The Overnight Report: New High

Daily Market Reports | Oct 22 2021

This story features WOODSIDE PETROLEUM LIMITED, and other companies. For more info SHARE ANALYSIS: WPL

World Overnight
SPI Overnight 7389.00 + 2.00 0.03%
S&P ASX 200 7415.40 + 1.70 0.02%
S&P500 4549.78 + 13.59 0.30%
Nasdaq Comp 15215.70 + 94.02 0.62%
DJIA 35603.08 – 6.26 – 0.02%
S&P500 VIX 15.01 – 0.48 – 3.10%
US 10-year yield 1.68 + 0.04 2.44%
USD Index 93.77 + 0.16 0.17%
FTSE100 7190.30 – 32.80 – 0.45%
DAX30 15472.56 – 50.36 – 0.32%

By Greg Peel

Deadline Looms

After a shaky start, the ASX200 was up over 30 points at lunchtime. But then trading in Evergrande recommenced on the Hong Kong stock exchange. The stock dropped -14% before settling at the close down -10%.

One month ago Evergande missed two interest payments on bond issues, and under the rules the company had one month to make good. Attempts to sell off 50.1% of its property services group have fallen over, and even an attempt to sell its Hong Kong headquarters has failed.

It is assumed that when the one month deadline is reached tomorrow, Evergrande will default. The PBoC and the Chinese government have made assurances the banking sector can cope, and that Evergrande creditors and asset owners (unfinished apartment buyers) will be supported, but nothing definitive has been forthcoming as yet.

What is assumed is that there will be a downturn in the Chinese property market – the biggest single contributor to both China’s GDP and household wealth. A slowdown in construction will impact on demand for construction materials. Last night iron ore fell -5.5%, base metals -4-5% and the oils -1.5%.

Those sectors will be under threat today on the ASX.

Energy was already under pressure yesterday (-1.4%) following production reports from Woodside Petroleum ((WPL)) and Santos ((STO)). Materials closed only slightly down.

Outside the macro, the session was dominated by individual stock movements related to the day’s AGM and quarterly updates. In the winner’s circle (in descending order), Perpetual ((PPT)), Cimic Group ((CIM)), Healius ((HLS)), Nickel Mines ((NIC)) and AMP ((AMP)) rose between 4 and 8%.

Among the losers, Flight Centre ((FLT)) topped the board with -5.8% and Webjet ((WEB)) came in with -3.1% just as Victorians go out on parole. Eyes to the UK’s new case surge, perhaps. Super Retail’s ((SUL)) AGM was the day before but it fell -4.4%, while after a good run a2 Milk ((A2M)) lost -3.5%.

a2 Milk contributed to a weak session for staples (-1.1%) while the big winner on the day, with Victoria reopening, was property (+1.7%).

Other sectors moves were mixed and modest.

Little mention of Evergrande on Wall Street last night, as the threat to the US is not substantial. Can’t say that for Australia, but our futures are up 2 points this morning.

And we’re back

Earnings results have provided the extra boost for the S&P500, which as of last night has recovered all of the September and early October losses. Of the 70 S&P companies reporting to date, 86% have posted earnings beats.

We recall, nonetheless, that analysts had been madly downgrading expectations heading into the season, largely on supply-side issues. And not all results have been crackers.

IBM fell -9.5% last night, which was worth -87 Dow points.

In this morning’s aftermarket, Intel’s (Dow) result is so far worth -8.5%, while Snap has plunged -23% after a big miss on advertising guidance. The impact has carried over to Facebook to the tune of -4.8%, ahead of its result.

Initial responses are not necessarily proving set in stone. Netflix was sold off earlier in the week on its result, but last night rose 4.5%. The response to Tesla’s result in Wednesday’s aftermarket was muted, but last night it rose 3%.

Throw in a 1% gain for Microsoft, pre-result, and there you have much of the Nasdaq’s outperformance on the day. While the past several sessions have featured solid advancing to declining share price ratios on the NYSE, last night saw decliners outpace advancers by almost two to one.

For the S&P to hit a new high, the big boys had to do the work.

