The Overnight Report: The Long Wait

Daily Market Reports | Jun 09 2021

This story features WISETECH GLOBAL LIMITED, and other companies. For more info SHARE ANALYSIS: WTC

World Overnight
SPI Overnight (Jun) 7314.00 + 10.00 0.14%
S&P ASX 200 7292.60 + 10.70 0.15%
S&P500 4227.26 + 0.74 0.02%
Nasdaq Comp 13924.91 + 43.19 0.31%
DJIA 34599.82 – 30.42 – 0.09%
S&P500 VIX 17.07 + 0.65 3.96%
US 10-year yield 1.53 – 0.04 – 2.61%
USD Index 90.13 + 0.16 0.18%
FTSE100 7095.09 + 17.87 0.25%
DAX30 15640.60 – 36.55 – 0.23%

By Greg Peel

Rock’n’Roll

The futures had suggested up 5 but the ASX200 shot through 7300 from the open yesterday to be up 44 points before 11am. Two hours later it was down -14 points before ultimately closing up 10.

Why the volatility? No idea. Probably just a bunch of computers playing games as we challenge yet another milestone (round number) for the index.

In the wash-up, only a couple of sectors stood out.

Technology’s renaissance continued (+1.5%) with the likes of WiseTech Global ((WTC)) and Nearmap ((NEA)) making top five appearances, while EML Payments ((EML)) kicked on another 6.0% and it was Guinness all round.

Biotech Mesoblast ((MSB)) topped the winners’ board with 8.8% but is either a top five winner or loser on about every other day.

Property (+0.8%) continues to gain attention with analysts espousing the virtue of industrial REITs at this inflationary time. Healthcare also rose 0.8% despite no movement in the currency.

Materials was the biggest loser, but only by -0.4% as gold miners offset falls in iron ore and base metal miners. The iron ore price has since bounced right back.

Mild gains or losses were posted in other sectors while banks and telcos slept.

No theme apparent.

The biggest losers on the day were a mixed bunch, all falling around -2%.

In economic news, NAB’s May survey showed business conditions continuing to push into sky-high territory, with the May index up to 37.2 from 31.9 in April and 25.5 in March. Such numbers bode well for capex spending and employment.

Confidence dipped to 19.8 from 23.5, with the survey period just catching the Melbourne lockdown announcement.

On that subject, it appears Melbourne is set for an easing of restrictions from Thursday – as to how easy we’ll have to wait to find out.

The futures are up 10 points this morning despite the S&P500 again closing flat.

Commodity price movements overnight were largely a reversal of Monday night and the Aussie is down a tad.

It’s a Struggle

One finds oneself on occasion struggling to find anything interesting to say about what happened in Wall Street’s session overnight and today is one of those times.

While the S&P500 has remained flat since mid-April, right now Wall Street is awaiting Thursday night’s CPI release so we may well see another flat session tonight.

The question is what will be the response? Investors freaked out last month when the April headline CPI came in at 4.2%, well above forecasts. The Fed shrugged it off, suggesting a spike in inflation was exactly what was anticipated given transitory factors, and elevated levels would have to be seen for longer than just one month before the FOMC saw any need to ponder tapering.

But how much longer? If the May number comes in equally hot, the most likely response will be weak. A big miss of forecast would be a low chance, but another “Goldilocks” result, a la the May jobs number, would see Wall Street rest easy.

Two months will nevertheless not yet be enough for the Fed to start squirming.

In other news, fast food chain Wendy’s has announced it will introduce chicken tenders.

Yes I thought that would get your attention. The fact of the matter is the Reddits decided last night the launch of “tendies”, as they are affectionately known because that’s what children call them, was a big event and thus worthy of sending the stock up 26%.

With AMC Entertainment now having stalled up a few thousand percent despite continuous capital raisings, hyperactive millennials need something else to jump on to. Yet Wendy’s is only shorted by 4%.

The question is to whether these meme stock games are just that – a new distraction for the gaming generation (which these days can involve large sums of money) – or whether there is some insidious Pied Piper behind the scenes playing the “pump and dump” game at the expense of naïve investors.

The SEC is looking into it.

Back to economics. The May CPI release may be looming but the US ten-year yield fell -4 basis points to 1.53% last night, helping the Nasdaq to again outperform.

Job openings in the US jumped to 9.3 million in April from 8.3 million in March, while we note the May jobs data suggested at least 7.5 million Americans still out of work.

That equation does not appear to be heading in the right direction.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1892.50 – 7.20 – 0.38%
Silver (oz) 27.60 – 0.28 – 1.00%
Copper (lb) 4.49 + 0.05 1.08%
Aluminium (lb) 1.10 + 0.02 1.63%
Lead (lb) 0.97 + 0.00 0.16%
Nickel (lb) 8.07 – 0.01 – 0.15%
Zinc (lb) 1.36 + 0.01 0.56%
West Texas Crude 70.05 + 0.82 1.18%
Brent Crude 72.16 + 0.69 0.97%
Iron Ore (t) 210.40 + 7.55 3.72%

It seems all is forgiven following Monday night’s metal pullbacks.

Gold has thus slipped back, with the US dollar a tad higher.

WTI has cracked US$70/bbl for the first time since 2018.

The Aussie is down -0.2% at US$0.7740.

Today

The SPI Overnight closed up 10 points.

Westpac will release its June consumer confidence survey today.

China reports May inflation numbers.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ART Airtasker Upgrade to Add from Hold Morgans
ASX ASX Ltd Downgrade to Reduce from Hold Morgans
BSL Bluescope Steel Upgrade to Buy from Neutral Citi
CWY Cleanaway Waste Management Downgrade to Underperform from Neutral Credit Suisse
FMG Fortescue Downgrade to Reduce from Hold Morgans
GXY Galaxy Resources Downgrade to Accumulate from Buy Ord Minnett
HPI Hotel Property Investments Upgrade to Add from Hold Morgans
PLS Pilbara Minerals Upgrade to Neutral from Sell Citi
Upgrade to Lighten from Sell Ord Minnett
TRS The Reject Shop Downgrade to Hold from Buy Ord Minnett
WHC Whitehaven Coal Upgrade to Buy from Accumulate 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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

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