Daily Market Reports | Mar 02 2021
This story features FORTESCUE LIMITED. For more info SHARE ANALYSIS: FMG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight (Mar) | 6817.00 | + 60.00 | 0.89% |
| S&P ASX 200 | 6789.60 | + 116.30 | 1.74% |
| S&P500 | 3901.82 | + 90.67 | 2.38% |
| Nasdaq Comp | 13588.83 | + 396.48 | 3.01% |
| DJIA | 31535.51 | + 603.14 | 1.95% |
| S&P500 VIX | 23.35 | – 4.60 | – 16.46% |
| US 10-year yield | 1.45 | – 0.01 | – 0.96% |
| USD Index | 91.04 | + 0.16 | 0.18% |
| FTSE100 | 6588.53 | + 105.10 | 1.62% |
| DAX30 | 14012.82 | + 226.53 | 1.64% |
By Greg Peel
Oh no you don’t
The local market was already set for a positive day from the morning’s open yesterday. Aside from last Friday’s action very much reflecting end of month squaring, over the weekend the US House had passed Biden’s US$1.9trn stimulus package and the FDA had approved Johnson & Johnson’s vaccine.
While coming in a late third in the US, J&J’s vaccine is being hailed as a game-changer, given it is one-dose only and can be stored in a fridge. The rollout begins this week.
Back locally, in came the day’s economic data.
ANZ Bank’s job ad series showed a 7.2% increase in February, following a 2.6% increase in January. Annual job ad growth rose to 13.4%, the highest since October 2018.
Lending on housing jumped by 10.5% in January to an annual rate of 44.3% — the highest since the series began in 2003. Owner-occupier loans represented 62% of January’s jump, driven by low rates and government subsidies. And what was the result?
House prices rose 2.1% in February – the biggest monthly jump since, would you know, 2003.
In the long dark past, before covid, the RBA had become concerned about Australia’s housing bubble, hence APRA moved in to tighten restrictions on lending, specifically by investors. Then came the banking Royal Commission, and the banks all but put up the shutters to borrowers. But when covid hit, Josh told the banks to ease up.
Now look where we are.
But just when the day’s news couldn’t get any better for the stock market, in came the RBA.
Concerned over the pace of the rise in government bond yields, the central bank stepped in and started buying at the long end. The result was a single-day -25 basis point fall in the ten-year yield to 1.65%. That yield had been up 77bps in February. We recall that in the past couple of weeks, rising bond yields have been spooking stock markets.
Up to now, the RBA has only been trying to keep the three-year rate down, such that everything from overnight cash to three years is trading at a mere 0.1%. A ten-year yield of near 2% was too much for the RBA to bear.
One might make the case that capping yields is negative for the banks, given the steeper the yield curve the greater are bank margins, but the financials sector led the market up in ASX200 points terms yesterday with a 2.0% rally. The housing data rather helped, and investors were indiscriminately buying everything yesterday anyway.
The only sector not to appear to have enjoyed otherwise fairly uniform spoils was materials (+0.3%), but if we count back Fortescue Metals' ((FMG)) massive dividend, the score is evened. And that’s after base metals and gold all saw sharp pullbacks on Friday night.
Oil also pulled back, but energy was up 1.9%. You get the picture.
And it ain’t over yet. A similar story played out on Wall Street last night and our futures are up another 60 points this morning.
We only need another 100-odd points to be back at the February high.
Aussie Aussie Aussie
It’s not often the Reserve Bank of Australia is credited with a massive rally on Wall Street, but that was the case last night. Alright – there was the stimulus passage and vaccine approval as well, but the RBA’s intervention into the bond market was a hot topic among traders.
It didn’t hurt either that an ECB official said the eurozone central bank “can and must react” against any undue tightening of financial conditions.
It was the same set-up on Wall Street as it had been in Australia. Friday saw a big reversal of trend to square up for month’s end. Monday brought a new dawn, and everyone was up early. Indeed, the bulk of Wall Street’s gains were achieved from the open.
The RBA’s move had the market asking whether the Fed might be forced to follow suit. If so, the switch out of growth and into value that dominated February, due to rising yields, may not be as necessary. And sure enough, everything was bought on Wall Street last night – value, growth, and everything in between.
It didn’t hurt that the US manufacturing PMI came in at a turbo-charged 60.8, up from 58.7 in January. Nor that in many states children began returning to school last night. The “reopening trade” is the theme for March, it would seem, but that didn’t stop Zoom jumping 10% in the session, and a further 11% (as I write) in the aftermarket having posted its quarterly result.
Rumours of the death of the stay-at-home theme are much exaggerated. While the likes of Zoom will no doubt revert to far less spectacular earnings growth soon enough, it is agreed that covid has changed our lives forever, and Zoom, and other stay-at-home winners, are here to stay.
Aiding the return of growth last night, and no evidence of any rotation given the Dow and Nasdaq had solid sessions last night, was a one point fall in the US ten-year bond yield. Big deal? The point is all last night’s news – stimulus, vaccine, PMI – might otherwise have had bond yields rising again, but they didn’t.
