article 3 months old

The Monday Report – 29 November 2021

Daily Market Reports | Nov 29 2021

This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: FLT

World Overnight
SPI Overnight 7166.00 – 104.00 – 1.43%
S&P ASX 200 7279.30 – 128.00 – 1.73%
S&P500 4594.62 – 106.84 – 2.27%
Nasdaq Comp 15491.66 – 353.57 – 2.23%
DJIA 34899.34 – 905.04 – 2.53%
S&P500 VIX 28.62 + 10.04 54.04%
US 10-year yield 1.48 – 0.16 – 9.91%
USD Index 96.09 – 0.69 – 0.71%
FTSE100 7044.03 – 266.34 – 3.64%
DAX30 15257.04 – 660.94 – 4.15%

By Greg Peel

Omigod

Not much one can say about Friday’s session on the ASX that isn’t obvious. Not much one can say about omicron either as for now it’s a case of “we just don’t” know and it will take a few weeks to find out.

That puts travel bans back in the spotlight, and no surprise the biggest individual hits taken in the market on Friday were the travel stocks, led out by Flight Centre ((FLT)) on -7.5% and Corporate Travel Management ((CTD)) on -5.8%, with Webjet ((WEB)) falling -5.1% and Qantas Airways ((QAN)) -5.5%.

One might expect Sydney Airport ((SYD)) to join them but it’s subject to takeover so it stayed put.

The hardest hit sector by a margin was energy (-4.6%) and sure enough oil prices fell -12% on Friday night.

Base metal and iron ore prices were also clobbered, but materials managed only a -1.7% fall. Only 14 of the ASX200 stocks closed in the green on Friday and the top five winners were all gold miners.

The gold price was only up by a tick on Friday night.

The biggest points contributors were, of course, the banks (-2.0%), with the Aussie ten-year yield falling -13 basis points to 1.73%.

One might have expected healthcare to be spared to some extent but it fell -1.5%. CSL ((CSL)) might be able to manufacture vaccines but it can’t collect blood in lockdowns. It fell -1.8%. Sonic Healthcare ((SHL)), which provides testing, was one of the 14 winners (just), while Fisher & Paykel Healthcare ((FPH)) makes ventilators and it fell -3.5%.

There was clear evidence of cyclicals being much harder hit than defensives, with property, utilities and telcos falling less than -1% and consumer staples “winning “ the session with -0.6%.

There goes the toilet paper again.

The question on everyone’s minds of course is: are we heading back into lockdowns, just in time for Christmas?

The other question is why did WHO break the Greek alphabet sequence and jump straight to “o” – omicron, when “e” – epsilon – was logically next?

These and other questions cannot be immediately answered.

We might have hoped the -1.7% fall for the ASX200 would be enough to consider Wall Street’s -2.3% fall simply as follow-on for the same reason, but no, our futures were down another -104 points on Saturday morning.

Strained Sentiment

It is somewhat ironic that in Wall Street parlance, the “black” in Black Friday implies a good thing but in 1929 and 1987, “Black Monday” was something altogether different. So it was a Black Friday on Friday night whichever way you look at it.

Not helping was the fact only three men and a dog were there to see it, with the half-session squeezed in between Thanksgiving and the weekend not one most bother to turn up for.

Computers don’t get hangovers though. But it meant that the usual wave of dip-buyers – particularly in the mega-cap tech names – were not there this time if indeed they were going to be. We’ll see tonight. There are as yet no omicron cases detected in the US but no one’s fooling themselves.

The spread of selling on Wall Street was much the same as it was here on Friday. Travel stocks, including cruise lines in particular, were just starting to find their feet again and they were summarily trashed. Energy was obviously carted and the banks fell heavily as the US ten-year yield dropped -16 points to 1.48%.

But in the US, healthcare stocks did go the other way. Moderna jumped 20%. And the stay-at-home winners of 2020, which had seen half their value wiped out in 2021 as the world reopened, also had positive sessions. Zoom and Peloton each added 5%.

