Daily Market Reports | Apr 14 2021
This story features AGL ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: AGL
| World Overnight | |||
| SPI Overnight (Jun) | 6971.00 | + 19.00 | 0.27% |
| S&P ASX 200 | 6976.90 | + 2.90 | 0.04% |
| S&P500 | 4141.59 | + 13.60 | 0.33% |
| Nasdaq Comp | 13996.10 | + 146.10 | 1.05% |
| DJIA | 33677.27 | – 68.13 | – 0.20% |
| S&P500 VIX | 16.65 | – 0.26 | – 1.54% |
| US 10-year yield | 1.62 | – 0.05 | – 3.10% |
| USD Index | 91.84 | – 0.25 | – 0.27% |
| FTSE100 | 6890.49 | + 1.37 | 0.02% |
| DAX30 | 15234.36 | + 19.36 | 0.13% |
By Greg Peel
Bridge Too Far
The futures were keen yesterday morning and from the open the ASX200 had another shot at 7000. That failed, but a late morning sortie again took the index to 6997 before it was slapped down hard. We’re not talking big numbers – the high was up 24 points.
If at first you don’t succeed, give up. The index closed up 2.
A failure to meaningfully breach 7000 is currently the fault of the resource sectors. Given oil and iron ore prices have been holding relatively steady, falls in energy (-0.7%), materials (-0.6%) and utilities (-1.2%), the latter led by AGL Energy ((AGL)), smacks more of investor rotation out of what have been solid winners in 2021 and into something else.
What that something else is is unclear. The banks (+0.4%) didn’t do a lot yesterday despite enjoying an upgrade in outlook from ratings agency Fitch.
Consumer staples did well (+0.8%) following a broker upgrade for a2 Milk ((A2M)), which prompted a 4.8% gain.
The standout sector gain was for technology (+2.2%), which was all about a 17.5% pop for Zip Co ((Z1P)) after the company provided a positive update. Poor man’s Afterpay no more.
That one outlier suggests investors are not switching from resources to tech specifically. Maybe they’re moving into garbage and cars, given Bingo Industries ((BIN)) rose 10.5% and Eagers Automotive ((APE)) 6.4% on no news.
Downside moves were fairly inconsequential, which indicates not a lot of breadth yesterday. It took the handful of standout gainers to counter all of the rest of the market.
And the flat session belied business conditions leaping to a record high in March, according to NAB’s monthly survey. The index jumped to 25.2 from 17.0 in February and 10.4 in January. This result has led ANZ Bank economists to suggest that while there will be an impact from the end of JobKeeper, it will only be short-lived.
Business confidence slipped slightly, to 15.5 from 17.8, but remains at decade-highs.
Other than the vaccine fiasco, for which we can’t entirely blame the government (we can blame them for a botched rollout), there is nothing specifically holding the stock market back at the moment other than the technical factor. And that factor is not about your Elliots and Fibonaccis, just about round number syndrome.
Round number syndrome is simply a matter of a trader much more likely to say “When it gets to 7000, I’m going to take profits” rather than offering up some very specific four-digit goal.
The ASX200 spent a lot of time trying to break 6800 and when it finally did, it raced up to 7000. If we cannot get through 7000 soon, we’ll likely see a pullback, and perhaps back to 6800 which now becomes solid support.
If we can, it will be ears pinned back.
Futures traders are not giving in just yet – the futures are up 19 points this morning. We can put that down to another gain and record high for the S&P500, but if we were blindly following Wall Street, we’d be at our own record high right now. And the fact that’s not too far away is another technical reason to take profits.
Six in seven million
That’s a very small percentage, but enough for US health regulators to pause the rollout of the one-dose, fridge-stored Johnson & Johnson vaccine under “an abundance of caution”. J&J’s share price was initially hit hard and the Dow fell -200 points from the open but all three major indices tracked gradually higher during the session.
Statistically, health experts would take the risk but morally, they can’t, and the likelihood is Americans will shun the J&J vaccine in favour of Moderna or Pfizer, of which the government has plenty. The task now is to identify the medical connection between those six blood clot cases with a goal of being able to steer the vulnerable to one of the other vaccines (not AstraZeneca).
