The Overnight Report: As Expected

Daily Market Reports | Nov 30 2021

This story features EML PAYMENTS LIMITED, and other companies. For more info SHARE ANALYSIS: EML

World Overnight
SPI Overnight 7255.00 + 41.00 0.57%
S&P ASX 200 7239.80 – 39.50 – 0.54%
S&P500 4655.27 + 60.65 1.32%
Nasdaq Comp 15782.83 + 291.18 1.88%
DJIA 35135.94 + 236.60 0.68%
S&P500 VIX 22.96 – 5.66 – 19.78%
US 10-year yield 1.53 + 0.05 3.24%
USD Index 96.27 + 0.18 0.19%
FTSE100 7109.95 + 65.92 0.94%
DAX30 15280.86 + 23.82 0.16%

By Greg Peel

Lockdown Assumption?

Friday’s abandon-ship reaction on the ASX, of the “sell first and ask questions later” variety, was followed up with a big fall on Wall Street in a very thin holiday-abbreviated session that drew immediate “overdone” calls. The -100 point fall in our futures on the Saturday looked too much like a double-up to be accurate.

And so it was the ASX200 opened down -100 points yesterday and ten minutes later was rallying sharply to be back to square by 1pm. Then in came the Johnny-come-latelies who were too slow to move on Friday, and those still in panic mode, to ensure another weak session for the index.

It’s still very early days for omicron, but already there are suggestions it could be a “godsend”, as one medico put it, rather than another lockdown-inducing deadly variant. If indeed it results in only mild symptoms, and if indeed it can muscle out delta, then even if it is more contagious, it means the virus is heading along the right path.

Thus, are more lockdowns necessary? Politicians simply don’t have the stomach for them. Dan Andrews must have a very depressing weekend.

Well, Australian investors are assuming lockdowns. On Friday a -1.0% fall for REITs was one of the better performances on the day. Yesterday another -1.4% was the worst sector performance alongside energy (-1.4%).

Taking a -5.5% drop for EML Payments ((EML)) out of the mix, which follows a 30% pop last week, four of the top five index losers yesterday were retail REITs, or in GPT Group’s ((GPT)) case, a mixed REIT including retail. This suggests Australians will once again not be getting out to malls.

And they won’t be driving anywhere – see energy. And this will bring about more job losses, mortgage foreclosures and business failures, and the RBA will have to stop tapering. Financials fell another -1.1% on top of Friday’s big fall.

We’ll be back to shopping online, and ordering food online, so consumer discretionary fell only -0.3% and Domino’s Pizza ((DMP)) rallied 4.1%. If not locked down we’ll be locked into our own states, making road-trip holidays once again the only option. Bapcor ((BAP)) rose 4.6%.

And we’ll be at home trading the market online, with not much else to do. Hub24 ((HUB)) rose 4.8% and Netwealth ((NWL)) 4.1%.

Do we really think this is the case? Ahead of Christmas? Maybe omicron will encourage Australians into non-mandated lockdown out of personal fear, but otherwise…

Materials was the best performer on the day (+0.7%) after commodities prices crashed left right and centre on Friday night. But Friday’s sell-down had anticipated such, and metal prices bounced last night. Technology rose 0.6% to be the only other sector winner, with utilities flat.

Wall Street came surging back overnight as expected, but here we’re still sceptical. The futures are only up 41 points this morning, which would not yet eat into Friday’s losses.

Rinse and Repeat

President Biden assured Americans last night omicron won’t lead to “any shutdowns or lockdowns”. State-wise it’s not his call to make, but then delta hasn’t brought about any lockdowns either and is still running riot.

I noted yesterday that every time the Nasdaq has taken a tumble this year, it’s not long before the buyers move into the tech mega-caps at a better price. Had they been there on Friday night they may have been tempted, but they were all at home eating turkey sandwiches.

So last night the Nasdaq rallied 1.9% to Friday night’s -2.2% fall, helping the S&P500 back up 1.3% against -2.3%. The Dow only managed to wipe 200 points off Friday’s near -1000 point fall, so in a wider market context Wall Street also remains tentative.

It’s now a watch and wait situation, the big question being will the current vaccines protect against omicron or do we need new ones? Both Pfizer and Moderna believe they can have initial trials completed in one-two weeks.

Biden’s policy for fighting covid in the northern winter is one of vaccines, boosters and testing, not lockdowns.

Medicos believe omicron may be the first step in what has long been suspected – covid will not go away, it will just become another seasonal standard like the flu to which it is related. Mild symptoms, and maybe yearly variants requiring yearly shots, which is good news for the likes of Moderna, which rose another 11% last night on top of Friday night’s 20%.

It is possible markets could go rather quiet from here until more is known. But confidence will be required for a full relief-rally.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1784.10 – 7.70 – 0.43%
Silver (oz) 22.82 – 0.27 – 1.17%
Copper (lb) 4.39 + 0.06 1.41%
Aluminium (lb) 1.21 + 0.02 2.11%
Lead (lb) 1.06 + 0.02 1.92%
Nickel (lb) 9.27 + 0.12 1.28%
Zinc (lb) 1.51 + 0.01 0.72%
West Texas Crude 69.14 + 0.99 1.45%
Brent Crude 72.82 + 0.10 0.14%
Iron Ore (t) 99.95 + 3.30 3.41%

Metals prices mimicked stock markets last night in partial bounce-backs.

Gold did not play safe haven on Friday night and this must have disappointed some. The US ten-year yield came back 5 points to 1.53%.

The oils made barely a dent on their -12% Friday night falls but there is an OPEC meeting on Thursday night, and the situation has changed.

No comeback for the Aussie, which is steady at US$0.7130.

Today

The SPI Overnight closed up 41 points or 0.6%.

In the panic we’ve lost sight of Australia’s GDP result due tomorrow. Yesterday’s data showed September quarter company profits were strong, thanks to commodity prices, while inventories were weak.

Today brings the current account, including the all-important terms of trade.

We’ll also see October building approvals and private sector credit.

China will release November PMIs.

The US will see a probably redundant consumer sentiment measure.

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

Dacian Gold ((DCN)), Omni Bridgeway ((OBL)) and Orocobre ((ORE)) hold AGMs.

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
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
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
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.)

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CHARTS

AMP BAP DCN DMP EML GPT HUB NWL OBL

For more info SHARE ANALYSIS: AMP - AMP LIMITED

For more info SHARE ANALYSIS: BAP - BAPCOR LIMITED

For more info SHARE ANALYSIS: DCN - DACIAN GOLD LIMITED

For more info SHARE ANALYSIS: DMP - DOMINO'S PIZZA ENTERPRISES LIMITED

For more info SHARE ANALYSIS: EML - EML PAYMENTS LIMITED

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For more info SHARE ANALYSIS: HUB - HUB24 LIMITED

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For more info SHARE ANALYSIS: OBL - OMNI BRIDGEWAY LIMITED