Daily Market Reports | Dec 21 2020
This story features A2 MILK COMPANY LIMITED, and other companies. For more info SHARE ANALYSIS: A2M
| World Overnight | |||
| SPI Overnight (Mar) | 6596.00 | – 10.00 | – 0.15% |
| S&P ASX 200 | 6675.50 | – 81.20 | – 1.20% |
| S&P500 | 3709.41 | – 13.07 | – 0.35% |
| Nasdaq Comp | 12755.64 | – 9.11 | – 0.07% |
| DJIA | 30179.05 | – 124.32 | – 0.41% |
| S&P500 VIX | 21.57 | – 0.36 | – 1.64% |
| US 10-year yield | 0.95 | + 0.02 | 1.94% |
| USD Index | 90.02 | + 0.21 | 0.23% |
| FTSE100 | 6529.18 | – 21.88 | – 0.33% |
| DAX30 | 13630.51 | – 36.74 | – 0.27% |
By Greg Peel
Lockdown
The local market looked inward on Friday as the Sydney Northern Beaches cluster sparked fears Sydney will do a Melbourne. Case numbers grew over the weekend and as investors were assuming on Friday, all states and territories have now re-closed their borders to varying degrees.
The Northern Beaches area has been locked down ahead of reassessment on Wednesday, and if things are looking grim there is the possibility all of Sydney will join London in being locked down for Christmas.
There was always the likelihood of selling on Friday to cap what had been a positive week, and to square off positions ahead of the holidays, with the market thinning out this week. But if this were the case, covid stole the limelight.
The banks led the market lower with a -2.1% drubbing. Cars off the road again and flights out of Sydney empty had energy and industrials both down -1.5%. No late rush to buy food for a Christmas that isn’t going to happen? Staples fell -1.5%.
Individually, a2 Milk ((A2M)) came out of its trading halt and as feared – because it had gone into a trading halt – its trading update was not good. With daigou sales to China impeded by a closed border, a2 Milk sales have fallen and the stock fell -23.7%.
Technology fell -2.9%, led by a -7.5% drop for Top 20 newbie Afterpay ((APT)), probably as much on profit-taking as the impact of potential Sydney retail closures. Discretionary fell only -0.8% because you can always buy online.
Defensives held up better. Healthcare fell only -0.2% and telcos -0.4% while utilities was one of only two sectors to close in the green, with +0.4%.
The other was materials, managing a net 0.1% gain on the ever-rising iron ore price, which is up another 3.4% this morning.
As would be expected, travel-related stocks took a beating, but none made it to the top five index losers. Mesoblast ((MSB)) fell -36% after a trial of its heart failure treatment remestemcel-L did not reach its intended target.
QBE Insurance ((QBE)) fell -12.5% after announcing a big loss on catastrophic 2020 weather in the US and the virus, which have led to surging reinsurance costs.
A solid run-up for Adbri ((ABC)) came to an end (-8.1%).
It remains to be seen now where this is headed. Having made the sharp adjustment on Friday, ahead of news of more cases and the border responses, it may become a matter of holding one’s breath in a week of thin volumes and potential volatility.
The NSW government’s decision on Wednesday is critical.
The futures closed down -10 points or -0.15% on Saturday morning to the S&P500’s -0.4% on Friday night.
Speaking of holding one’s breath…
As I write, the US stimulus situation remains fluid. The two parties are reportedly “close” to a deal (as they have been since July) worth US$900bn. Stimulus or not, a funding bill must be passed by midnight in Washington, which is the close of trade today on the ASX.
Both parties want to attach the stimulus bill to the funding bill so they can all go home for Christmas. As has also been the case since July, Wall Street is confident a bill will be reached, as it must.
In other news, the FDA has approved the Moderna vaccine. Distribution will begin as quickly as possible and the good news with this one is it doesn’t need to be super-refrigerated.
US banks have passed their latest Fed stress tests with flying colours. The door is now open for them to recommence buybacks and the CEOs of all majors have been champing at the bit.