The ongoing saga of Democrat polarisation over Biden’s grand stimulus plan took another twist last night. Arizona’s Democrat senator will oppose any increase in corporate and capital gains tax and a tax on the rich, which are the bedrock of how Biden plans to fund his spending.

In other news, a company by the name of Digital World Acquisition Corp has announced a plan to merge with a company called Trump Media & Technology Group with a plan to launch its own social media platform in competition with the Facebooks and Twitters of the world.

Yes – that Trump. Would we expect the platform to draw users? DWAC shares rose 386%.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1783.00 + 1.00 0.06%
Silver (oz) 24.13 – 0.15 – 0.62%
Copper (lb) 4.54 – 0.21 – 4.42%
Aluminium (lb) 1.34 – 0.06 – 4.41%
Lead (lb) 1.10 + 0.02 1.68%
Nickel (lb) 9.02 – 0.51 – 5.40%
Zinc (lb) 1.60 – 0.07 – 3.97%
West Texas Crude 82.65 – 1.22 – 1.45%
Brent Crude 84.75 – 1.05 – 1.22%
Iron Ore (t) 117.50 – 6.95 – 5.58%

Bit of a horror movie.

At least the Aussie is down -0.7% at US$0.7463.

Today

The SPI Overnight closed up 2 points.

Flash estimates of October PMIs are due across the globe today.

There’s another handful of AGMs today, including that of Insurance Australia Group ((IAG)).

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ALL Aristocrat Leisure Upgrade to Outperform from Neutral Macquarie
ALX Atlas Arteria Upgrade to Add from Hold Morgans
BAP Bapcor Upgrade to Add from Hold Morgans
BHP BHP Group Upgrade to Add from Hold Morgans
BSL BlueScope Steel Downgrade to Equal-weight from Overweight Morgan Stanley
CL1 Class Downgrade to Hold from Buy Ord Minnett
DMP Domino's Pizza Enterprises Upgrade to Neutral from Underperform Macquarie
EVN Evolution Mining Downgrade to Neutral from Outperform Credit Suisse
GPT GPT Group Downgrade to Neutral from Outperform Credit Suisse
HMC HomeCo Upgrade to Hold from Lighten Ord Minnett
IEL IDP Education Downgrade to Hold from Add Morgans
IGO IGO Upgrade to Outperform from Neutral Credit Suisse
NAN Nanosonics Upgrade to Add from Hold Morgans
OZL OZ Minerals Downgrade to Neutral from Buy Citi
Equal-weight Morgan Stanley
PAN Panoramic Resources Upgrade to Outperform from Neutral Macquarie
SRL Sunrise Energy Metals Downgrade to Neutral from Outperform Macquarie
SUL Super Retail Downgrade to Hold from Accumulate Ord Minnett
SXY Senex Energy Downgrade to Neutral from Buy Citi
Downgrade to Neutral from Outperform Credit Suisse
Downgrade to Hold from Add Morgans
Downgrade to Hold from Buy Ord Minnett
VMY Vimy Resources Downgrade to Hold from Add Morgans
WEB Webjet Downgrade to Neutral from Outperform Macquarie
WOR Worley Upgrade to Buy from Neutral 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.)

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CHARTS

A2M AMP CIM FLT HLS IAG NIC PPT STO SUL WEB WPL

For more info SHARE ANALYSIS: A2M - A2 MILK COMPANY LIMITED

For more info SHARE ANALYSIS: AMP - AMP LIMITED

For more info SHARE ANALYSIS: CIM - CIMIC GROUP LIMITED

For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED

For more info SHARE ANALYSIS: HLS - HEALIUS LIMITED

For more info SHARE ANALYSIS: IAG - INSURANCE AUSTRALIA GROUP LIMITED

For more info SHARE ANALYSIS: NIC - NICKEL MINES LIMITED

For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED

For more info SHARE ANALYSIS: STO - SANTOS LIMITED

For more info SHARE ANALYSIS: SUL - SUPER RETAIL GROUP LIMITED

For more info SHARE ANALYSIS: WEB - WEBJET LIMITED

For more info SHARE ANALYSIS: WPL - WOODSIDE PETROLEUM LIMITED