The Overnight Report: Never Lasts Long

Daily Market Reports | Sep 14 2021

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

World Overnight
SPI Overnight (Jun) 7421.00 – 14.00 – 0.19%
S&P ASX 200 7425.20 + 18.60 0.25%
S&P500 4468.73 + 10.15 0.23%
Nasdaq Comp 15105.58 – 9.91 – 0.07%
DJIA 34869.63 + 261.91 0.76%
S&P500 VIX 19.37 – 1.58 – 7.54%
US 10-year yield 1.32 – 0.02 – 1.27%
USD Index 92.62 + 0.04 0.04%
FTSE100 7068.43 + 39.23 0.56%
DAX30 15701.42 + 91.61 0.59%

By Greg Peel

Ever Resourceful

It was another up and down day for the ASX200 yesterday, swinging in a range of -17 points to plus 30 before settling at plus 18. By the end of the show, it was once again the resources sectors that drove the market.

Despite the iron ore price continuing to slip away, BHP Group ((BHP)) was up 0.6% yesterday. Base metal prices continued their run upwards, but among mining stocks, non-base metals led the charge, with some help from gold.

Analysts are warning the rally in lithium has run too far, but Pilbara Minerals ((PLS)) topped the index leaders’ board yesterday with a 7.3% gain. Rare earths are in fashion too, with Lynas Rare Earths ((LYC)) up 5.4%. Two gold miners were on the leaders’ board as well, alongside Sydney Airport ((SYD)), which rose 4.6% on an increased takeover offer.

The most material moves were nevertheless posted by uranium miners, none of which are in the index. On another weekly surge in the spot uranium price, Energy Resources of Australia ((ERA)) rose 27.3%, Paladin Energy ((PDN)) 14.6% and Boss Energy ((BOE)) 13.2%.

The materials sector rose 1.0% on the day, while energy rose 1.3% on higher oil prices. No other sector came close.

Losing sectors on the day were the banks (-0.1%), property (-0.4%) and technology (-0.3%), the latter due to a fall in the Square share price.

There was no theme among the worst performing index stocks on the day. Litigation specialist Omni Bridgeway ((OBL)) fell -5.1%, UR Westfield ((URW)) -3.1%, and Redbubble ((RBL)), which is in either top five every day, fell -2.7%.

So outside of resources, there’s very little going on in the post result season doldrums. Next month we will see a flood of September quarter reports, and of AGMs, which will reinform the market at the micro level.

At the macro level, we’ll see the US CPI tonight and our own jobs numbers on Thursday, and the Fed meets next week to announce its tapering plan.

Focus in the meantime is clearly on vaccination rates, and not so much on case-counts, although yesterday’s drop in NSW back to the 1200s from the weekend’s near 1600 result may provide a little ray of hope.

That said, the futures are down -14 points this morning with the S&P500 up 0.2%.

The resources sectors today will face some give-back in base metal prices and another solid drop in the iron ore price, offset by WTI crude jumping back above US$70/bbl.

And We’re Back

After a week-long fall that saw the S&P500 down -1-7% and the Dow down -2.2%, Wall Street swung back around last night, sending the S&P500 up 0.2% and the Dow up 0.8%.

While many on Wall Street believe the major indices simply must be due a decent pullback from lofty valuations, and September-October would be a suitable time, the minor pullbacks seen throughout this year are becoming gradually smaller in magnitude.

News is that the US case-count saw a seven-day average of 136,000 per day last week, down from 157,000 per day at the end of August. This provided some impetus.

But in reality the only driving force last night was the energy sector, which jumped 2.9%. Next best was property on 0.5%.

OPEC posted its monthly oil market assessment last night, which suggested delta will delay an expected recovery in oil demand into next year. But next year, demand is expected to surge back above pre-pandemic levels.

OPEC has increased its 2022 demand forecast to an average 4.2m barrels per day, which is an increase of 900,000bpd on its forecast only one month ago. To that end, the WTI crude price last night jumped 1% to be back above US$70/bbl.

US oil & gas companies and their service contractors have been wallowing despite higher oil prices because major institutional investors will no longer touch them due to ESG considerations. All very laudable, but not an actual impact on oil demand/supply.

