The Overnight Report: Not Finding Traction

This story features ANZ GROUP HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: ANZ

By Greg Peel

New Resistance

I had queried the futures being down -26 points yesterday morning, given Wall Street selling was all about Big Tech, and sure enough after a brief drop the ASX200 surged through the 7100 mark late morning.

There followed a very long pause for thought, followed by some late selling to ensure the index closed safely just under 7100. Bit scary up there near all-time highs. Maybe a new assault will need to be planned.

All the action was in healthcare (+1.0%), materials (+0.8%) and the banks (+0.6%). Offset was provided by technology (-1.1%), which was simply following the Nasdaq.

It was a busy day in bank land. ANZ Bank ((ANZ)) reported results that would be exceptional, in both earnings and dividend terms, if it were not cycling the original lockdown a year ago and a regulatory suspension/slashing of dividends. The market clearly expected more, hence ANZ shares fell -3.2%.

ASIC announced it is suing Westpac ((WBC)) for alleged insider trading in bank bill swaps, but this goes back to 2016 and has been well anticipated. Westpac fell -0.1%. National Bank ((NAB)) reports this morning, and rose 0.4% yesterday, so the outgoing funds found their way to Commonwealth Bank ((CBA)) which rose 2.5%.

CBA provides a quarterly update next week.

In healthcare, it was all about CSL ((CSL)), which gained 2.4%, while the gain in materials was driven again by the big miners on yet another increase in the iron ore price, as well as solid gains overnight in base metal prices.

Aerial photography company Nearmap ((NEA)) leapt 14.6% to top the index after providing a very positive update, and then promptly went into a trading halt pending announcement on legal proceedings.

Still in the sky, Flight Centre ((FLT)) topped the index losers for the second day running, losing -5.4% on top of yesterday’s -4.6%. One might assume the India situation does not bode well for the return of international travel.

Flight Centre is the fourth most shorted stock on the ASX, at over 9%. Also over 9% and topping the list is Webjet ((WEB)).

Having broken up though 7000 in the third week of April, the ASX200 has been stuck between support at 7000 and resistance at 7100 ever since. Clearly something “new” will be needed to make that push through to all-time highs.

Bank results aren’t doing it, although we still have NAB, Macquarie Group ((MQG)) and CBA to go. The next two weeks bring a run of out-of-cycle earnings reports.

The futures are up but 5 points this morning, which suggests another look at 7100, but not much else.

Jabbed

Late in last night’s session on Wall Street, the Biden Administration declared it would waive intellectual property rights on covid vaccines, thus making them available for manufacture across the globe.

Pfizer and Moderna had elected to profit from their vaccine sales from the outset, but as a goodwill gesture, others had not. It’s a tricky argument, as while morally sound there is a question of incentive were this virus to mutate to new form that current vaccines don’t protect against, or if another virus were to appear down the track.

But there’s more to it. Pfizer and Moderna largely pre-sold vaccines ahead of final approval, and as such have already booked those profits. Currently they are struggling to secure the raw materials to feed increased manufacturing capacity, which begs the question of how the rest of the world will fare in trying to start up their own manufacturing.

In the wash up, Moderna shares fell -6% but Pfizer (Dow) closed flat. Shares in Pfizer’s German partner BioNTech fell -3.5%.

At the time, the major indices were all pulling back from earlier gains. All had opened strongly, including the Nasdaq, but soon faltered, grafted back, and faltered again. The Nasdaq ultimately underperformed once more, but losses and gains were mixed this time among the mega-techs.

The smallish gain for the Dow took the average to a new all-time high. The S&P500 remains effectively unmoved since mid-April.

Last night’s ADP report showed 742,000 private sector jobs added in April, falling short of 800,000 expectations. While it may have been a “miss”, 742,000 is a very big number in historical context.

The ADP report is also a notoriously poor lead indicator into Friday’s no-farm payroll numbers, for which economists are forecasting a full million jobs added in April.

The miss follows slightly disappointing manufacturing and services PMI releases earlier in the week, but again, they are still at very high levels. The US housing market, as is the case in Australia, is booming. The March quarter saw GDP growth of 6.4%, which is China stuff.

So the tapering debate rages on.

For now, the bond market is having nothing to do with it. And the Fed vice chair appeared on CNBC this morning to echo Powell’s mantra, in essence, of “not even thinking about it”.

It will all come down to the data, over quite a wide timeframe.

Commodities

It will be interesting to see what China (and Japan) might do today to the iron ore price when they return from holiday. As I suggested yesterday, two big moves up in price without China is almost unprecedented.

A bit of a pop for nickel has taken it back over the US$8/lb mark.

The Aussie remains ever volatile, back up 0.5% to US$0.7751 this morning. It’s been yo-yoing all week.

Today

The SPI Overnight closed up 5 points.

The Bank of England holds a policy meeting tonight.

As noted, NAB reports earnings, as do Eclipx Group ((ECX)) and Irongate Group ((IAP)).

Rio Tinto ((RIO)), Genworth Mortgage Insurance ((GMS)), Iress ((IRE)) and TPG Telecom ((TPG)) hold AGMs.

The Australian share market over the past thirty days…

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