and the US follows suit with industrial production tomorrow and retail sales on Wednesday.

The US also sees numbers for housing market sentiment, housing starts and fortnightly consumer sentiment.

New Zealand reveals its June quarter GDP result on Thursday.

Australia’s August jobs numbers are out on Thursday.

Thursday is also the expiry on September quarter ASX derivatives – futures and options – and could well add to the current level of volatility on the day.

Ex-dividends continue to come thick and fast this week.

Auckland International Airport ((AIA)) reports monthly “traffic” stats on Wednesday and Sydney Airport ((SYD)) on Friday.

Spark New Zealand ((SPK)) hosts an investor day on Wednesday while Clover Corp ((CLV)) reports earnings on Friday and Cromwell Property ((CMW)) holds an EGM.

The Australian share market over the past thirty days…

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