The Overnight Report: Calm Descends

This story features VIRGIN MONEY UK PLC, and other companies. For more info SHARE ANALYSIS: VUK

World Overnight
SPI Overnight (Mar)	6759.00	– 18.00	– 0.27%
S&P ASX 200	6824.60	+ 62.00	0.92%
S&P500	3830.17	+ 3.86	0.10%
Nasdaq Comp	13610.54	– 2.23	– 0.02%
DJIA	30723.60	+ 36.12	0.12%
S&P500 VIX	22.91	– 2.65	– 10.37%
US 10-year yield	1.13	+ 0.03	2.35%
USD Index	91.17	– 0.04	– 0.04%
FTSE100	6507.82	– 8.83	– 0.14%
DAX30	13933.63	+ 98.47	0.71%

By Greg Peel

And Back Again

Indications that the GameStop game had blown itself out on Wall Street was enough for bargain hunters to hit the Australian market yesterday for fear of missing out. But for a couple of sectors, it was a “buy everything” session.

It was a week ago when the ASX200 suddenly plunged from a prior closing level of 6781, and yesterday the index closed at 6824. A 90 point rally at the peak gave way to only 60 points, suggesting a few of last week’s early movers locked in short term profits in the afternoon.

The banks were the major drivers, rising 1.5%. This time healthcare was not the funding source – it rose 2.0%. Telcos, energy, discretionary and even utilities all joined the one percent-plus club.

The spoilsports were materials (-0.8%), which succumbed to a drop in the iron ore price, and technology (-0.2%), due to falls in the BNPL names after the UK introduced new regulations in order to protect the vulnerable. Will it happen here?

Virgin Money UK ((VUK)) is a plaything for the bold, being one of the most volatile stocks on the market. It jumped 14.6% to lead the index yesterday simply by guiding to flat net interest margins.

Corporate Travel Management ((CTD)) was next best with 6.4% after Ord Minnett upgraded to Buy. This follows a similar upgrade from Credit Suisse last week, leaving all six covering brokers in the FNArena database on Buy or equivalent ratings.

On the downside, Northern Star Resources ((NST)) and Saracen Minerals ((SAR)) both fell a uniform -4% on a “sell the fact” after the merger of the two goldminers was granted approval. It’s a rare day when one sees a leviathan like BHP Group ((BHP)) in the top five mover tables, but it only fell -2.2%, thanks to iron ore.

Last week data revealed a surge in loan demand for newly constructed detached houses, thanks to government subsidies. Yesterday’s data showed December building approvals jumping 10.9% against a market forecast of 3.0%. Remember when it was all about apartments? Not anymore. Apartment approvals rose 2.3% and detached houses 15.8%.

Annual house approval growth has hit 55% – the strongest since 2002. Aside from government subsidies, demand is being led by the now entrenched work-from-home regime, leading workers to escape plague-ridden cities.

All those new houses are going to need furniture, white goods, electronic goods…and the tree changers will need to swap the Corolla for a Hilux.

As easy as A-B-C

Alphabet, owner of a little search engine called Google, jumped 7.4% last night after announcing a record quarter. That’s a lot of points for both the Nasdaq and S&P500, although last night’s overall trade smacked of traders needing a little lie down after recent activities.

Amazon also posted a record profit, but that’s never good enough for Wall Street. The stock fell -2.0%, but was also impacted by the announcement founder Jeff Bezos will be stepping aside from the day-to-day. He’s probably miffed Elon has pipped him for the world’s fattest wallet.

The S&P is not quite back to the level from which it fell when the short squeeze made its mark, but the dust has at least now settled. GameStop rose all of 2.7% last night.

But the fallout continues, with newly minted Treasury Secretary Janet Yellen calling a meeting with the SEC, CFTC, Fed and New York Fed (which services the Treasury) to discuss the past week’s shenanigans. Robinhood’s CEO has been requested to testify before the House Financial Services Committee.

Meanwhile, Democrats have paved the way for a vote in the Senate on the stimulus bill, but the market is already pricing in the full US$1.9trn via Kamala’s casting vote. The vaccine rollout continues to pick up pace, but there was no new news on that front either last night.

The good news is 174,000 private sector jobs were created in January, up from 78,000 in December and beating expectations of 50,000. The all-important non-farm payroll numbers are out tomorrow night.

The US ten-year yield continues to quietly tick up – up another three points to 1.13% last night, which continues to drive a recovery for US banks. They still have some way to go to regain pre-pandemic levels.

Otherwise, it was just a quiet session.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1832.80	– 2.00	– 0.11%
Silver (oz)	26.51	+ 0.16	0.61%
Copper (lb)	3.55	+ 0.02	0.64%
Aluminium (lb)	0.90	+ 0.00	0.26%
Lead (lb)	0.91	– 0.01	– 0.57%
Nickel (lb)	8.00	– 0.04	– 0.55%
Zinc (lb)	1.18	+ 0.03	2.37%
West Texas Crude	55.64	+ 0.85	1.55%
Brent Crude	58.38	+ 0.83	1.44%
Iron Ore (t)	152.05	+ 1.95	1.30%

Speaking of the Democrats, an executive order that flew under the radar on Biden’s first day was one to shut down construction of the controversial XL pipeline which was to pump oil from Canada to Texas. Obama had always been opposed, on environmental grounds.

The XL is not the only planned pipeline in the US so opponents are now keen to hear whether others will be similarly halted. Aside from the usual market issues, recent strength in oil prices reflects the Biden administration’s policy of shifting away from fossil fuel production.

Zinc’s standout rise last night is attributed to “dip-buying” after recent falls. Nothing on Reddit?

The Aussie is back to a more familiar US$0.7620 after rising 0.4%.

Today

Late selling yesterday has followed through to the SPI Overnight falling -18 points or -0.3%.

Locally we’ll see updated ABS data for December trade today.

Centuria Office REIT ((COF)), Janus Henderson ((JHG)) and Pinnacle Investments ((PNI)) report earnings. Make sure you keep up to date with this season's progress via 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
BHP	BHP	Downgrade to Neutral from Outperform	Credit Suisse
CTD	Corporate Travel	Upgrade to Buy from Accumulate	Ord Minnett
DRR	DETERRA ROYALTIES	Upgrade to Outperform from Neutral	Credit Suisse
		Upgrade to Buy from Neutral	UBS
FCT	Firstwave Cloud Technology	Downgrade to Hold from Add	Morgans
FMG	Fortescue	Upgrade to Outperform from Neutral	Credit Suisse
HLS	Healius	Upgrade to Buy from Sell	UBS
ORE	Orocobre	Downgrade to Hold from Add	Morgans
PBH	Pointsbet Holdings	Downgrade to Hold from Buy	Ord Minnett
SGR	Star Entertainment	Upgrade to Accumulate from Hold	Ord Minnett
SIQ	Smartgroup	Upgrade to Buy from Hold	Ord Minnett
TAH	Tabcorp Holdings	Downgrade to Neutral from Outperform	Credit Suisse
UMG	United Malt Group	Upgrade to Neutral from Underperform	Credit Suisse
VHT	Volpara Health Technologies	Downgrade to Lighten from Hold	Ord Minnett
WEB	Webjet	Upgrade to Buy from Hold	Ord Minnett
WOR	Worley	Upgrade to Hold from Lighten	Ord Minnett
		Downgrade to Neutral from Outperform	Credit Suisse
		Downgrade to Neutral from Buy	UBS
WSA	Western Areas	Downgrade to Neutral from Outperform	Credit Suisse

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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