Daily Market Reports | Sep 24 2021
This story features CORPORATE TRAVEL MANAGEMENT LIMITED, and other companies. For more info SHARE ANALYSIS: CTD
|SPI Overnight||7356.00||+ 8.00||0.11%|
|S&P ASX 200||7370.20||+ 73.30||1.00%|
|Nasdaq Comp||15052.24||+ 155.40||1.04%|
|S&P500 VIX||18.63||– 2.24||– 10.73%|
|US 10-year yield||1.41||+ 0.07||5.54%|
|USD Index||93.10||– 0.35||– 0.37%|
|FTSE100||7078.35||– 5.02||– 0.07%|
By Greg Peel
There was no new news emanating from China yesterday regarding Evergrande’s outstanding interest payments. All we know is its domestic bond obligation was “resolved”, while still not knowing what that means, and that we haven’t heard what happened regarding the USD bond payment also due yesterday.
We do know Evergrande’s share price jumped 18% in Hong Kong yesterday. Mind you, that’s after falling -90% in twelve months. And that the PBoC pumped more liquidity into the banking system yesterday.
Perhaps what has most soothed the market here and around the world is a general agreement Evergrande will not be a Lehman. Everyone in the know seems adamant about that.
We also know it were the banks leading the charge yesterday in market cap terms (+1.3%), having been left out of the initial recovery from Monday.
If we’re not going to do a Lehman, that’s a relief. And now the Fed has signalled tapering, it’s the first step towards eventual rate rises. And it wouldn’t have hurt that Trade Minister Dan Tehan has “promised” (core or non-core?) the international border will reopen at least by Christmas.
As to where you can go will depend on what the policies are in other countries. And already the Wicked Witch of the North has poured cold water on the news, warning she won’t necessarily open the state border.
The heavily shorted travel agent stocks had a good rally yesterday, albeit it was the least shorted – Corporate Travel Management ((CTD)) – that made it onto the index winners’ board with 6.6%. That was behind News Corp ((NWS)), which jumped 8.4% on an announced buyback, and Whitehaven Coal ((WHC)), which trades on coal prices and rose 7.2%.
While the banks did the heavy lifting yesterday, technology topped the percentages with a 3.0% gain, led by Square and Zip Co ((Z1P)) post Indian acquisition announcement, while energy (+2.9%) and utilities (+2.1%) chimed in on higher oil prices and supposed China relief.
You know it’s a Buy Everything day when AGL Energy ((AGL)) gets a bid (+5.3%).
All sectors closed in the green yesterday, but rather bizarrely the big underperformer was called materials, up a mere 0.2% with iron ore up 14%. But that is after a -60% correction. Staples (+0.3%) did what staples do.
Iron ore has since held its ground, base metal and oil prices were higher overnight, but a leap in US bond yields has turned the lights out again for gold.
Wall Street has surged, but as was the case on the way down earlier in the week, our market has been leading on the Evergrande news, given the time zone, rather than following as usual. Thus while the Dow was up over 500 points, our futures are up a mere 8 points this morning.
It is a truth universally acknowledged that smart investors stay out of the stock market in the last hour and a half post a Fed statement, rather making their move the next day. It appears that on Wednesday night, bond investors made the same call.
The US ten-year yield did not move post-statement. Last night it jumped 7 basis points to 1.41%. If this had been six months ago, it would have been curtains for the Nasdaq. But last night the Nasdaq jumped 1.0%.
There was nonetheless a bias towards value and cyclicals, with the Dow up 1.5% and S&P500 1.2%, but long duration growth stocks (many yet to post a profit) are beholden to the longer term discount rate. So why the change of heart?
For months, Wall Street has been worried about a “taper tantrum”. Yet over the same period, many on Wall Street have been calling time on massive “emergency” bond purchases, given the economy’s spectacular bounce out of the covid crisis. So for months, expectations of the beginning of tapering have been gradually priced in.
All that remained was the uncertainty. From when, and how fast? That uncertainty was put to bed on Wednesday night. Markets don’t like uncertainty. Now that Wall Street knows where it stands vis a vis monetary policy, it’s safe to pile back in.
On the other hand, there remains concern the Fed is “behind the curve” when it comes to inflation. The prime reason is that of company after company reporting supply and labour shortage issues, resulting in price pressures. FedEx reported earnings on Wednesday night and copped a hiding for those reasons. Last night the CEO of UPS suggested the same issues will still be evident in a year’s time.
Nine FOMC members have forecast, at this stage, the first rate hike will be in 2022 – far sooner then the Chair continues to insist. Forget the taper tantrum – the fear now is the Fed will be forced to act a lot faster than it currently expects.
But for now, it’s back to normal programming. Last night the S&P500 closed above its Evergrande tipping point.
The banks led the charge on the jump in bond yields, while the rebound in oil prices again has energy hot on their heels. All S&P sectors closed in the green bar property and utilities, which did not get hit earlier in the week.
That was the week that was. Assuming Wall Street doesn’t fall in a heap tonight, it will be the first week in four the S&P has closed higher.
We still don’t know what’s going on with Evergrande.
All discussed above.
It is understandable that US bond yields should rise on taper anticipation. It does not compute that the US dollar should then fall, down -0.4% last night. But given the greenback is a safe haven in times of uncertainty, clearly that trade was unwound last night on supposed Evergrande relief.
The Aussie has thus shot up 0.9% to US$0.7299 on a combination of both.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1742.80||– 25.10||– 1.42%|
|Silver (oz)||22.50||– 0.16||– 0.71%|
|Copper (lb)||4.22||+ 0.01||0.29%|
|Aluminium (lb)||1.34||+ 0.00||0.10%|
|Lead (lb)||0.97||+ 0.01||0.53%|
|Nickel (lb)||8.78||+ 0.08||0.97%|
|Zinc (lb)||1.39||+ 0.02||1.61%|
|West Texas Crude||73.30||+ 1.07||1.48%|
|Brent Crude||77.22||+ 1.28||1.69%|
|Iron Ore (t)||108.90||+ 1.35||1.26%|
The SPI Overnight closed up 8 points.
The highlight of today’s trade is no ex-dividends (outside of any tiddler companies).
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|AGL||AGL Energy||Upgrade to Buy from Hold||Ord Minnett|
|AST||AusNet Services||Upgrade to Equal-weight from Underweight||Morgan Stanley|
|BAP||Bapcor||Upgrade to Buy from Neutral||Citi|
|BBN||Baby Bunting||Upgrade to Buy from Neutral||Citi|
|CIA||Champion Iron||Upgrade to Buy from Neutral||Citi|
|EVT||Event Hospitality & Entertainment||Upgrade to Buy from Neutral||Citi|
|SIG||Sigma Healthcare||Downgrade to Neutral from Buy||Citi|
|TCL||Transurban Group||Upgrade to Outperform from Neutral||Credit Suisse|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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