For that we can thank the RBA.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1721.30 | – 14.30 | – 0.82% |
| Silver (oz) | 26.45 | – 0.25 | – 0.94% |
| Copper (lb) | 4.15 | – 0.04 | – 0.87% |
| Aluminium (lb) | 0.98 | – 0.01 | – 0.87% |
| Lead (lb) | 0.95 | + 0.02 | 1.62% |
| Nickel (lb) | 8.53 | + 0.05 | 0.57% |
| Zinc (lb) | 1.28 | + 0.01 | 0.49% |
| West Texas Crude | 60.36 | – 1.14 | – 1.85% |
| Brent Crude | 63.40 | – 1.02 | – 1.58% |
| Iron Ore (t) | 174.35 | – 2.30 | – 1.30% |
Unfortunately we can’t thank the RBA for the Aussie, which on any other day would have fallen on central bank bond market intervention (money printing) but last night rose 0.8% to US$0.7771. It’s only fair, given the Aussie had collapsed around -3% in two days from the US80c level.
Metals prices did not exactly come roaring back last night to mimic stocks, and with the US dollar up another 0.2% gold is sinking into the sunset. More attention was focused on oil.
OPEC-Plus is going to meet this week, rather than wait until April. Notwithstanding any other developments, it was always a chance the Saudis would at least have moved to trim production curtailments now oil prices have rallied back from their depths.
Then the Biden Administration reversed Trump’s decision to put Yemen’s Houthi rebels on the terrorist list, and now is holding the Crown Prince responsible for the murder of Jamal Khashoggi. To say that the Saudi’s might be a little peeved is probably understating it.
Will the Saudis retaliate with a big reversal of production cuts? I doubt Vladimir will have much objection.
Today
The SPI Overnight closed up 60 points or 0.9%.
Vale the February results season. Now comes the analysis.
The RBA will meet today for some back-slapping and high fives.
The December quarter current account out today, including the terms of trade, will be the last piece in tomorrow’s GDP puzzle.
We’ll also see January building approvals.
Don’t forget to keep an eye on those ex-divs.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| A2M | a2 Milk Co | Downgrade to Lighten from Hold | Ord Minnett |
| ALX | Atlas Arteria | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| APE | EAGERS AUTOMOTIVE | Upgrade to Outperform from Neutral | Macquarie |
| Upgrade to Accumulate from Hold | Ord Minnett | ||
| APX | Appen | Upgrade to Buy from Accumulate | Ord Minnett |
| ASB | Austal | Upgrade to Outperform from Neutral | Credit Suisse |
| CCX | City Chic | Downgrade to Neutral from Buy | Citi |
| CRN | Coronado Global Resources | Upgrade to Add from Hold | Morgans |
| FCL | Fineos Corp | Downgrade to Hold from Accumulate | Ord Minnett |
| FLT | Flight Centre | Upgrade to Outperform from Neutral | Macquarie |
| Upgrade to Hold from Lighten | Ord Minnett | ||
| Downgrade to Sell from Neutral | Citi | ||
| Downgrade to Underperform from Neutral | Credit Suisse | ||
| Downgrade to Equal-weight from Overweight | Morgan Stanley | ||
| Downgrade to Neutral from Buy | UBS | ||
| HLO | HELLOWORLD TRAVEL | Upgrade to Hold from Lighten | Ord Minnett |
| JHC | Japara Healthcare | Downgrade to Accumulate from Buy | Ord Minnett |
| MGX | Mount Gibson Iron | Downgrade to Neutral from Outperform | Macquarie |
| MPL | Medibank Private | Upgrade to Neutral from Underperform | Macquarie |
| Upgrade to Add from Hold | Morgans | ||
| MWY | Midway | Upgrade to Buy from Hold | Ord Minnett |
| NAN | Nanosonics | Upgrade to Add from Hold | Morgans |
| Upgrade to Hold from Lighten | Ord Minnett | ||
| NIC | Nickel Mines | Downgrade to Neutral from Buy | Citi |
| NUF | Nufarm | Upgrade to Outperform from Neutral | Macquarie |
| Downgrade to Neutral from Outperform | Credit Suisse | ||
| NVX | Novonix | Upgrade to Add from Hold | Morgans |
| NXT | Nextdc | Upgrade to Buy from Accumulate | Ord Minnett |
| ORI | Orica | Upgrade to Outperform from Neutral | Credit Suisse |
| Downgrade to Neutral from Outperform | Macquarie | ||
| Downgrade to Hold from Add | Morgans | ||
| QUB | Qube Holdings | Downgrade to Neutral from Outperform | Credit Suisse |
| Downgrade to Hold from Buy | Ord Minnett | ||
| REH | Reece | Upgrade to Hold from Lighten | Ord Minnett |
| RHC | Ramsay Health Care | Downgrade to Neutral from Buy | Citi |
| SCG | Scentre Group | Downgrade to Neutral from Outperform | Credit Suisse |
| SEK | Seek Ltd | Downgrade to Underperform from Neutral | Macquarie |
| TPG | TPG Telecom | Upgrade to Buy from Neutral | UBS |
| WGN | Wagners Holding | Upgrade to Outperform from Neutral | Credit Suisse |
| Upgrade to Outperform from Neutral | Macquarie | ||
| WTC | Wisetech Global | Upgrade to Neutral from Sell | Citi |
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