The Overnight Report: Return To Normal Programming

Daily Market Reports | Jun 23 2021

World Overnight
SPI Overnight (Jun) 7248.00 – 5.00 – 0.07%
S&P ASX 200 7342.20 + 106.90 1.48%
S&P500 4246.44 + 21.65 0.51%
Nasdaq Comp 14253.27 + 111.79 0.79%
DJIA 33945.58 + 68.61 0.20%
S&P500 VIX 16.66 – 1.23 – 6.88%
US 10-year yield 1.47 – 0.01 – 0.81%
USD Index 91.72 – 0.14 – 0.15%
FTSE100 7090.01 + 27.72 0.39%
DAX30 15636.33 + 33.09 0.21%

By Greg Peel

And do-see-do your partner

Just to recap, Monday’s Australian government bond market action:

Two-year yield 0.07%, up 3 basis points; five-year 0.84%, -1bps; ten-year 1.49%, -9bps; fifteen-year 1.85%, -10bps.

And now yesterday’s Australian government bond market action:

Two-year yield 0.07%, unch; five-year 0.86%, +2bps; ten-year 1.58%, +9bps; fifteen-year 1.95%, +10bps.

On a net two-day basis, we can say nothing happened in the bond market, except whiplash.

The ASX200 didn’t quite make it all the way back, but yesterday was still pretty much a mirror image of Monday on the sector break-down. What went down, came back up, at about the same pace.

The only notable difference was the financials sector, which fell -3% on Monday and only came back 2% yesterday, which largely explains why the index fell -133 points but only recovered 106.

Also in the 2% rebound club were energy, materials, telcos and property, with 1.5% going to industrials and discretionary, with other sectors less so. Healthcare was the only sector to close down (-0.6%) because it was more tied to the Aussie dollar rebound.

Staples and technology were the only two sectors to post (modest) gains on Monday, and did so again yesterday, so it was not quite a perfect mirror image.

Nonetheless, one wonders whether this frankly ridiculous two-day experience would have occurred when traders did not have computers but yelled at a chalkboard instead (as I did back in the mists). No momentum algos, no high frequency trading, and a one-and-a-half hour lunchbreak. I doubt it.

I also suggested yesterday that anyone looking to buy Monday’s dip from the open would not have a chance. Sure enough the index opened up 105 points in the first ten minutes, and closed up 106. At around 3pm it was basically back to square over two days but some late selling emerged, likely from those feeling nervous about the whole sideshow and what might happen next.

Of course, nothing in Australia set this off – it was all Wall Street. At times this year the local market has not sycophantically followed Wall Street, particularly if it’s all about the Nasdaq, but on occasions such as the last two days we do tend to reach for the Codral.

Anyway, Wall Street kicked on again last night as if nothing had ever happened, and our futures are down -5 points this morning.

What Just Happened?

The Nasdaq hit a new all-time high last night. The S&P500 hit one intraday but drifted off to the close.

Microsoft hit a new all-time high, and is now worth US$2trn.

Jerome Powell was forced last night to endure a political mud-throwing competition that had him in the centre, as the lunatic fringe (Congress) took policy pot shots. The Fed chair was not there to criticise or otherwise Democrat fiscal policy, but that’s what the Republicans clearly wanted him to do.

Powell simply stuck to the script, and subsequently fed Wall Street nothing new.

As a result, Wall Street pushed quietly higher. The fact the Nasdaq outperformed is testament to an assumption the Fed is not going to change its policy anytime soon. No matter what James Bullard said.

You will recall that this whole thing started when the non-voting St Louis Fed president suggested it makes sense for the FOMC to turn more hawkish.

The volatility only serves to underscore (other than aforementioned algos, HFC etc) that Wall Street is not at all confident in the Fed’s stance. On the basis of “Don’t fight the Fed,” it’s willing to continue to invest on the assumption the bull run will continue, and willing to once again back growth over value.

Many a US fund manager is currently suggesting investors back both. Because at the slightest sign of a problem, Wall Street will run screaming into the hills, as we saw on Friday night. Quite frankly, nobody knows whether inflation will prove transitory or not.

If I take the opinions of fund managers/commentators appearing on CNBC in recent times, I can only arrive at a pure 50/50 split. Moreover, both the transitories and structurals are equally adamant they are right.

In the middle are confused and flighty investors.

So we can look forward to Friday night, when the US May PCE inflation measure is released.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1778.80 – 4.60 – 0.26%
Silver (oz) 25.76 – 0.18 – 0.69%
Copper (lb) 4.14 – 0.04 – 1.02%
Aluminium (lb) 1.09 – 0.01 – 0.67%
Lead (lb) 0.98 – 0.00 – 0.21%
Nickel (lb) 8.05 + 0.18 2.25%
Zinc (lb) 1.29 – 0.00 – 0.12%
West Texas Crude 73.06 – 0.60 – 0.81%
Brent Crude 74.90 – 0.03 – 0.04%
Iron Ore (t) 212.70 + 6.15 2.98%

The dust has settled, for the most part.

Nickel’s move has been attributed to “strong demand”, which must rather annoy you know who.

Iron ore has been almost as volatile as the stock market these past few sessions, but the end result is little more than consolidation just above US$200/t.

The Aussie is relatively steady at US$0.7553, and is having a Bex and a quick lie down.

Today

The SPI Overnight closed down -5 points.

Locally we’ll see preliminary May trade data today.

Estimates of June PMIs will be flashed across the globe.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BLD Boral Upgrade to Hold from Lighten Ord Minnett
CGF Challenger Downgrade to Neutral from Buy UBS
COL Coles Downgrade to Neutral from Buy Citi
Downgrade to Neutral from Outperform Credit Suisse
FLT Flight Centre Travel Upgrade to Neutral from Underperform Credit Suisse
ILU Iluka Resources Downgrade to Hold from Accumulate Ord Minnett
IVC Invocare Downgrade to Sell from Neutral Citi
JMS Jupiter Mines Downgrade to Neutral from Outperform Macquarie
NHC New Hope Upgrade to Outperform from Neutral Credit Suisse
RIO Rio Tinto Downgrade to Sell from Neutral UBS
S32 South32 Upgrade to Outperform from Neutral Macquarie
SHL Sonic Healthcare Downgrade to Neutral from Buy Citi
SUN Suncorp Downgrade to Hold from Add Morgans
WAF West African Resources Upgrade to Outperform from Neutral Macquarie

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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