Daily Market Reports | Aug 04 2021
This story features AFTERPAY LIMITED, and other companies. For more info SHARE ANALYSIS: APT
|SPI Overnight (Jun)||7381.00||+ 9.00||0.12%|
|S&P ASX 200||7474.50||– 16.90||– 0.23%|
|Nasdaq Comp||14761.30||+ 80.23||0.55%|
|S&P500 VIX||18.04||– 1.42||– 7.30%|
|US 10-year yield||1.18||+ 0.00||0.17%|
|USD Index||92.08||+ 0.01||0.01%|
|DAX30||15555.08||– 13.65||– 0.09%|
By Greg Peel
Well we could hardly call a loss of -0.2% for the ASX200 on the day a taper tantrum, and the index was already trending quietly down ahead of the 2.30pm RBA statement release. It did drop a swift -20 points on the release, but quickly recovered.
The RBA had flagged for months it would make a QE decision at the July meeting, so it was of little surprise when it announced a cutback to $4bn per week of bond purchases from $5bn as of September. It was nonetheless expected the RBA would implement its self-promoted “flexibility” and decide at yesterday’s meeting to delay that taper.
But while delta and new lockdowns would have been a reasonable excuse to do so, the RBA stuck to its guns, making no change.
Interesting data releases yesterday were those of building approvals and housing finance. Approvals fell -6.7% in June having fallen -7.6% in May when -4.0% was forecasts. House approvals led the fall.
Finance fell -1.6% in June after a 4.9% gain in May, when economists had forecast a gain of 2.0%. Owner-occupier finance led the fall.
While no one is suggesting the housing bubble has burst – far from it – I might suggest possible explanations for weakness. Firstly, building materials prices are through the roof and supply is scarce. Secondly, thanks to bushfires and floods, builders are booked out for up to three years (I know this from personal experience). In terms of finance, mortgage rates may be still rock-bottom but house prices are quite the opposite.
It was a mixed session among sectors last night. Technology again stood out (+4.4%) as Afterpay ((APT)) kicked on another 11.4% after analysts largely gave the Square deal the thumbs up, while Zip Co ((Z1P)) gained another 7.5% as rumours circle that Klarna might be interested, not wishing to be left at the gate.
The annual Diggers & Dealers conference is on this year and miners presenting met with mixed responses. Chalice Mining ((CHN)) got the gold star and rose 6.8% while four of the top five losers on the day were indeed miners. Materials fell -0.9%.
Worst index performer overall was PointsBet Holdings ((PBH)), which fell -11.2% on a rights issue.
Energy fell -1.4% on oil price falls to be the worst sector performer on the day. Industrials dropped -0.6% as investors quietly exit lockdown-impacted toll roads, airports and airlines, with Qantas ((QAN)) again laying off workers.
The RBA statement should have been good news for the banks, along with assumptions of further buybacks to be announced, but they fell -0.5%. Too much doom and gloom elsewhere.
Utilities managed a 0.9% gain but other sector moves were mixed and inconsequential.
So a bit of a pullback from a new all-time high and despite a 0.8% rally for the S&P500 last night our futures are only up 9 points this morning.
Wall of Worry
If you want to go into a public place in New York City, such as a restaurant, gym or cinema, you now have to provide proof of either vaccination or a very recent negative test.
Mask mandates have been reintroduced in San Francisco and Louisiana – the latter being one of the group of lowly vaccinated states. In Florida, where case numbers are rising as fast as they did in the last wave, the governor refuses to impose a mask mandate.
In Texas, second only to Florida in case numbers, the governor has gone one step further. He has banned mask wearing and banned any sort of mandate such as New York is imposing, and many national corporations are independently imposing.
China has announced fresh mass-testing in one city where a delta outbreak is of concern. And guess which one – Wuhan. Probably escaped from a lab.
In unrelated news, Beijing is continuing its crackdown on US-listed Chinese stocks – this time gaming companies, with games described in state-run media yesterday as “opium for the mind”. Tencent took another hit, and more so pure-play gaming companies, serving only to increase a loss of trust in China as an investment destination.
(I actually agree with them on this one.)
Despite all of the above, the S&P500 last night just squeaked over the prior all-time high set in late July.
It’s a hackneyed expression, but once again commentators suggest Wall Street is “climbing a wall of worry”. Delta may be a major threat, and runaway US economic growth may appear to have peaked, but still, one after the other, companies are reporting earnings beats.
In this, the biggest week of reporting, the numbers remain unchanged – almost 90% of S&P stocks beating forecasts for an average 17% earnings growth.
It’s not all beer and skittles however. It is evident that inflation is having an impact, such that while some companies have been able to pass on higher input costs into prices, some have not. A case in point last night was Clorox, which manufacturers a swathe of household items ranging from cleaning products to Glad wraps and bags.
With a miss on earnings, and a warning of further margin pressure to come, Clorox fell -9.5%.
Something to take into consideration as we enter the local earnings season?
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1810.50||– 2.80||– 0.15%|
|Silver (oz)||25.53||+ 0.13||0.51%|
|Copper (lb)||4.35||– 0.04||– 0.86%|
|Aluminium (lb)||1.18||– 0.01||– 0.46%|
|Lead (lb)||1.10||– 0.00||– 0.16%|
|Nickel (lb)||8.86||– 0.03||– 0.31%|
|Zinc (lb)||1.35||– 0.03||– 2.47%|
|West Texas Crude||70.56||– 0.70||– 0.98%|
|Brent Crude||72.14||– 1.06||– 1.45%|
|Iron Ore (t)||184.15||+ 0.75||0.41%|
Delta. Enough said.
Despite lower commodity prices, the Aussie has leapt up 0.5% to US$0.7398 on RBA “hawkishness”.
The SPI Overnight closed up 9 points.
July services PMI numbers from around the globe are out today.
We’ll see a final update of June retail sales.
July private sector jobs numbers are out tonight.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|A2M||a2 Milk Co||Upgrade to Neutral from Sell||Citi|
|BKW||Brickworks||Downgrade to Accumulate from Buy||Ord Minnett|
|CMM||Capricorn Metals||Downgrade to Underperform from Neutral||Macquarie|
|FMG||Fortescue Metals||Downgrade to Neutral from Outperform||Credit Suisse|
|IRE||Iress||Downgrade to Neutral from Outperform||Credit Suisse|
|NAB||National Australia Bank||Upgrade to Add from Hold||Morgans|
|ORG||Origin Energy||Upgrade to Outperform from Neutral||Credit Suisse|
|Downgrade to Hold from Buy||Ord Minnett|
|RSG||Resolute Mining||Upgrade to Outperform from Neutral||Macquarie|
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