Daily Market Reports | Sep 15 2021
This story features BEACH ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: BPT
|SPI Overnight (Jun)||7391.00||– 42.00||– 0.57%|
|S&P ASX 200||7437.30||+ 12.10||0.16%|
|S&P500||4443.05||– 25.68||– 0.57%|
|Nasdaq Comp||15037.76||– 67.82||– 0.45%|
|DJIA||34577.57||– 292.06||– 0.84%|
|S&P500 VIX||19.46||+ 0.09||0.46%|
|US 10-year yield||1.28||– 0.05||– 3.55%|
|USD Index||92.65||+ 0.03||0.03%|
|FTSE100||7034.06||– 34.37||– 0.49%|
By Greg Peel
It was another very choppy session on the ASX yesterday, with the index trading in a range of down -37 points to up 21, closing in the positive. However, with Wall Street down again overnight, our futures are down -42 points this morning, so the chances of holding above 7400 are thin.
Yesterday was all about oil, with the energy sector leaping 4.5% and utilities 1.1% after OPEC significantly upgraded its 2022 demand forecast.
Beach Energy ((BPT)) led out the sector with a 7.2% gain, Woodside Petroleum ((WPL)) finally found some love with 6.2%, while fiances Santos ((STO)) and Oil Search (OSH)) both rose over 5%. AGL Energy ((AGL)) rose 4.1%.
Oil prices were steady last night, but the S&P500 energy sector reversed by -1.6% on the US CPI result. More on that below.
Materials were remarkably resilient yesterday (+0.6%) in the face of the plummeting iron ore price, but an interesting twist has developed in that market.
According to Shaw & Partners, a price of US$130/t is the threshold before the cost of production makes smaller miners uneconomical. If they stop producing, the lower-cost big producers will pick up the slack in volumes, to some degree offsetting the much lower price.
What was not evident yesterday was any clear response to the day’s NSW covid update, and the fact we’ve seen the numbers drop from 1600 to 1200 to 1100 in three days. It could be a head fake, or it could be a trend.
Covid is nevertheless on the mind of the RBA governor, who yesterday at a presentation said “I find it difficult to understand why rate rises are being priced in next year or early 2023,” implying the RBA’s “no rate hike before 2024” stance is very much intact.
The Australian ten-year yield dropped -6 basis points to 1.21%.
It was this comment that turned the index around mid-session, with the banks ending up 0.4%. For the banks it remains a balance between lower for longer rates (bad) and lower chance of foreclosures and bankruptcies (good).
Property (+1.1%) is beneficiary of lower rates but otherwise yesterday saw selling in the consumer sectors, healthcare and technology. The worst fall was reserved for industrials (-1.1%), after Brambles ((BXB)) dropped -8.3% following an investor day that failed to excite.
Second worst individual index performer was telco company Uniti Group ((UWL)), which dropped -5.0% on news a director has been charged with insider trading.
Given the ASX200 has struggled this week to hold the 7400 level, a break down this morning could be the straw, as technical support levels are in danger.
Good news and bad
The US consumer price index rose only 0.3% in August when 0.4% was expected. The annual CPI rate fell to 5.3% from 5.4% in July. The core (ex-food & energy) CPI rose only 0.1%, and the annual core rate fell to 4.0% from 4.3%.
Woohoo! Wall Street immediately jumped on the implication that, if we add the weak August jobs number and this inflation read, the Fed will not be so quick on the tapering trigger.
But it didn’t last long.
The US ten-year bond yield dropped -5 basis points to 1.28% on that same implication, sending the bank sector into a -1.4% drop. Then there was the matter of the breakdown.
Soaring CPI numbers earlier in the year were buoyed by big “reopening” price increases in the likes of airline tickets, hotel rooms and used cars – the latter a result of surging new car prices on lack of production (chip shortage). But August saw a pullback in mobility, as Americans again restrained their travel as delta ran amok.
The August CPI thus contained falls in the prices of airline tickets, hotel rooms and used cars, while new cars, most other household goods and also rents continued to rise. With the delta wave possibly now peaking, the suggestion is once mobility bounces back again, this dip in the CPI could prove…ahem…transitory.
On the August numbers, the implication is lower immediate demand for oil, thus while oil prices held on, the energy sector fell -1.6%.
The pullback from the opening pop was not overly substantial until Apple started falling, eventually by -1.0%. Being a member of all three major indices, and the biggest company, a share price fall in Apple is highly influential in market cap terms.
Apple fell because the company’s new suite of products, launched last night, underwhelmed. Last year’s iPhone 12 (with 5G!) was a notable technological step-up. The iPhone 13 offers only incremental improvements, as is the case for the watch and iPad.
It appears the index dip started by Apple was enough to set off a nervous, September-fearful Wall Street and by the closing bell, all sectors closed in the red.
The test now is whether or not the S&P500 can hold its 50-day moving average, off which it has bounced in every single (minor) pullback this year. Break that, and the more significant pullback so many have been predicting (and hoping for) may finally eventuate.
Yet it’s difficult to find anyone who does not still believe Wall Street will close out the year higher, based on the assumption the delta hit will fade and it will be back to the reopening rush of earlier in the year.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1804.60||+ 11.10||0.62%|
|Silver (oz)||23.84||+ 0.13||0.55%|
|Copper (lb)||4.25||– 0.04||– 0.91%|
|Aluminium (lb)||1.29||– 0.02||– 1.86%|
|Lead (lb)||1.04||– 0.02||– 1.47%|
|Nickel (lb)||8.97||– 0.04||– 0.46%|
|Zinc (lb)||1.37||– 0.02||– 1.26%|
|West Texas Crude||70.46||+ 0.01||0.01%|
|Brent Crude||73.95||+ 0.32||0.43%|
|Iron Ore (t)||120.35||– 2.25||– 1.84%|
Drops in base metal prices appear not to have any much to do with the US CPI, rather a correction under way from the earlier overshoot.
Gold, on the other hand, was boosted by the subsequent fall in bond yields.
Oil prices were up and down all day before closing flat. One CPI print does not suddenly wipe out the prior night’s OPEC demand forecast upgrade, but tell that to the stock market.
Here’s an interesting point to note, with regard inflation: The US natural gas price has now doubled in 2021, just as the US heads into the winter heating season.
Commodity price falls have the Aussie down -0.6% at US$0.7323.
The SPI Overnight closed down -42 points or -0.6%.
Yesterday’s NAB business survey revealed a lot more of a positive result than feared, particularly given the weak July result, as businesses presumably can now see light at the end of the delta tunnel.
Today brings Westpac’s September consumer confidence survey.
China will report August industrial production, retail sales and fixed asset investment today, which could yet be another downer.
The US also reports August industrial production.
Today’s list of ex-dividends includes a biggie from Cimic Group ((CIM)).
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|
|HDN||HomeCo Daily Needs REIT||Downgrade to Hold from Accumulate||Ord Minnett|
|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|
|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|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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