Daily Market Reports | Dec 08 2021
This story features ZIP CO LIMITED, and other companies. For more info SHARE ANALYSIS: Z1P
|SPI Overnight||7376.00||+ 22.00||0.30%|
|S&P ASX 200||7313.90||+ 68.80||0.95%|
|Nasdaq Comp||15686.92||+ 461.76||3.03%|
|S&P500 VIX||21.89||– 5.29||– 19.46%|
|US 10-year yield||1.48||+ 0.05||3.21%|
|USD Index||96.38||+ 0.05||0.05%|
By Greg Peel
Mind your language
Having not followed down Wall Street’s tech sector sell-off on Monday, yesterday the ASX200 was happy to take Wall Street’s swift rebound on board, albeit not without a couple of stumbles along the way.
There was clearly some concern about what the RBA might do (follow the Fed’s sped up tapering?) as just before the statement release the index was up only 26 having been up 67 at the open. And on first glance, one sentence stood out.
“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range. This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.”
That was the same as last month, but was followed by:
“This is likely to take some time and the Board is prepared to be patient.”
Whereas last month the corresponding sentence was:
“…with the central forecast being for underlying inflation to be no higher than 2.5% at the end of 2023 and for only a gradual increase in wages.”
What happened to 2023? Has the RBA, like the Fed, become more hawkish?
Traders (and computers) tend to look at the last sentence first, as it is the policy summary. But go back up into the full text and you’ll find:
“A further, but only gradual, pick-up in underlying inflation is expected. The central forecast is for underlying inflation to reach 2.5% over 2023.”
So in the end, no real change. The board will discuss its tapering program at the next meeting in February, and does not see omicron as derailing the economic recovery. On that all-clear, the index closed up 68 – where it had begun.
All sectors closed in the green except utilities (-0.1%). Energy won on percentage (+2.1%) on the oil price surge, followed by technology on the Nasdaq bounce (+1.9%) and a full 10% bounce-back for Zip Co ((Z1P)) after falling by the same amount on Monday, thanks to a timely trading update.
Healthcare finally found some buyers (+1.7%), despite a bounce-back for the Aussie, as the market looks past CSL’s ((CSL)) blood donations at the Mexican border issue. Consumer discretionary was another cyclical to outperform (+1.6%), which bleeds into property (+1.3%).
The banks did their bit (+0.7%) as did materials (+0.5%), with a good rally in the iron ore price cancelling out some falls in base metals.
The bottom line is the ASX200 has now recovered half of its omicron-driven fall (exacerbated by the Fed taper speed-up) whereas the S&P500 has all but recovered fully after last night’s rally. We’ve still got about a hundred points to go, and the futures are up only 22 this morning, or 0.3% to the S&P500’s 2%.
So still some effort required.
Back on Track
In the wake of Dr Fauci’s encouraging (but still cautious) words on Sunday night, on Monday night British drug maker GlaxoSmithKline gave investors another confidence boost after it said its monoclonal antibodies treatment is effective against all strains of the omicron variant, based on new data.
The medicos are still urging caution until the truth can be properly tested but on Wall Street, it’s back to FOMO. Stock indices posted their second big day of recovery rallies but this time, the less certain performance of the Nasdaq on Monday night swung to the best day since March for the tech-heavy index.
The mega-caps posted more solid gains and the chipmakers, which had been down on Monday night, completely flipped and came racing back.
Travel-related stocks all went for another run, as did energy companies, as oil prices also went for another run.
Even Chinese tech stocks saw solid gains. Every S&P500 sector closed in the green.
So assuming Wall Street is pre-emptively correct about omicron being less of a threat, it’s a case of as you were. Beijing’s monetary policy easing to counter its economic slowdown is also providing a boost to confidence.
So now it’s on to Fed monetary policy, with the CPI due on Friday, the PPI next Tuesday, and the next Fed meeting on Wednesday, at which it is expected a doubling in the pace of QE tapering will be announced.
Wall Street doesn’t seem too fussed about it.
Nor about the US government set to run out of money as soon as next week, nor US-China tensions around the Olympics (don’t mention Taiwan), nor US-Russia tensions around what looks like could be an invasion of Ukraine…
Hey, it’s Christmas!
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1785.90||+ 7.00||0.39%|
|Silver (oz)||22.52||+ 0.18||0.81%|
|Copper (lb)||4.32||– 0.01||– 0.28%|
|Aluminium (lb)||1.20||+ 0.01||1.03%|
|Lead (lb)||1.01||– 0.00||– 0.43%|
|Nickel (lb)||9.23||+ 0.18||1.99%|
|Zinc (lb)||1.48||+ 0.01||0.64%|
|West Texas Crude||71.93||+ 2.22||3.18%|
|Brent Crude||75.41||+ 2.04||2.78%|
|Iron Ore (t)||108.55||+ 8.15||8.12%|
“Iron ore seems comfortable for the moment around the US$100/t mark. (Every time I say that it shoots off in one direction or the other.)”
Iron ore jumped 8%.
Nickel also recovered its Monday night fall.
The oils added another 3% gain to their 5% gain on Monday night.
And it looks like yet again forex traders got themselves just too short the Aussie. It can’t just be iron ore that has the currency flying back up 1% to US$0.7115 with the US dollar little moved.
We did see yesterday however that China’s exports rose 22% in November when 16% was forecast, and imports rose 32% when 20% was forecast. Note these are US dollar values, so higher prices are just as influential as increased volumes.
The SPI Overnight closed up 22 points or 0.3%.
As good as nothing on the calendar today.
Not that Japanese trade data are not also important to Australia. We just don’t pay as much attention these days.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|FMG||Fortescue Metals||Downgrade to Hold from Buy||Ord Minnett|
|IAG||Insurance Australia||Downgrade to Underweight from Equal-weight||Morgan Stanley|
|MTS||Metcash||Upgrade to Outperform from Neutral||Macquarie|
|NST||Northern Star Resources||Upgrade to Buy from Neutral||UBS|
|OTW||Over The Wire||Downgrade to Accumulate from Buy||Ord Minnett|
|RIO||Rio Tinto||Downgrade to Hold from Buy||Ord Minnett|
|RMD||ResMed||Upgrade to Outperform from Neutral||Macquarie|
|SIG||Sigma Healthcare||Downgrade to Neutral from Outperform||Credit Suisse|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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