Daily Market Reports | Mar 03 2021
This story features A2 MILK COMPANY LIMITED, and other companies. For more info SHARE ANALYSIS: A2M
World Overnight | |||
SPI Overnight (Mar) | 6738.00 | + 16.00 | 0.24% |
S&P ASX 200 | 6762.30 | – 27.30 | – 0.40% |
S&P500 | 3870.29 | – 31.53 | – 0.81% |
Nasdaq Comp | 13358.79 | – 230.04 | – 1.69% |
DJIA | 31391.52 | – 143.99 | – 0.46% |
S&P500 VIX | 24.10 | + 0.75 | 3.21% |
US 10-year yield | 1.42 | – 0.03 | – 2.14% |
USD Index | 90.74 | – 0.30 | – 0.33% |
FTSE100 | 6613.75 | + 25.22 | 0.38% |
DAX30 | 14039.80 | + 26.98 | 0.19% |
By Greg Peel
Double Counting
After a very strong night on Wall Street, the AX200 opened with a flourish yesterday as the computers pushed the index up 71 points in the first half hour. Then a human pointed out the reasons Wall Street had rallied on Monday night were the exact same reasons the ASX200 had rallied hard on Monday, so why are we going again?
At 2pm the index was back where it had closed on Monday, sparking a brief rally, before selling overwhelmed once more and from peak to close the index had fallen -100 points.
Nothing to be overly concerned about. And this morning, with the S&P500 down -0.8%, our futures are up 16.
The resource sectors led the index down yesterday on drops in oil and specifically gold prices. The iron ore price held up, but investors sold the Big Three anyway, likely because they’re now all ex-div so time to cash in and look elsewhere. Energy fell -1.9% and materials -1.5% with daylight next.
The only two sectors to close in the green were staples (+0.8%) and banks (+0.4%).
The RBA did nothing new at its meeting yesterday other than note the bond purchases it made on Monday were a bring-forward of the next tranche of QE planned for after this month, and there is no change to the total QE target. The purchases were brought forward to “assist with the smooth functioning of the market”.
Whack-a-mole.
The RBA will only raise rates when inflation is sustained in the 2-3% target range, and the board doesn’t see that happening until at least 2024.
Australia posted its seventh straight current account surplus in the December quarter, led once again by the trade balance, which was itself led not by volumes but by prices. Exports rose 3.8% and the star of the show was the rural sector, where volumes rose 23.5% to mark the biggest jump since 1974.
You know what you can do with your barley tariffs.
Imports rose 4.9%, because of the current trend of consumers buying “stuff” to compensate for the lack of other spending options.
Building approvals fell -11.2% in January after having surged late last year. Approvals were still up 39% annually. The HomeBuilder subsidy took a step down in January and will end this month, so there may be more of the same. However, lending to home construction is up a lazy 141% annual, so no great need to panic.
Nothing all that exciting among individual stocks yesterday, noting results season is done and dusted. Topping the index was a2 Milk ((A2M)) on a bit of bargain hunting after it was thumped post-result. It rose 7.6%.
Eagers Automotive ((APE)) was another suffering a negative result response. It rose 4.5%. Nine Entertainment’s ((NEC)) was well-received, and yesterday it kicked on 4.4%.
Gold miners appeared in the top five losers, along with Omni Bridgeway ((OBL)), after a weak result posted on Friday. It fell -7.0%. Zip Co ((Z1P)) fell -5.8% because it went up on Monday.
Pause and Recover
They’re still talking about us over there. “Leave it to Australia’s central bank to take action,” hailed a Dow Jones report last night. Will the Fed do the same?
It may not have to. On the assumption it would if necessary, US bond yields have now fallen back after last week’s surge. We recall that the US ten-year briefly hit 1.61% last Thursday before settling at 1.52% but has drifted back ever since, post-RBA intervention.
Last night the yield dropped another -3 basis points to 1.42%. But as yields ease off it is clear Wall Street does not believe they’re going to continue to just head back down again. For last night US stocks went back into growth-to-value rotation mode.
