The Overnight Report: Take A Deep Breath

This story features VIVA ENERGY GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: VEA

By Greg Peel

Back in Service

Moderna provided Australian day-traders with a get out of jail free card yesterday morning. After 24 minutes on Monday, day-traders were stuck in quarantine with their long positions no doubt praying Wall Street didn’t tank overnight. It didn’t.

Quite the opposite. The ASX200 had put on 73 points in those 24 minutes and yesterday, locked that in and added another 46 in the first hour on the vaccine news. Enough, it would appear, for said day-traders to take profits. Half an hour later the morning’s gains were all given back.

Another attempt at a rally failed and by day’s end, the ASX200 closed, effectively, 90 points higher on the vaccine news if we add in Monday.

The runaway star of the vaccine show yesterday was the energy sector, which closed up 3.4%. Even Viva Energy ((VEA)) got in on the act, gaining 6.7%.

Viva was beaten only by the two maddest stocks on the ASX – UR Westfield ((URW)) and Whitehaven Coal ((WHC)). The former jumped 16.3% on some board rearrangement, and the vaccine, while the latter; I have no idea. It’s not coal prices, because Whitehaven could just as easily be down by that much in the next session of two. It always is.

The biggest points influence on the ASX200 were financials – a clear vaccine winner – which gained 1.4%. Offsetting were falls for healthcare (-1.2%) and telcos (-1.2%) which were likely profit-taking, although NextDC ((NXT)) for some reason is sold down on vaccine news (-5.9%), being a virus winner.

Utilities fell -1.9% after Macquarie downgraded AGL Energy ((AGL)) to Underperform on regulatory changes. Tech fell -2.8%. Afterpay ((APT)) reported surging sales but also a new joint CEO, which didn’t seem to go down well (-5.4%).

The RBA minutes were out yesterday, but threw no new light as was expected after making its historic move, other than to suggest “it was time”.

Also helping the banks yesterday was the surprise inclusion in the NSW budget of stamp duty being optional, able to be traded for a land tax instead. No stamp duty, more affordability, right? Well not if you’re stuck paying land tax each year, and if you remove stamp duty, house prices simply rise by that amount.

After a double-whammy vaccine rally over the week, Wall Street went into profit-taking mode via the Dow futures during our afternoon yesterday, which clearly weighed on ASX sentiment to the close.

Drug Dealing

Amazon launched an online prescription pharmacy service last night. It was just another brick in Amazon’s wall, so only worth a 0.1% gain.

Listed pharmacy stocks crashed, nevertheless. The incumbent discount online pharmacist lost -20%. Dow component Walgreens Boots fell -10%, contributing most to Dow weakness.

No Senator, we’re not a monopoly.

Home Depot, another Dow component, reported earnings that smashed forecasts and fell -2.5%. After rallying heavily twice on vaccine news, with value leading the way, Wall Street had already decided to take profits before the market had opened.

The Dow opened down over -400 points, but spent the rest of the session paring that back.

The focus for the day was on the retail sector. October retail sales met expectations with a 0.3% rise, but this is the weakest result in six months amid growing voluntary and involuntary lockdowns.

Home Depot (US Bunnings) has been a virus winner so in theory must be a vaccine loser. Department store Macy’s was already near death before it was shut down by the virus, but last night it reported earnings and jumped 10%. Mind you, that took the share price to US$8.80. In 2015 it traded at US$69.

In other news, having confirmed five quarters of net profit, Tesla will finally be admitted into the S&P500 in the end-of-quarter reshuffle. In terms of market cap, Tesla will come in ahead of 492 of the 500 stocks. It’s the “biggest” stock debut ever for the index.

Tesla rose 8%.

In the wash-up it was a profit-taking session across all indices, with the Dow the worst performer and Nasdaq the least, reversing last week’s trend.

One wonders now whether the next vaccine announcement will have a similar impact. But the next cabs off the rank are running behind Pfizer and Moderna and may not even make announcements this year.

So what will Wall Street do between now and then? The running case-count for November to date is two million additions.

Commodities

Bit of a mixed bag last night. Iron ore seems back in rally mode, but has been bouncing around in about a US$115-130/t range for some months now.

The RBA minutes confirmed the primary objective of rate cut/QE was to bring the Aussie down, which as we know has done nothing but rally ever since. Last night it fell -0.1% to US$0.7305 when the dollar index fell -0.2%.

Today

The ASX200 faded away yesterday afternoon as the Dow futures began falling, but last night the Dow made enough of a comeback to have the SPI Overnight up 8 points this morning.

Today’s September quarter wage price index number tells us Australia’s GDP result is not far off.

Aristocrat Leisure ((ALL)), ALS Ltd ((ALQ)) and United Malt Group ((UMG)) all report earnings today.

Today’s welter of AGMs includes those of Seven Group ((SVW)) and Pact Group ((PGH)).

The Australian share market over the past thirty days…

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