It’s a case of “if a tree falls in the forest…”, so we will simply have to wait until tomorrow morning to know whether, if out futures prove to be correct today, more selling on the ASX is the right call or the wrong call. Certainly the ASX200 is more impacted as an index on lower commodity prices and the weight of the banks, and we don’t have FAAMGs.

But the April 2020 turnaround, albeit after a -30%-plus plunge, has taught longer term investors a lesson, as evidenced in consistent 2021 dip-buying, so the biggest fall this year might just bring out the buyers.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1791.80 + 3.40 0.19%
Silver (oz) 23.09 – 0.47 – 1.99%
Copper (lb) 4.33 – 0.13 – 2.92%
Aluminium (lb) 1.18 – 0.05 – 4.39%
Lead (lb) 1.04 – 0.01 – 1.34%
Nickel (lb) 9.15 – 0.37 – 3.92%
Zinc (lb) 1.50 – 0.05 – 2.92%
West Texas Crude 68.15 – 9.88 – 12.66%
Brent Crude 72.72 – 9.50 – 11.55%
Iron Ore (t) 96.65 – 3.45 – 3.45%

Enough said.

There was no great rush into gold as a safe haven, despite the big fall in bond yields. The -0.7% drop in the US dollar was a counter but no doubt traders were wary that if selling on Wall Street leads to margin calls, then investors will sell everything, including gold, to cover.

Bitcoin fell -8%.

Looks like they picked a bad day to release strategic oil reserves.

The Aussie is down another -0.9% at US$0.7135. At this rate we’ll be back in the swinging sixties before Christmas.

The SPI Overnight closed down -104 points or -1.4% on Saturday morning.

The Week Ahead

Suddenly the world has changed once again. It might prove an overreaction, but for now we can at least say inflation is off the front page.

It puts Wednesday’s Australian September quarter GDP result into perspective – one which is forecast to show contraction due to lockdowns. Today we’ll see lead-in numbers for company profits and inventories, and tomorrow the current account including the terms of trade.

We’ll also see monthly numbers for building approvals and private sector credit tomorrow, house prices on Wednesday and housing finance on Thursday.

Wednesday is the first of the new month and of summer, so I’m told. China will release its November PMIs on Tuesday and everyone else will release manufacturing PMIs on Wednesday and services PMIs on Friday.

Given China’s propensity to lock down at the first sign of a sniffle, its PMIs may not mean much.

In the US, the focus would have been heavily on the November jobs numbers – private sector on Wednesday and non-farm payrolls on Friday – but they may be up in the air now as well.

The US will also see consumer confidence and house prices tomorrow and factory orders on Friday.

In the local stock market, the AGM season now slows to a trickle and there are a few ex-divs this week from recent earnings reporters.

AMP ((AMP)) hosts an investor day tomorrow.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ADH Adairs Upgrade to Accumulate from Hold Ord Minnett
APA APA Group Upgrade to Add from Hold Morgans
APX Appen Downgrade to Underperform from Neutral Macquarie
AVG Australian Vintage Downgrade to Hold from Add Morgans
BAP Bapcor Downgrade to Equal-weight from Overweight Morgan Stanley
Downgrade to Hold from Buy Ord Minnett
CQR Charter Hall Retail REIT Downgrade to Underweight from Equal-weight Morgan Stanley
CWN Crown Resorts Upgrade to Outperform from Neutral Credit Suisse
FPH Fisher & Paykel Healthcare Upgrade to Outperform from Neutral Macquarie
SCP Shopping Centres Australasia Property Downgrade to Neutral from Outperform Macquarie
Downgrade to Equal-weight from Overweight Morgan Stanley
TNE TechnologyOne Downgrade to Underperform from Neutral Macquarie
Downgrade to Sell from Neutral UBS
WEB Webjet Upgrade to Add from Hold Morgans

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

AMP CSL CTD FLT FPH QAN SHL WEB

For more info SHARE ANALYSIS: AMP - AMP LIMITED

For more info SHARE ANALYSIS: CSL - CSL LIMITED

For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED

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

For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED

For more info SHARE ANALYSIS: SHL - SONIC HEALTHCARE LIMITED

For more info SHARE ANALYSIS: WEB - WEBJET LIMITED