The Monday Report – 21 June 2021

Daily Market Reports | Jun 21 2021

By Greg Peel

Rotation

The ASX200 had two attempts to breach 7400 on Friday, failing both times, and as a small net gain for the day suggests simply gave up in the afternoon.  But the small gain belies some significant sector switching below the surface.

The Nasdaq hitting a new high on Thursday night appeared to trigger a resurgence in the local tach sector, led by the big BNPL names Afterpay ((APT)), up 6.5%, and Zip Co ((Z1P)), up 9.9%. The sector closed up 3.5%.

Consumer discretionary rose 2.0%, following a rush of buying in the beaten-down, and heavily shorted, travel industry names.

Healthcare gained 1.3% as a beneficiary of the plunging Aussie dollar, which is due to the surging US dollar, which is due to a seemingly more hawkish Fed, despite Jay Powell’s ongoing dovishness.

Just to emphasise the level of confusion regarding Fed policy, on Thursday local defensive stocks were sold down but on Friday they were bought back up again. Telcos fell -1.9% on Thursday and rose 1.9% on Friday, utilities were down -1.1% and bounced 0.5%, and property was down -1.5% and bounced 0.7%.

The resource sectors were nonetheless sold down again, with energy down -1.9% and materials down -1.1%. The banks rounded out the selling with a -0.7% drop.

The question from here is: does the market fear inflation, and thus the first steps towards tightening from the Fed, or has the market now adjusted for that assumption?

Rather than attempt to pick apart Friday’s local trade any further, today might be more telling.

The answer might become more apparent, given the SPI futures closed down -48 points on Saturday morning. Once again it’s all about the Fed, and signals from the market remain confusing. All major US indices fell heavily on Friday night.


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