Up until the final hour, the Dow was slightly higher despite its big rally on Monday night and the Nasdaq was lower, after its big rally on Monday night, which reflects the text book rotation trade. A wave of late selling sent all indices into the red, but still the Dow well outperformed the Nasdaq.
The late selling was likely a response to Monday night’s enormous surge.
Biden’s stimulus bill is in the Senate, and the issue is not one of trying to get some Republicans on side, as that’s irrelevant, but making sure every single Democrat senator is on board. That is not yet certain, hence the bill may yet need some tweaking.
The main problem is the scatter gun approach of the stimulus, championed by Treasury Secretary Yellen, but not so popular with everyone. A more targeted package would appease the doubters. We could sum it all up simply by asking does Elon Musk need a US$1400 hand-out as well as Joe the janitor?
The Democrats have to reach a decision swiftly, as the stop-gap extension to government support agreed upon at the eleventh hour before the December expiry runs out at the end of March.
Commodities
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 1735.20 | + 13.90 | 0.81% |
Silver (oz) | 26.72 | + 0.27 | 1.02% |
Copper (lb) | 4.17 | + 0.02 | 0.47% |
Aluminium (lb) | 1.00 | + 0.02 | 2.26% |
Lead (lb) | 0.95 | – 0.00 | – 0.18% |
Nickel (lb) | 8.41 | – 0.13 | – 1.49% |
Zinc (lb) | 1.29 | + 0.01 | 0.98% |
West Texas Crude | 59.75 | – 0.61 | – 1.01% |
Brent Crude | 62.72 | – 0.68 | – 1.07% |
Iron Ore (t) | 175.55 | + 1.20 | 0.69% |
The US has placed new sanctions on Russia in response to the treatment of Alexi Navalny. Given the US has already upset the Saudis – twice – upsetting the Russians as well may not bode well for oil prices when OPEC-Plus meets to seek revenge later this week.
The question for the cartel is of course one of balancing production with price impact, so as to not shoot themselves in the foot. Both economies are totally reliant on oil exports. Oil prices have been quietly slipping away, but there’s no sign of panic.
The US dollar slipped back -0.3% to provide some reprieve for gold, alongside slightly weaker bond rates.
This didn’t help the Aussie situation. While yesterday’s RBA statement and current account surplus did not move the currency during the day, last night it jumped back another 0.8% to US$0.7834.
Here we go again.
Today
The SPI Overnight closed up 16 points.
Our GDP’s out today.
The world will release February service sector PMIs and the Fed will release its Beige Book.
US private sector jobs numbers are due tonight.
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 |
APX | Appen | Upgrade to Buy from Accumulate | Ord Minnett |
ASB | Austal | Upgrade to Outperform from Neutral | Credit Suisse |
CRN | Coronado Global Resources | Upgrade to Add from Hold | Morgans |
DTC | Damstra Holdings | Downgrade to Equal-weight from Overweight | Morgan Stanley |
EVN | Evolution Mining | Upgrade to Buy from Neutral | Citi |
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 | ||
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 |
ORI | Orica | Upgrade to Outperform from Neutral | Credit Suisse |
Downgrade to Neutral from Outperform | Macquarie | ||
Downgrade to Hold from Add | Morgans | ||
Downgrade to Neutral from Buy | UBS | ||
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 |
TPG | TPG Telecom | Upgrade to Buy from Neutral | UBS |
VOL | Victory Offices | Downgrade to Hold from Buy | Ord Minnett |
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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CHARTS
For more info SHARE ANALYSIS: A2M - A2 MILK COMPANY LIMITED
For more info SHARE ANALYSIS: APE - EAGERS AUTOMOTIVE LIMITED
For more info SHARE ANALYSIS: NEC - NINE ENTERTAINMENT CO. HOLDINGS LIMITED
For more info SHARE ANALYSIS: OBL - OMNI BRIDGEWAY LIMITED