The Overnight Report: All About Tech

This story features CSL LIMITED, and other companies. For more info SHARE ANALYSIS: CSL

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Not Bovvered

Since the close on the ASX yesterday, Sydney’s lockdown has been extended by a month. It comes as little surprise, given yesterday’s case-count marked a new record.

It doesn’t seem to bother the stock market. The ASX200 did nothing but rally yesterday after the 11am announcement to be up 50 points at lunchtime, despite looking on Monday like it might play the week’s events cautiously.

Did the market rally because there was no lockdown extension announced at 11am despite record cases? Hard to believe, given the market has done nothing but rise over the whole lockdown period to date. Victoria and SA are now both out, so there’s a counter as well.

The banks were up 0.6% yesterday. We’ll see how they respond to the lockdown today. The major drivers yesterday were materials (+1.6%) on solid commodity prices across the board and energy (+1.3%), which rebounded after a couple of days of M&A related falls.

Property also rallied yesterday (+0.5%), despite lockdowns impacting on offices and retail.

Healthcare was the major offset (-0.6%). The big names have been up and down with the currency of late and for CSL ((CSL)), any excitement over the government’s AZ marketing push is likely offset by the country’s loss in faith in ATAGI.

Overvaluation woes continued in technology (-1.0%).

Among individual stocks, OZ Minerals ((OZL)) topped the charts (+6.5%) on its production report, BlueScope Steel ((BSL)) rose 6.4% after releasing preliminary earnings numbers, and Virgin Money UK ((VUK)) rose 4.3% on its earnings result.

To the downside, a2 Milk ((A2M)) took another hit yesterday (-6.4%). As investors continue to exit US-listed Chinese stocks, the Hong Kong stock market fell -4.2% yesterday. While it has fallen to match selling in Chinese tech stocks in the US (or there’d be an arbitrage), a loss of faith in the CCP’s approach to capitalism may be apparent.

And hence nervousness around any Australasian company dependent on China.

Crown Resorts ((CWN)) continues to bust (-5.5%).

Outside the index, covid winner Temple &Webster ((TPW)) jumped 7.4% on its earnings result.

Japara Healthcare ((JHC)) has been approached by the Canadians and hence jumped 18.5%, sending residential aged care peers Regis Healthcare ((REG)) and Estia Health ((EHE)) up 12.6% and 8.6%.

Wall Street finally had a down-day last night but it was all about Big Tech, ahead of results. Realistically this shouldn’t affect us but the futures are down -24 this morning. Commodity prices also cooled off last night, so there will be some influence in that regard.

And the lockdown extension?

China Syndrome

Beijing’s specific crackdown on US-listed Chinese ride-share company Didi and Chinese education companies has caused a downdraught for US-listed Chinese mega-techs. Alibaba, for example, is China’s Amazon, so if global capital has lost faith in the Chinese market, one might as well shift out of Alibaba and into Amazon, which is safer (notwithstanding regulatory scrutiny).

The result has been a steady run-up for FAAMG over a few of days despite earnings results pending. Last night US investors decided it was a sensible idea to square up ahead of those results. Hence underperformance for the Nasdaq, dragging down the S&P500, of which FAAMG represents a quarter of market cap.

After the bell this morning (our time), Apple, Microsoft and Google all reported. All three smashed earnings and revenues out of the park, Google in particular. As I write, the US aftermarket has Apple down -1.4%, Microsoft down -2.5% and Google up 0.6%. Google was initially up 3.5%, so all three copped some “sell the fact”.

Microsoft saw the worst response as despite solid numbers, the chip shortage has impeded PC sales, and thus software sales. Facebook reports tonight and Amazon tomorrow night.

UPS also posted solid numbers, during the session, and fell -7%. Delivery growth in the quarter was not as strong as last June quarter, which given last year’s lockdown should have been a no brainer. Starbucks posted a beat in the aftermarket, and is down -3%.

This is what happens when you enter earnings season at all-time highs. (The ASX200 was as of yesterday less than -20 points short of its all-time high.)

In other news, the Conference Board monthly index of US consumer confidence has risen to a 16-month high. This seems rather incongruous as delta continues to run rampant. Last night the CDC returned to advising masks to be worn indoors.

US durable goods orders rose 0.8% in June, missing forecasts of 2.0%. Shortages of both supplies and labour are to blame.

The Case-Shiller 20-city house price index rose 17% year on year in May, smashing April’s record high of 15%. But recent home sales data suggest the housing market has hit its bridge too far, with sales falling in June on simple unaffordability.

The Fed has entered its two-day meeting, with the statement and press conference due tonight.

Commodities

The new surge in base metal prices continued from the open on the LME last night, but quickly turned to profit-taking after the solid run.

Iron ore is clinging on to US$200/t.

The Aussie is down -0.3% at US$0.7364, and for now appears to be in a tight range in the 73s.

Today

Today we learn if Australian inflation has gone the way of the US, with the June quarter CPI numbers.

Fed tonight.

Rio Tinto ((RIO)) reports earnings today, along with Champion Iron ((CIA)) and Frontier Digital Ventures ((FDV)).

Gold Road ((GOR)), IGO ((IGO)) and St Barbara ((SBM)) provide production reports.

Life360 ((360)) and Pointsbet Holdings ((PBH)) provide quarterly updates.

The Australian share market over the past thirty days…

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