Daily Market Reports | Jun 07 2023
This story features AGL ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: AGL
|SPI Overnight||7163.00||+ 24.00||0.34%|
|S&P ASX 200||7129.60||– 86.70||– 1.20%|
|Nasdaq Comp||13276.42||+ 46.99||0.36%|
|S&P500 VIX||13.96||– 0.77||– 5.23%|
|US 10-year yield||3.70||+ 0.01||0.16%|
|USD Index||104.12||+ 0.11||0.11%|
By Greg Peel
“Recent data indicate that the upside risks to the inflation outlook have increased and the Board has responded to this. While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas. Unit labour costs are also rising briskly, with productivity growth remaining subdued.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.
“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.” [My emphasis]
So back off!
The ASX200 opened down through 7200 yesterday and subsequently fell -55 in the first half hour before finding a modicum of support, clawing back around 20 points ahead of the RBA. Given the market was backing a pause, there was a chance 7200 could be regained on the news.
But it wasn’t to be, and the index fell out of bed at 2.30pm.
I think there was a clue in the recent inflation data and minimum wage rise.
It is not only that the RBA hiked another 25 points to 4.10%, but as the above extract suggests, they are not done yet. Economists still expect at least one more hike, most likely in August following July’s release of the more comprehensive June quarter CPI numbers.
Yet in the wash-up, we’re just back to where we were on Friday. Yesterday’s fall reversed Monday’s gain, which was fuelled by US debt ceiling and jobs excitement. The consumer discretionary sector led the percentage moves on Monday, up 1.8%, and yesterday led them down, by -2.2%.
Utilities is playing the contra at present, falling -0.3% on Monday and rising 0.5% yesterday on a gain against the tide for AGL Energy ((AGL)). Technology also fell on Monday, down -1.1%, but was an outperformer yesterday with only a -0.2% fall.
Everything else was largely hammered, reversing Monday. The banks were the biggest drag on the index in falling -1.5%. The prospect of mortgage rate increases is outweighed by the risk. The financials sector also copped a -10.2% fall for ASX ((ASX)) shares, after the exchange outlined its new five-year plan, ex-blockchain.
The resource sectors couldn’t save the day, with materials down -0.9% after a solid few sessions and energy falling -0.6% despite higher oil and coal prices. Whitehaven Coal ((WHC)) and New Hope Corp ((NHC)) topped the index winners.
The Aussie ten-year yield rose 2 points and the two-year 8 points to 3.83%, which is still a gap to the cash rate of 4.10%.
The Aussie shot up 0.7%.
Wall Street has posted a mildly positive session overnight and after yesterday’s “sell everything” panic, our futures are up 24 points this morning. Only about 50 more needed to get back to 7200.
It’s a Small World
Wall Street limped to a modest gain last night as order was restored, with the Nasdaq back to outperforming the Dow. Friday had seen a revival in non-tech buying, as the Dow surged on the debt ceiling resolution and strong jobs number, and as many warned tech was becoming overblown.
Monday night saw a bit of a pullback before last night, as noted, saw order restored.
What has changed is investors’ attitude to small caps. Small caps are more volatile than large and more closely correlated with the economy, hence the jobs report in particular further underscored a growing belief the US may not even see a recession after all.
The Russell 2000 small cap index is up only 5.4% for the year compared to 11.6% for the S&P500 and 26.8% for the Nasdaq, but the bulk of that 5.4% has been achieved over the last three sessions. The Russell jumped over 3% on Friday and another 2.7% last night.
The Russell is heavily weighted towards regional banks, so no new news on that crisis front, and an apparent end to the run on deposits, has led to greater confidence.
Yet just when it looked like the tech rally may have run its course for now, more and more experts are out and about espousing the virtues of AI, and how it will be bigger than even the introduction of the Internet itself.
Hard to ignore.
There is little now on the horizon for Wall Street until next Tuesday, when the May CPI data are released. On the Wednesday night the Fed makes its rate decision which is still backed to be a pause. In the meantime, there is a Fed “blackout”, with no one allowed to speak.
Following up on yesterday’s news, Apple slipped a bit further last night (-0.2%) on a complete lack of excitement over the unveiling of its US$3500 AR/VR headset.
Having announced it was going after Binance on Monday night, the SEC announced last night it is going after Coinbase, which subsequently fell -12%. Both are accused of trading unregistered crypto securities.
I thought, for crypto, that was the whole point.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1963.60||+ 1.90||0.10%|
|Silver (oz)||23.57||+ 0.01||0.04%|
|Copper (lb)||3.76||+ 0.00||0.08%|
|Aluminium (lb)||0.99||– 0.02||– 2.10%|
|Nickel (lb)||9.44||+ 0.13||1.42%|
|Zinc (lb)||1.03||– 0.00||– 0.46%|
|West Texas Crude||71.74||– 0.41||– 0.57%|
|Brent Crude||76.11||– 0.46||– 0.60%|
|Iron Ore (t)||108.59||+ 1.21||1.13%|
The current problem for aluminium is the Russians keep dumping their inventory with the LME even as overall inventories decline. No one wants to buy Russian aluminium anymore, except the Chinese, and in March the US imposed a 200% tariff on Russian imports.
Not much else happening otherwise. Despite the Saudis announcing a production cut, the oils have slipped back again.
The Aussie is up 0.7% on the RBA rate hike at US$0.6670.
The SPI Overnight closed up 24 points or 0.3%.
Australia’s March quarter GDP result is out today. The market is forecasting a 0.3% quarterly increase, down from 0.5% in December, for 2.4% annual growth.
The RBA governor will speak today. Tomatoes available at the door.
China reports May trade numbers.
The Australian share market over the past thirty days…
|Index||06 Jun 2023||Week To Date||Month To Date (Jun)||Quarter To Date (Apr-Jun)||Year To Date (2023)|
|S&P ASX 200 (ex-div)||7129.60||-0.22%||0.54%||-0.67%||1.29%|
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|A2M||a2 Milk Co||Upgrade to Neutral from Sell||Citi|
|ADH||Adairs||Downgrade to Neutral from Buy||UBS|
|AMI||Aurelia Metals||Upgrade to Speculative Buy from Hold||Ord Minnett|
|AUB||AUB Group||Upgrade to Accumulate from Hold||Ord Minnett|
|EBO||Ebos Group||Upgrade to Lighten from Sell||Ord Minnett|
|LFG||Liberty Financial||Upgrade to Buy from Neutral||Citi|
|MHJ||Michael Hill||Downgrade to Neutral from Buy||Citi|
|MP1||Megaport||Downgrade to Accumulate from Buy||Ord Minnett|
|NAN||Nanosonics||Upgrade to Add from Hold||Morgans|
|NHC||New Hope||Upgrade to Accumulate from Hold||Ord Minnett|
|NWH||NRW Holdings||Upgrade to Buy from Neutral||Citi|
|PPM||Pepper Money||Upgrade to Buy from Neutral||Citi|
|REA||REA Group||Downgrade to Neutral from Buy||Citi|
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