Daily Market Reports | Apr 09 2021
This story features EML PAYMENTS LIMITED. For more info SHARE ANALYSIS: EML
| World Overnight | |||
| SPI Overnight (Jun) | 6961.00 | + 2.00 | 0.03% |
| S&P ASX 200 | 6998.80 | + 70.80 | 1.02% |
| S&P500 | 4097.17 | + 17.22 | 0.42% |
| Nasdaq Comp | 13829.31 | + 140.47 | 1.03% |
| DJIA | 33503.57 | + 57.31 | 0.17% |
| S&P500 VIX | 16.95 | – 0.21 | – 1.22% |
| US 10-year yield | 1.63 | – 0.02 | – 1.27% |
| USD Index | 92.06 | – 0.37 | – 0.40% |
| FTSE100 | 6942.22 | + 56.90 | 0.83% |
| DAX30 | 15202.68 | + 26.32 | 0.17% |
By Greg Peel
Beyond 7000
In November Biden won the election, despite claims to the contrary, and the first vaccines were announced. Wall Street has done nothing but rally ever since if measured by the broad market S&P500 (rotation notwithstanding).
In contrast, it took the ASX200 from November to early March to get from 6600 to 6700. Later in March the index was capped at 6800 for a period. With that level finally breached, April has seen a swift run up to 6900, only a blink, and yesterday the tape printed 7000.
This despite government subsidies ending in March, restrictions to the vaccine rollout due to clots, and a bunch of clots running the rollout show.
In April to date, the ASX200 has risen almost 4%.
We had been to some extent hampered by the currency since November, but just as it looked like the Aussie might hit US80c and keep going, with commodity prices soaring, the US dollar made a recovery and the Aussie has since been relatively stable either side of US77c.
As for yesterday’s rally, which came with yet again no real lead from Wall Street, it looks more technical than anything else. That breach of 6800 fired up algos and momos and they've been feeding on themselves. There was no real trigger otherwise.
Bond yields, too, have settled into a more stable pattern, and did not much move yesterday, but yesterday was a day to buy banks. And miners. The iron ore price did move up overnight but the big miners have recently not been moving in lockstep. Financials gained 1.1% and materials 1.8% to lead the rally.
All sectors otherwise closed in the green, by varying amounts, although utilities may not have gotten the memo.
There was no standout among the banks, with three of four gaining over 1%, while all three iron ore miners gained an even stronger 2.5%.
There was nothing startling among individual stock moves either. The top five index winners’ board was well diversified, with a 5.7% gain for EML Payments ((EML)) enough for gold, while downside moves were also pretty minimal.
The index closed a tick under 7000. The question now is will 7000, which is an even rounder number than 6800 or 6900, provide some resistance for a while or can we go steaming through. With Wall Street waking up and putting on a bit of a rally last night, our futures are up a whole 2 points this morning.
We have also heard this morning of a new case in NZ. How to burst a bubble.
The ASX200 hit 7000 for the first time in January. The covid low was 5100.
The boys are back in town
Apple, Amazon and Microsoft all rose around 1% last night. Doesn’t seem like much, but when you’re that big you do have a significant influence on indices (although Microsoft is the only Dow component among them).
All three major indices closed higher, but we again saw the trend that was prevalent in the 2020 rally from the covid bottom – that of Big Tech ruling the roost. That was upset in 2021 by the spike in bond yields, but having hit 1.78% the US ten-year has slipped back to around 1.64% and is for now holding pretty steady.
The rotation trade of 2021 has been all about selling the covid winners and buying the reopening winners, but as it has been pointed out, there’s no reason Big Tech is not a reopening winner as well, as long as bond yields behave.
And behaving they are for now, with the Fed chair again hammering his message home last night on a CNBC panel. The Fed is not worried about inflation. It expects a spike in inflation but that’s okay, it will be transitory. Hence the FOMC is happy to let inflation to run a bit hot for a while – not just a month or so but maybe even years, with the aim of reducing the 8.5m true unemployment total – and has the tools to rein inflation in when the time comes.
Nothing particularly new, but market supportive nonetheless, especially for growth stocks.
Throughout the rotation of 2021, the S&P500, which splits the difference between growth and value, has tracked steadily higher in a clear upward channel. Each time it hits the top of the channel it backs off, and each time it hit the bottom it recovers.
The projected top of the channel ahead is a little over 4100, and last night the S&P closed at 4097. Another new high of course.
Last night’s rally came despite a surprise tick-up in weekly new jobless claims, which a few months ago would have led to the opposite outcome.
The VIX volatility index on the S&P has now fallen below 17, into complacency territory. The VIX can fall all the way to low single digits, and stay there for some time if nothing untoward occurs, so the warning bells aren’t sounding just yet.
Indeed, as long as the US vaccine rollout continues at its current pace, and fuels the reopening of the economy, and as long as there are no new outbreaks due to the public becoming more complacent earlier than health experts would like, no one can see any reason why the rally can’t just keep plugging on.
Wall Street is about to enter the March quarter earnings season.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1755.80 | + 18.20 | 1.05% |
| Silver (oz) | 25.45 | + 0.35 | 1.39% |
| Copper (lb) | 4.05 | + 0.00 | 0.05% |
| Aluminium (lb) | 1.03 | + 0.01 | 0.87% |
| Lead (lb) | 0.89 | + 0.00 | 0.30% |
| Nickel (lb) | 7.47 | + 0.04 | 0.49% |
| Zinc (lb) | 1.29 | + 0.02 | 1.44% |
| West Texas Crude | 59.60 | – 0.17 | – 0.28% |
| Brent Crude | 63.31 | + 0.27 | 0.43% |
| Iron Ore (t) | 172.15 | – 0.75 | – 0.43% |
As Democrats argue over a tax hike to 28% or 25% to pay for Biden’s massive stimulus package, which comes on top of the massive relief package, gold is making a steady recovery.
Steady yields and a lower greenback last night helped.
Both also helped the Aussie back up 0.6% to US$0.7655.
Today
The SPI Overnight closed up 2 points. Looks like we're set for a breather at least at 7000. Fridays are good days to have one. I’ll see you for a chateaubriand and claret at the usual.
The RBA will release a Financial Stability Review today.
China will release inflation numbers.
The US will release March wholesale inflation.
The local corporate calendar is getting thin.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BSL | Bluescope Steel | Downgrade to Neutral from Buy | Citi |
| PPH | Pushpay Holdings | Upgrade to Hold from Lighten | Ord Minnett |
| RSG | Resolute Mining | Upgrade to Neutral from Underperform | Macquarie |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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