Daily Market Reports | Sep 10 2021
This story features WHITEHAVEN COAL LIMITED, and other companies. For more info SHARE ANALYSIS: WHC
|SPI Overnight (Jun)||7391.00||+ 25.00||0.34%|
|S&P ASX 200||7369.50||– 142.50||– 1.90%|
|S&P500||4493.28||– 20.79||– 0.46%|
|Nasdaq Comp||15248.25||– 38.38||– 0.25%|
|DJIA||34879.38||– 151.69||– 0.43%|
|S&P500 VIX||18.80||+ 0.84||4.68%|
|US 10-year yield||1.30||– 0.04||– 2.62%|
|USD Index||92.51||– 0.19||– 0.20%|
|FTSE100||7024.21||– 71.32||– 1.01%|
By Greg Peel
When the Levee Breaks
In the end, 7500 provided about as much support as an Afghan army. The sellers had been trying all week to slam the ASX200 down through that level, under cover of each morning’s ex-dividends, but only yesterday did they succeed.
This time the buyers clearly stood aside. There was no specific trigger for the sell-off other than pent up pressure. If anything, there was a slight defensive bias to the session, with the “outperforming” sectors on the day being staples (-0.7%), property (-1.1%), healthcare (-1.3%) and utilities (-1.8%).
Every other sector fell -2%-plus, and technology lost over -3% after the Nasdaq turned overnight.
There was no joy in the news Sydney, and still-locked up areas of regional NSW, will come out of lockdown when 70% are double-dosed. While a specific target is supposedly good news, the assumption this won’t happen for more than another month is not so thrilling.
It was clearly not good news that China’s wholesale inflation (PPI) rose by a thirteen-year high rate of 9.5% in August (annual), up from 9.0% in July. Such inflation will be passed on through goods exports across the globe. But not domestically, given China’s CPI rose only 0.8% due to falling oil and pork prices.
There were also more signs in government interference in China’s stock market, with Beijing moving to “de-emphasise” profits. Why not just go the whole hog back to communism? The Hang Seng fell -2.3% yesterday.
It was not good news locally that payroll numbers have continued to fall in August, but then hardly a surprise amidst lockdowns.
And in the wake of WA smugly declaring a record budget surplus, the crumbling iron ore price has everyone concerned. It is not the case for other metals however. See below. Interestingly, one of the biggest elements of China’s PPI surge were coal prices, with Beijing still refusing to buy Australian.
That really hurts. Whitehaven Coal ((WHC)) was one of the handful of index stocks closing in the green yesterday.
Either way, it was clear the day’s agenda was pre-set at the open. No news good or bad was going to make any difference. As an indication, fifth place on the top five index leaders’ board yesterday required a gain of 0.3%.
But, as I suggested above, in these situations buyers typically just stand out of the way and let it happen, providing for opportunities the next day. The S&P500 fell -0.5% last night, and our futures are up 25 points this morning.
More of the same
The ECB declared last night it would now purchase bonds (QE) at a “moderately lower pace”, but would not taper.
No – no one else understands either.
Apparently slowing bond purchase is not in this instance “tapering” because purchases had been pumped up to emergency levels recently and now they’re dropping back to earlier levels.
But a funny thing happened in US bond yields overnight.
We recall the US ten-year yield opened the week with a 5 basis point jump attributed to the fact the Treasury would be issuing an awful lot of debt this week, with supply assumed to overwhelm demand. Turns out, the opposite was true.
Last night’s 30-year Treasury auction was swamped, and the ten-year fell -4 basis points to 1.30%. Lower long-end yields typically imply fears of a slowing economy, which may well be the case, but the theory is clouded by sovereign bond buying form regions with much lower or even negative rates.
Wall Street is, nonetheless, concerned about a slowing US economy, as delta runs unabated in the South. Having mandated that all federal workers must be vaccinated, Biden last night moved to mandate vaccinations for all private contractors to the government. This is seen as good news in fighting delta, but not good enough at this point.
The major indices continue to slip away. At this stage the de-rating is fairly incremental, as was the run up to the August new highs, so the question now is whether or not incremental will give way to something more fundamental, such as a -5% pullback that has not been seen all year.
There is much agreement that something of this nature is quite possible, and overdue, but no real confidence it will actually happen.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1794.20||+ 5.60||0.31%|
|Silver (oz)||24.01||+ 0.10||0.42%|
|Copper (lb)||4.25||+ 0.06||1.55%|
|Aluminium (lb)||1.28||+ 0.03||2.41%|
|Lead (lb)||1.07||– 0.00||– 0.26%|
|Nickel (lb)||9.18||+ 0.25||2.74%|
|Zinc (lb)||1.38||+ 0.01||0.44%|
|West Texas Crude||68.14||– 1.16||– 1.67%|
|Brent Crude||71.23||– 1.48||– 2.04%|
|Iron Ore (t)||130.50||– 2.55||– 1.92%|
Standout moves among base metals last night reflect a short-squeeze underway on the LME, which in turn reflects low Shanghai exchange warehouse inventories in the face of unrelenting demand. Despite Beijing’s efforts, China continues to pump out, for example, stainless steel.
Lower US yields help gold recover somewhat, but were also seen as a bad sign for oil, on the assumption of slowing economy fears. And Beijing plans to release oil from its strategic reserve.
The US dollar index fell back a tad last night, but did not spur on the Aussie, which is steady at US$0.7368. Bit of offshore selling on the ASX yesterday?
The SPI Overnight closed up 25 points or 0.3%.
Bit of a breather on the ex-div front today.
Chalice Mining ((CHN)) holds an EGM.
EML Payments ((EML)) holds an investor day.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|CTD||Corporate Travel Management||Downgrade to Neutral from Outperform||Credit Suisse|
|FLT||Flight Centre Travel||Upgrade to Outperform from Neutral||Credit Suisse|
|FMG||Fortescue Metals||Upgrade to Buy from Neutral||Citi|
|HSN||Hansen Technologies||Upgrade to Buy from Hold||Ord Minnett|
|IMD||Imdex||Upgrade to Outperform from Neutral||Macquarie|
|MIN||Mineral Resources||Upgrade to Buy from Neutral||Citi|
|MQG||Macquarie Group||Downgrade to Hold from Add||Morgans|
|TNE||Technology One||Downgrade to Neutral from Buy||UBS|
|WEB||Webjet||Downgrade to Neutral from Outperform||Credit Suisse|
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