Daily Market Reports | Jul 22 2021
This story features CIMIC GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: CIM
|SPI Overnight (Jun)||7290.00||+ 64.00||0.89%|
|S&P ASX 200||7308.70||+ 56.50||0.78%|
|Nasdaq Comp||14631.95||+ 133.08||0.92%|
|S&P500 VIX||17.91||– 1.82||– 9.22%|
|US 10-year yield||1.28||+ 0.07||5.87%|
|USD Index||92.79||– 0.18||– 0.19%|
By Greg Peel
And We’re Back
The local market did not cop the same level of panic selling as Wall Street did earlier in the week and in fact held up pretty well on the Tuesday following Wall Street’s tumble. But there was no lack of enthusiasm yesterday morning to back the Wall Street bounce.
No chance to get on, however. The ASX200 opened up 70 points in the first ten minutes and ultimately closed lower, having been up 100 points late morning. Another triple-digit case-count in Sydney did not stop the index reaching its peak, but sellers moved in in the afternoon.
The 110 case-count in Sydney has to be put into the context of a record 80,000-plus tests undertaken.
The heavyweight sectors uniformly drove the market higher, with banks and energy up 1.4% and healthcare and materials up 1.2%.
Consumer discretionary actually won the day with a 1.6% gain, despite a preliminary read on June retail sales showing a -1.8% fall. Economists had forecast -0.7%.
As I have noted previously, we’re used to this now in the Days of Covid. The June data caught the start of the lockdowns, and July will be worse, but we’ve had enough lockdowns now to know sales outperform as soon as lockdowns are lifted, affecting little change on a net basis.
Consumer staples, telcos, utilities and property all posted a gain of 0.5-0.8%, leaving the laggards as technology (+0.2%) and industrials (-0.1%).
Technology has really settled down lately compared to the volatile times of the past, largely because that index is now dominated by a BNPL industry that appears to be increasingly risky amidst stiff competition and no barriers to entry.
While retail sales bounce back quickly from lockdowns, toll roads, airlines and airports do not.
Industrials closed lower despite first-cab-off-rank Cimic Group’s ((CIM)) earnings result, which led to a 4.5% gain. Oil Search rose another 3.6% on rumours the bid from Santos ((STO)) has brought Woodside Petroleum ((WPL)) into the race, having had a swing and a miss three years ago.
On the subject of takeovers, Altium ((ALU)) was yesterday’s worst index performer, falling -5.0% after suitor Autodesk lost interest.
Yesterday’s afternoon sellers will not be happy Wall Street has kicked on with it again last night and our futures are up 64 points this morning.
The Aussie has come back a bit, iron ore was down -3% but Brent crude was up 5%, so perhaps a mixed day for the resource sectors.
Wall Street’s swift as-you-were bounce on Tuesday night alleviated concerns that this time a realistic (and overdue) correction was on the cards. So if it’s not going to correct, then it’s still a raging bull market.
But as was the case in Australia, the bulk of last night’s gains were made from the opening bell. The major indices largely tracked sideways for the rest of the session.
The shake-out has meant that the week’s earnings results are less likely to be met with “sell the fact” as they would be the case were indices still at all-time highs. To that end two big Dow names – Coca-Cola and Verizon — posted positive results last night and were rewarded. Beats to date are running at above 80%, as was that case last quarter.
The S&P500 is nevertheless now within -1% below the last high.
Not so positive was the response to Netflix. It reported in Tuesday night’s aftermarket and despite beating forecasts, new subscription guidance for the September quarter fell well short of expectation. That was worth -3.5% last night.
Clearly, Netflix is never going to see another 2020, even if delta sends the world back into lockdown. The company is facing two issues in 2021 – everyone who wanted a subscription took one up when locked down last year, and last year’s lockdown meant no new content was produced to entice any new subscribers this year.
By contrast, fast food chain Chipotle – another 2020 winner – reported sales in excess of pre-pandemic levels and jumped 12%. One doesn’t subscribe to Chipotle, one just eats the stuff.
FANG is dead. Long live FAAMG.
Apple was the only member of that group not to push ahead last night. Those floods in Zhengzhou? That’s where all the iPhones are made.
In other news, blow me down if all 50 Republican senators didn’t vote against the infrastructure bill put forward by a bipartisan group of House members. Those senators have nonetheless suggested a deal is “close” (they always are), so it was not just a get stuffed Trumpist response.
This bill required 60 senate votes. The other half of Biden’s package, dubbed “human stimulus” as it is largely to do with welfare, is considered a budget measure so needs only a majority vote.
No, I don’t understand either.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1803.30||– 6.60||– 0.36%|
|Silver (oz)||25.23||+ 0.30||1.20%|
|Copper (lb)||4.21||– 0.01||– 0.25%|
|Aluminium (lb)||1.12||+ 0.02||1.65%|
|Lead (lb)||1.06||+ 0.02||1.98%|
|Nickel (lb)||8.36||– 0.14||– 1.65%|
|Zinc (lb)||1.32||– 0.01||– 0.74%|
|West Texas Crude||70.30||+ 2.88||4.27%|
|Brent Crude||72.16||+ 3.54||5.16%|
|Iron Ore (t)||213.60||– 6.45||– 2.93%|
Aluminium has recovered some of Tuesday night’s loss and for iron ore, it is often a case these days of two steps forward and one step back. Iron ore’s still trading in a tight range around the US$220/t mark, with demand still outstripping supply, and nothing much Beijing can do about it.
Oil prices were ripe for a bounce-back and last night’s weekly US inventory numbers provided the catalyst. While inventories rose overall, oil stored at Cushing Oklahoma, from which the WTI futures price is derived, is at the lowest level since early 2020.
After crashing all the way down to under US73c this week, the Aussie has rebounded from that intraday low yesterday on US dollar weakness (and likely short-covering) and is up 0.4% over 24 hours at US$0.7359.
The SPI Overnight closed up 64 points or 0.9%.
ABS preliminary numbers for the June trade balance are due today.
The ECB meets tonight.
Japan is closed today.
Megaport ((MP1)) provides an update.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|ABP||Abacus Property||Downgrade to Neutral from Outperform||Macquarie|
|ARF||Arena REIT||Downgrade to Neutral from Outperform||Macquarie|
|CCP||Credit Corp||Upgrade to Add from Hold||Morgans|
|COH||Cochlear||Downgrade to Equal-weight from Overweight||Morgan Stanley|
|CPU||Computershare||Downgrade to Hold from Add||Morgans|
|DMP||Domino's Pizza Enterprises||Downgrade to Underperform from Neutral||Macquarie|
|EVN||Evolution Mining||Upgrade to Neutral from Sell||Citi|
|Downgrade to Neutral from Outperform||Credit Suisse|
|Downgrade to Underperform from Neutral||Macquarie|
|HUB||HUB24||Downgrade to Neutral from Outperform||Macquarie|
|Downgrade to Hold from Add||Morgans|
|LNK||Link Administration||Upgrade to Add from Hold||Morgans|
|MPL||Medibank Private||Downgrade to Hold from Add||Morgans|
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For more info SHARE ANALYSIS: ALU - ALTIUM
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