Tesla is now in the S&P500, as at the close on Friday night. It will be the seventh largest company in the index with a market cap weighting of 1.25%, which is the biggest addition in the history of the index.
Tesla’s addition was part of a general end of quarter rebalancing for the S&P500. It coincides with the December quarter “quadruple witching” of equity derivative expiries. While there was some nervousness evident in Friday night’s trade regarding stimulus, afternoon trade was all about the non-fundamental volatility of the rebalancing and expiry.
At 3.30pm the Dow was at its low for the day, down -274. At 3.55pm it was square. Five minutes later it closed down -124. You get the picture.
From here it’s all about that stimulus package. Will Wall Street wake on Monday to the news it needs to hear? And if so, what’s the response?
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1881.00 | – 4.70 | – 0.25% |
| Silver (oz) | 25.74 | – 0.20 | – 0.77% |
| Copper (lb) | 3.61 | + 0.04 | 1.17% |
| Aluminium (lb) | 0.93 | + 0.00 | 0.24% |
| Lead (lb) | 0.93 | + 0.00 | 0.36% |
| Nickel (lb) | 7.93 | + 0.02 | 0.28% |
| Zinc (lb) | 1.29 | + 0.01 | 0.99% |
| West Texas Crude | 49.10 | + 0.68 | 1.40% |
| Brent Crude | 52.26 | + 0.73 | 1.42% |
| Iron Ore (t) | 164.15 | + 5.45 | 3.43% |
As the Chinese steel industry whinges and whines to nobody who’s prepared to listen about the high price of iron ore, the price just keeps going higher.
Gee, sorry.
Copper and the oils also continue on their merry way.
The US dollar did bounce 0.2% on Friday night, but the -0.5% fall in the Aussie to US$0.7584 would include domestic issues.
The SPI Overnight closed down -10 points on Saturday morning, ahead of the jump in Sydney cases and the subsequent border shutdowns.
The Week Ahead
In Australia, Christmas Day signals the beginning of the summer holiday hiatus, while in the US it’s just one day off and back to business. It just happens to create a long weekend this year.
Hence plenty of US data will be rolled out this week, including existing home sales, consumer confidence, the Richmond Fed index and a revision of September quarter GDP on Tuesday, and new home sales, consumer income & spending and PCE inflation on Wednesday and durable goods orders on Thursday.
Australia will see preliminary numbers from the ABS for November retail sales tomorrow and trade on Wednesday.
On Thursday the ASX will close at 2.30pm.
That night the NYSE will close at 1pm local.
The Western world is shut on Friday.
Orica ((ORI)) holds its AGM tomorrow.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| BOQ | Bank Of Queensland | Downgrade to Hold from Add | Morgans |
| EBO | EBOS Group | Upgrade to Outperform from Neutral | Credit Suisse |
| HAS | Hastings Technology Metals | Upgrade to Buy from Hold | Ord Minnett |
| HT1 | HT&E Limited | Upgrade to Buy from Neutral | UBS |
| MIN | Mineral Resources | Initiation of coverage with Buy | UBS |
| NEA | Nearmap | Downgrade to Neutral from Outperform | Macquarie |
| NST | Northern Star | Upgrade to Buy from Neutral | Citi |
| PRU | Perseus Mining | Upgrade to Buy from Neutral | Citi |
| QBE | QBE Insurance | Downgrade to Neutral from Buy | UBS |
| SAR | Saracen Mineral | Upgrade to Buy from Neutral | Citi |
| SSM | Service Stream | Downgrade to Neutral from Outperform | Macquarie |
| SWM | Seven West Media | Upgrade to Buy from Neutral | UBS |
| VRT | Virtus Health | Upgrade to Add from Hold | Morgans |
| Z1P | Zip Co | Upgrade to Neutral from Sell | UBS |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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CHARTS
For more info SHARE ANALYSIS: A2M - A2 MILK COMPANY LIMITED
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For more info SHARE ANALYSIS: MSB - MESOBLAST LIMITED
For more info SHARE ANALYSIS: ORI - ORICA LIMITED
For more info SHARE ANALYSIS: QBE - QBE INSURANCE GROUP LIMITED