So all is not lost.
The other shock news last night was the US March CPI result. The headline number jumped 0.6% to take the annual rate all the way to 2.6% from February’s 1.7% — a two and a half year high. That’s well into the Fed’s “let it run for a while” range.
Sell bonds! Sell tech!
Or not. The Fed pays no attention to the headline CPI and the 0.6% gain was attributable mostly to higher oil prices, and to a lesser extent higher food prices. Take those out and the core CPI rose 0.3% to 1.6% annual, up from 1.3%.
The Fed doesn’t pay much attention to this number either, preferring the personal consumption & expenditure (PCE) measure of inflation.
The US ten-year yield fell a full -5 basis points to 1.62%, allowing the Nasdaq to rise 1%. Go back a couple of months and the result would have been completely the opposite, but it seems now Wall Street is convinced the Fed is not going anywhere in terms of policy change.
Coincident with the J&J vaccine pause is a US case-count now back up to 70,000 per day, as the predicted impact of Spring Break complacency comes to pass. Health authorities have advised the state of Michigan in particular to shut down. Meanwhile, vaccinations hit a record 4.8m shots on Sunday.
Quite the mixed picture, and enough (along with bond rates) to drive investors back into stay-at-home winners and former growth stock favourites. The S&P was led up last night by Apple and Tesla, and once again overall NYSE breadth was weak, with upside and downside volumes roughly even.
This suggests investors are continuing to sell out of many of the other names in the 500 that rarely crack a mention. The Russell small cap index has also significantly underperformed this month as the S&P has grafted along to almost daily new highs.
Tonight the first of the big US banks “kick-off” earnings season. The results need to be good.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1745.80 | + 13.10 | 0.76% |
| Silver (oz) | 25.33 | + 0.55 | 2.22% |
| Copper (lb) | 4.04 | + 0.01 | 0.19% |
| Aluminium (lb) | 1.03 | + 0.01 | 0.89% |
| Lead (lb) | 0.89 | + 0.01 | 0.69% |
| Nickel (lb) | 7.37 | + 0.06 | 0.75% |
| Zinc (lb) | 1.25 | + 0.00 | 0.28% |
| West Texas Crude | 60.18 | + 0.48 | 0.80% |
| Brent Crude | 63.97 | + 0.77 | 1.22% |
| Iron Ore (t) | 172.35 | – 0.65 | – 0.38% |
A slightly weaker US dollar, in line with bond yields, has commodity prices slightly higher for the most part.
An attack on Saudi oil facilities has given oil an extra boost.
The Aussie is up 0.3% at US$0.7646 to match the greenback’s fall.
Today
The SPI overnight closed up 19 points or 0.3%.
The RBNZ holds a policy meeting today.
Locally we’ll see Westpac’s consumer confidence survey.
The Fed Beige Book is out tonight.
Cimic Group ((CIM)) and Hotel Property Investments ((HPI)) hold AGMs.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BSL | Bluescope Steel | Upgrade to Buy from Accumulate | Ord Minnett |
| GXY | Galaxy Resources | Upgrade to Outperform from Underperform | Macquarie |
| HUB | HUB24 | Upgrade to Outperform from Neutral | Macquarie |
| MAI | Mainstream Group Holdings | Downgrade to Hold from Add | Morgans |
| Downgrade to Hold from Buy | Ord Minnett | ||
| NCM | Newcrest Mining | Upgrade to Buy from Accumulate | Ord Minnett |
| NWL | Netwealth Group | Upgrade to Outperform from Neutral | Macquarie |
| ORE | Orocobre | Upgrade to Outperform from Underperform | Macquarie |
| Downgrade to Hold from Buy | Ord Minnett | ||
| PTM | Platinum Asset Management | Downgrade to Underperform from Neutral | Credit Suisse |
| SBM | St Barbara | Upgrade to Buy from Accumulate | Ord Minnett |
| TAH | Tabcorp Holdings | Upgrade to Outperform from Neutral | Credit Suisse |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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CHARTS
For more info SHARE ANALYSIS: A2M - A2 MILK COMPANY LIMITED
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For more info SHARE ANALYSIS: HPI - HOTEL PROPERTY INVESTMENTS LIMITED