Daily Market Reports | Mar 16 2023
This story features BREVILLE GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BRG
|SPI Overnight||6945.00||– 115.00||– 1.63%|
|S&P ASX 200||7068.90||+ 60.00||0.86%|
|S&P500||3891.93||– 27.36||– 0.70%|
|Nasdaq Comp||11434.05||+ 5.90||0.05%|
|DJIA||31874.57||– 280.83||– 0.87%|
|S&P500 VIX||26.14||+ 2.41||10.16%|
|US 10-year yield||3.49||– 0.15||– 4.01%|
|USD Index||104.73||+ 1.10||1.06%|
|FTSE100||7344.45||– 292.66||– 3.83%|
|DAX30||14735.26||– 497.57||– 3.27%|
By Greg Peel
Swiss investment bank Credit Suisse has been sailing close to the wind for many years, struggling out of the GFC and more recently beset by a string of scandals. Last night its biggest shareholder, the Saudi National Bank (9.88%), said it could not buy more shares on regulatory grounds, sending the Credit Suisse share price down -30% in Europe.
The plunge sparked a rush among UK/European governments to push the Swiss into action. Ultimately the Swiss National Bank (central bank) announced it would provide Credit Suisse with liquidity “if needed”, but not before UK/European stock indices all fell well over -3%.
Before that announcement, the Dow opened down over -700 points.
One Step Forward
Someone will be smiling today. Smack on 11am yesterday what was presumably a big sell-order knocked the ASX200 down from a 55 point opening rebound to only 13 points by lunchtime, before investors returned once the seller was apparently satisfied to reset the day’s activity.
Unfortunately it was all for naught. The futures are down -115 points this morning.
Buyers also appeared to pay little heed to what were rather disappointing data out of China. Chinese industrial production rose only 2.4% over January-February (combined due to the lunar holiday distortion) when 2.6% was forecast.
Retail sales rose 3.5% as expected, but sales of big-ticket items such as car and home appliances fell. Fixed asset investment grew by 5.5%, beating 4.4% forecasts, but real estate investment fell -5.7% having fallen -10% over 2022.
Not the stuff of a Chinese economy surging back from lockdown.
It was almost a “Buy Australia Back” session yesterday, with all sectors in the green bar two. Discretionary lost -0.2% inclusive of Breville Group ((BRG)) going ex-div, and energy just ticked into the red despite a steep fall in oil prices overnight (and more last night).
Technology led the charge (+2.4%) in line with the Nasdaq, even while bonds had the day off for a rest. Next best was healthcare (+1.6%), to show there was no risk/defensive discrimination.
Materials and the banks joined hands and both gained 0.9%.
I could go on, but there’s little point.
We recall that US bond yields collapsed on Monday night, having already faltered late last week, to wipe around -50 points off the two-year yield which, in an indirect way, was basically the 50 point March rate hike Wall Street had previously feared. Yields rebounded on Tuesday night, albeit not all the way back, and last night plunged again to be even lower than Monday night.
The ten-year fell -17 points to 3.46% and the two-year fell -33 points to 3.89%.
The Fed funds futures are now split 50/50 on a 25 point hike next week or a pause.
Those assuming a 25 point hike believe the Fed should signal a pause will follow. The reason to continue hiking is to indicate that despite the issues in US regional banks, the monetary policy trajectory is not impacted, and the bank situation is under control, and inflation still needs to be tamed.
The 25 point club also warns that were the Fed to pause, only a week or so after a 50 point hike was on the cards, would be to signal something is indeed wrong and drastic action has to be taken. This could be as much a negative signal as a pause is otherwise positive for the market.
Yet last night’s US February PPI perhaps provided the Fed with a get-out. The annual headline rate fell to 4.6% from 5.7% in January when 5.4% was forecast. The core rate dropped to 4.4% from 5.4% when 5.2% was expected.
Retail sales fell -0.4% in February following a (revised down) 3.2% gain in January, which implies more “good” news for the Fed. However, core sales (ex food & energy) rose 0.5%, and the dollar values are not inflation-adjusted. So realistically consumer demand remains robust.
One point to note is there is no connection between Silicon Valley Bank’s failure and Credit Suisse’ predicament. Credit Suisse earlier this week warned it had found “material weakness in our internal control over financial reporting” for the years 2021 and 2022. This is not a contagion event, just a coincidence.
But with nerves around the global banking sector rather fragile at present, it was not great timing.
Credit Suisse shares ultimately closed down -14% in New York trading, with the Swiss National Bank news coming through after Europe had closed.
So the Fed has a lot to think about, and a whole week to do so, which leaves Wall Street in rather a vacuum until then. The major economic data releases are now out of the way (except perhaps for US industrial production on Friday night) and the Fed is in a mandatory blackout period pre-meeting with regard any commentary.
Let’s hope no other nasties are revealed in the meantime.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1918.20||+ 15.00||0.79%|
|Silver (oz)||21.78||+ 0.12||0.55%|
|Copper (lb)||3.86||– 0.09||– 2.31%|
|Aluminium (lb)||1.13||– 0.03||– 2.17%|
|Lead (lb)||0.94||– 0.01||– 1.08%|
|Nickel (lb)||10.24||– 0.10||– 0.95%|
|Zinc (lb)||1.29||– 0.04||– 3.12%|
|West Texas Crude||68.32||– 3.21||– 4.49%|
|Brent Crude||74.57||– 3.00||– 3.87%|
|Iron Ore (t)||130.09||+ 0.05||0.04%|
Here comes the global recession, and China’s not much help.
Perhaps the most interesting movements last night were a combination of US bond prices up, and the US dollar up, and the USD gold price up. The dollar should go down on lower yields while gold should go up, but gold should go down if the dollar is up.
All three are global safe havens, and that defines the current mood.
The SPI Overnight closed down -115 points or -1.6%.
Maybe today’s local jobs report can take bloody submarines off the front page.
New Zealand reports its December GDP this morning. Such happy days.
The ECB meets tonight, and despite the situation is still expected to hike by 50 points as flagged.
The US will see housing starts tonight.
Sayona Mining ((SYA)) reports “earnings” and there is another handful of ex-divs.
Today is March quarter expiry day for ASX equity derivatives (futures, options), but any subsequent volatility will likely be lost in the wash. We have also suddenly come a long way down from what are most likely the most crowded strike prices.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|GNC||GrainCorp||Upgrade to Hold from Lighten||Ord Minnett|
|NHC||New Hope||Upgrade to Accumulate from Hold||Ord Minnett|
|NWS||News Corp||Upgrade to Accumulate from Hold||Ord Minnett|
|PPT||Perpetual||Upgrade to Buy from Accumulate||Ord Minnett|
|QBE||QBE Insurance||Upgrade to Hold from Lighten||Ord Minnett|
|SKT||SKY Network Television||Upgrade to Accumulate from Hold||Ord Minnett|
|SUL||Super Retail||Upgrade to Lighten from Sell||Ord Minnett|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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