The Overnight Report: Encore Performance

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World Overnight
SPI Overnight (Mar)	6741.00	– 38.00	– 0.56%
S&P ASX 200	6818.00	+ 55.70	0.82%
S&P500	3819.72	– 50.57	– 1.31%
Nasdaq Comp	12997.75	– 361.04	– 2.70%
DJIA	31270.09	– 121.43	– 0.39%
S&P500 VIX	26.67	+ 2.57	10.66%
US 10-year yield	1.47	+ 0.06	3.89%
USD Index	90.92	+ 0.18	0.20%
FTSE100	6675.47	+ 61.72	0.93%
DAX30	14080.03	+ 40.23	0.29%

By Greg Peel

Bouncing Back

Australia’s GDP rose by 3.1% in the December quarter, following the 3.4% gain in the September quarter, and beating forecasts of 2.5%. It is the first time in the 60 years of the data series two consecutive quarters of 3%-plus growth has been seen.

Mind you, the -7% fall in the June quarter was one for the record books as well. It’s just a shame March had tipped over -0.3%, as had it been slightly positive our golden run would not have ended. Despite the two solid quarters, GDP at the end of 2020 remained -1.1% below that of 2019.

The beat of forecasts has been attributed to Victoria coming out of lockdown. A key economic driver — household consumption — rose 4.3% in the quarter, but split 10.4% to the Vics and 2.3% everyone else. That 2.3% is still historically strong, and came despite household incomes going -3.3% backwards in the quarter as government stimulus measures began to be wound back.

The stock market clearly liked the move as a whole, although it was quite the mixed session sector-wise.

The banks continue to lead the index higher (+1.2%) on rising bond yields, although the ten-year actually slipped back a tad yesterday despite the strong GDP number. The Aussie’s down -0.5% this morning as well.

Materials suddenly boomed (+3.1%) as investors leapt back into iron ore miners after some selling this week and ploughed back into gold miners after a small bounce in the gold price overnight. Clearly the expectation was gold’s recent correction was over.

It isn’t. Gold fell another twenty bucks last night.

Otherwise we note the day’s losers were staples (-1.2%), healthcare (-1.0%), technology (-1.4%) and telcos (-0.2%) which we could, if pressed, call covid sectors. Covid sectors don’t like vaccines.

That said, it was confirmed yesterday Australia’s international border will remain shut for another three months, before another assessment. But no one would have been shocked to hear it.

Consumer discretionary rose only 0.2% despite the strong household spending read in the GDP, but then December was over two months ago, and government unemployment support comes to an end this month.

Among individual stocks, four of the top five index winners were goldminers, led out by Ramelius Resources ((RMS)) with 13.7%. Bummer. Snatching the silver was Nufarm ((NUF)), which is riding the back of the rural revival.

Nothing overly interesting on the downside, with News Corp’s ((NWS)) -3.8% fall topping the losers’ table.

We’re set to give back ground today and I’d be watching technology, as the Nasdaq has been trashed yet again. The 6800-6900 zone for the ASX200 has been as far as we’ve been able to reach in the run-back from a year ago.

Our futures are showing down -38.

Nasdacked

Since Monday night’s sudden, RBA-inspired surge, Wall Street has slipped straight back into the theme preceding that surge, of growth-to-value rotation. Last night’s trade could have been a video replay of Tuesday night.

All session the Dow was modestly higher as the Nasdaq got slammed, just as was the case on Tuesday, until right at the death when the sellers moved in in earnest, as was the case on Tuesday. Despite the Dow closing down -0.4%, it still represented clear outperformance to the Nasdaq’s -2.7%.

Last night the US ten-year bond yield, which had appeared to stabilise in the low 1.4s after the RBA made its move (prompting assumptions the Fed would do the same), jumped back 6 basis points to 1.47%, to be the primary driver of accelerated Nasdaq dumping.

The stocks being sold range from all the big FANG & Co names through to chip stocks and covid winners such as Zoom and Peloton.

The stocks being bought range from grandpa’s large-cap favourites to airlines, casinos, and anything hospitality. With Biden having brokered a deal for Merck to produce Johnson & Johnson’s vaccine, thus doubling immediate production capacity, every American adult could now be vaccinated before the summer.

If they so choose. Concern on that front had Dolly Parton last night being publicly vaccinated before pushing the vaccination message on camera. No queue-jumping – the woman is 75.

There was also concern last night the Fed Beige Book, while indicating “modest” growth across regions, did point out supply chain shortages and delays that were pushing up the price of inputs to US manufacturing, which in a word means “inflation”.

Likely why bond yields rose again.

Also concerning was an ADP private sector jobs number for February showing 117,000 jobs added against 225,000 forecast.

After a very strong ISM manufacturing PMI number on Monday night, last night the ISM services PMI showed a fall to 55.3 from 58.7.

So it’s still a mixed bag across the US economy, but much hope is being generated by the vaccine rollout. So much so that Texas and Mississippi – two states in which case numbers are firmly back on the rise – are set to end mandated mask-wearing and reopen businesses, prompting despair from Dr Fauci and colleagues.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1714.90	– 20.30	– 1.17%
Silver (oz)	26.19	– 0.53	– 1.98%
Copper (lb)	4.17	+ 0.00	0.08%
Aluminium (lb)	0.99	– 0.01	– 0.61%
Lead (lb)	0.93	– 0.02	– 2.07%
Nickel (lb)	7.91	– 0.50	– 5.93%
Zinc (lb)	1.26	– 0.04	– 2.85%
West Texas Crude	61.30	+ 1.55	2.59%
Brent Crude	64.12	+ 1.40	2.23%
Iron Ore (t)	177.45	+ 1.90	1.08%

Bond yields up, US dollar up, goodnight gold. Bitcoin is back over US$50k.

A week ago Russian company Norilsk, the world’s largest producer of palladium and high-grade nickel, suspended operations at two of its mines due to flooding. Last night the company reported it should have the problem under control by next week.

Hence nickel fell -6%.

Rumour spread last night that OPEC-Plus was indeed not planning to wind back production cuts when it meets tonight. Hence despite new data showing the biggest crude inventory build on record, oil prices snapped back.

Again the Aussie has defied Economics 101, falling -0.5% on a better than expected GDP result. But we’ll take it.

Today

The SPI Overnight closed down -38 points or -0.6%.

Note that futures prices do not reflect ex-dividends on the day. So today be warned that all of BHP Group ((BHP)), Rio Tinto ((RIO)), CSL ((CSL)) and Woolworths ((WOW)) go ex together, providing for a steep points handicap from the open before any market sentiment is apparent.

Otherwise we’ve now entered the post result season doldrums, in which corporate newsflow dries up for a while and analysts take a break.

Today brings retail sales and trade data for January but the ABS had already released preliminary numbers for both.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
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
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
REH	Reece	Upgrade to Hold from Lighten	Ord Minnett
VOL	Victory Offices	Downgrade to Hold from Buy	Ord Minnett

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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