Global demand for EVs may be surging, and ambitious emissions reduction targets may be the new deal, but energy markets can still look to certain realities in the decade ahead.

The citizens of less wealthy countries cannot afford expensive EVs. The infrastructure build-out to support EVs is an enormous proposition, particularly in large geographies. And we are yet to hear of a prototype electric airliner (the biggest consumer of oil) or cargo ship.

Despite rumours to the contrary, oil is not yet dead.

In other news, Nike (Dow) fell -2.5% on a broker downgrade. The broker pointed to supply chain disruption as the reason why the leading shoemaker will not have enough stock to meet the usual Christmas demand.

Nike shoes are made in Vietnam. Like Australia, last year Vietnam was a poster child for containing covid but like Australia, this year’s delta variant has not been contained. Cases in Vietnam are continuing to rise, and the country’s vaccination rate is 4-5%. The government has forced closures of manufacturing facilities.

Nike cannot just up sticks and shift production elsewhere in a couple of months.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1793.50 + 6.70 0.37%
Silver (oz) 23.71 + 0.03 0.13%
Copper (lb) 4.29 – 0.02 – 0.39%
Aluminium (lb) 1.32 + 0.00 0.02%
Lead (lb) 1.06 – 0.02 – 1.55%
Nickel (lb) 9.01 – 0.25 – 2.75%
Zinc (lb) 1.39 – 0.01 – 0.59%
West Texas Crude 70.45 + 0.73 1.05%
Brent Crude 73.63 + 0.71 0.97%
Iron Ore (t) 122.60 – 6.15 – 4.78%

A bit of give-back last night for raging base metal prices.

Another solid drop for iron ore, to be down -US$100/t, or -45%, from its peak.

Oils as noted.

The Aussie is steady at US$0.7369.

Today

The SPI Overnight closed down -14 points.

We’ll see the NAB business confidence survey for August today.

The August US CPI results are out tonight.

Zip Co ((Z1P)) hosts an investor day today.

Today’s list of ex-dividends includes Breville Group ((BRG)), News Corp ((NWS)) and TPG Telecom ((TPG)).

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AZJ Aurizon Holdings Upgrade to Add from Hold Morgans
FMG Fortescue Metals Upgrade to Buy from Neutral Citi
IMD Imdex Upgrade to Outperform from Neutral Macquarie
JMS Jupiter Mines Downgrade to Underperform from Neutral Macquarie
MFG Magellan Financial Downgrade to Sell from Neutral UBS
MIN Mineral Resources Downgrade to Hold from Buy Ord Minnett
MQG Macquarie Group Downgrade to Hold from Add Morgans
NAB National Australia Bank Downgrade to Neutral from Outperform Credit Suisse
NVX Novonix Downgrade to Hold from Add Morgans
QUB Qube Holdings Downgrade to Neutral from Outperform Credit Suisse
TNE TechnologyOne Downgrade to Neutral from Buy UBS

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

BHP BOE BRG ERA LYC NWS OBL PDN PLS RBL SYD TPG URW Z1P

For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED

For more info SHARE ANALYSIS: BOE - BOSS ENERGY LIMITED

For more info SHARE ANALYSIS: BRG - BREVILLE GROUP LIMITED

For more info SHARE ANALYSIS: ERA - ENERGY RESOURCES OF AUSTRALIA LIMITED

For more info SHARE ANALYSIS: LYC - LYNAS RARE EARTHS LIMITED

For more info SHARE ANALYSIS: NWS - NEWS CORPORATION

For more info SHARE ANALYSIS: OBL - OMNI BRIDGEWAY LIMITED

For more info SHARE ANALYSIS: PDN - PALADIN ENERGY LIMITED

For more info SHARE ANALYSIS: PLS - PILBARA MINERALS LIMITED

For more info SHARE ANALYSIS: RBL - REDBUBBLE LIMITED

For more info SHARE ANALYSIS: SYD - SYDNEY AIRPORT

For more info SHARE ANALYSIS: TPG - TPG TELECOM LIMITED

For more info SHARE ANALYSIS: URW - UNIBAIL-RODAMCO-WESTFIELD SE

For more info SHARE ANALYSIS: Z1P - ZIP CO LIMITED