Daily Market Reports | Nov 02 2021
This story features WESTPAC BANKING CORPORATION, and other companies. For more info SHARE ANALYSIS: WBC
|SPI Overnight||7360.00||+ 13.00||0.18%|
|S&P ASX 200||7370.80||+ 47.10||0.64%|
|Nasdaq Comp||15595.92||+ 97.53||0.63%|
|S&P500 VIX||16.41||+ 0.15||0.92%|
|US 10-year yield||1.58||+ 0.02||1.16%|
|USD Index||93.88||– 0.24||– 0.25%|
By Greg Peel
Bank of New South Wails
A look across sector moves in the ASX200 yesterday confirms to a great extent that Friday’s tumble was as much an end-of-month profit-taking session as anything else, albeit clouded by the fact bond yields surged on Friday and pulled back yesterday.
But there was one small glitch. All sectors fell on Friday and all sectors rose yesterday except one. A disappointing earnings result from Westpac ((WBC)), including a lower than expected buyback, had that stock down -7.4% to be the worst index performer.
I think the last time Westpac fell by that much in a day, Kerry Packer stepped in.
Some investors switched into Commonwealth Bank ((CBA)) it would appear, as it rose 1.5%. Despite analyst objections, CBA still remains the shortest price favourite since Phar Lap. ANZ Bank ((ANZ)), which has already reported, stood still, while National Bank ((NAB)), yet to report, fell -0.9%. The sector fell -0.5%.
Hence rather than recovering all or most of Friday’s fall, the ASX200 managed only about a half.
Friday’s big surge in bond yields likely involved a bit of a short-covering scramble (via the futures), as yesterday the two-year yield fell back -10 points, the five-year -18 points and the ten-year -17 points, ahead of today’s RBA meeting, implying a bit of a safety trade.
This reversal helped to fuel reversals in the yield-paying sectors yesterday, with telcos up 2.3%, utilities 1.7%, property 0.7% and staples 0.6%. Energy reversed with a 1.2% gain, and even materials managed 0.3% despite falls in base metal, gold and iron ore prices.
Healthcare posted only a small fall on Friday due to a solid response to ResMed’s ((RMD)) earnings, but yesterday jumped 1.5% despite ResMed falling -4.9% on a rethink. It took a 2.0% gain for CSL ((CSL)) to overcome.
Fun fact of the day: you know those ads bombarding the tele featuring beefy blokes bouncing around in bamboo undies? Step One IPO’d yesterday and jumped 80%.
In other news, Australian house prices rose an average 1.5% in October to be up 21.6% year on year – the fastest rate in 32 years. But that 1.5% is the slowest rate of growth in nine months. Tighter lending restrictions, rising fixed mortgage rates and unaffordability suggest the writing’s on the wall.
For the stock market, we could net out Friday and yesterday and consider, ex-Westpac, that November begins today from square. However, Victoria is closed, and the Big Event occurs half an hour before the other one. That Big Event could have a material impact.
Speaking of central bank meetings, we’ll know by early Thursday morning our time just what the Fed’s tapering plans will be. While it makes sense for Wall Street to go quiet in the run-up, it’s not often the case.
It was hardly explosive, but last night all of the S&P500, Nasdaq and Dow posted new all-time highs.
More remarkable was a 2.7% leap for the Russell 2000 small cap index. The Russell has underperformed the major indices all year throughout the delta surge and is still far from its highs, but loaded with small banks, small energy stocks and a raft of other small cyclical businesses, it’s making a comeback.
Historically, Wall Street stages a run-up to new year after a soggy September, and historically, the Russell outperforms. It’s hard to find any commentator who doesn’t think history will repeat this year (it doesn’t always work) and a lot of that is to do with the belief Fed tapering is happily priced in.
So we can only wait and see.
Meanwhile, fuelling the rally are ongoing earnings results. The stats have 83% of S&P500 companies reporting to date beating estimates by an average 7%. There are 167 companies reporting this week.
In other corporate news, meme stock favourite AMC Entertainment, which after exploding in January thanks to Robinhood’s merry men and women, was expected to come back to earth but didn’t, rose 4.8% after declaring its best month of cinema revenues since the pandemic began. The stock is up 1600% year to date.
A G20 agreement to drop the EU’s planned 56% tariffs on steel and aluminium in response to Trump’s tariff attacks had Harley Davidson up 9%.
Tesla rose 8.5% on no news, other than EV sales expectations apparently increasing from prior forecasts. The stock is up 50% in a month, to US$1208, recalling that last year Tesla did a 5:1 stock split, and before that Elon threatened to take the stock private at US$400.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1793.70||+ 9.40||0.53%|
|Silver (oz)||24.02||+ 0.13||0.54%|
|Copper (lb)||4.46||+ 0.00||0.00%|
|Aluminium (lb)||1.23||– 0.01||– 0.86%|
|Lead (lb)||1.10||+ 0.00||0.05%|
|Nickel (lb)||8.85||+ 0.03||0.32%|
|Zinc (lb)||1.56||+ 0.00||0.26%|
|West Texas Crude||83.95||+ 0.38||0.45%|
|Brent Crude||84.54||+ 0.82||0.98%|
|Iron Ore (t)||103.30||– 3.45||– 3.23%|
Iron ore is again threatening to fall through US$100/t. Australia’s Big Miners are not seeing major share price falls because (a) we’ve been here once already and (b) their cost of production is so low compared to smaller players that they still back up the truck to the bank at US$100/t when others become non-commercial.
The dividends won’t be quite so spectacular, but still pretty solid, analysts insist.
Gold has recovered somewhat from Friday’s US dollar-driven fall, with the greenback dropping back a bit last night.
The Aussie is steady at US$0.7520 as traders look forward to their RBA Day lunches.
The SPI Overnight closed up 13 points.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|A2M||a2 Milk Co||Upgrade to Neutral from Underperform||Credit Suisse|
|ANZ||ANZ Bank||Upgrade to Neutral from Sell||Citi|
|CHL||Camplify||Upgrade to Add from Hold||Morgans|
|COE||Cooper Energy||Downgrade to Accumulate from Buy||Ord Minnett|
|DEL||Delorean Corp||Upgrade to Speculative Buy from Hold||Morgans|
|FMG||Fortescue Metals||Upgrade to Hold from Reduce||Morgans|
|JBH||JB Hi-Fi||Upgrade to Outperform from Neutral||Macquarie|
|MQG||Macquarie Group||Upgrade to Buy from Neutral||Citi|
|PBH||PointsBet||Downgrade to Hold from Buy||Ord Minnett|
|REH||Reece||Upgrade to Neutral from Underperform||Macquarie|
|Upgrade to Hold from Reduce||Morgans|
|Upgrade to Buy from Lighten||Ord Minnett|
|RWC||Reliance Worldwide||Upgrade to Buy from Neutral||UBS|
|WAF||West African Resources||Upgrade to Outperform from Neutral||Macquarie|
|WOW||Woolworths Group||Downgrade to Sell from Neutral||UBS|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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For more info SHARE ANALYSIS: ANZ - AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
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