The Overnight Report: Holding Pattern

This story features LYNAS RARE EARTHS LIMITED, and other companies. For more info SHARE ANALYSIS: LYC

World Overnight
SPI Overnight (Jun)	7328.00	+ 19.00	0.26%
S&P ASX 200	7394.30	– 0.10	– 0.00%
S&P500	4422.30	+ 10.51	0.24%
Nasdaq Comp	14840.71	+ 3.72	0.03%
DJIA	35144.31	+ 82.76	0.24%
S&P500 VIX	17.58	+ 0.38	2.21%
US 10-year yield	1.28	– 0.01	– 0.78%
USD Index	92.64	– 0.27	– 0.29%
FTSE100	7025.43	– 2.15	– 0.03%
DAX30	15618.98	– 50.31	– 0.32%

By Greg Peel

Foiled Again

The futures had it right yesterday morning – the ASX200 opened up 23 points in the first five minutes. But that was the end of that. In a choppy, low volume, lacklustre session the index proceeded to fall back to square by the close.

There appears little incentive to push the market to a new high at this point, with 7400 again a barrier. The likely reason is we have Australia’s CPI out tomorrow, a Fed statement on Thursday, a big week in the US earnings season and the first trickle of the local earnings season. All could be pivotal.

Closing flat was actually a good effort yesterday when we note materials was the only sector to close in the green (+1.0%) thanks to strength across all industrial metals and minerals. Four of the top five index winners on the day were miners.

Lynas Rare Earths ((LYC)) led out with 10.6% on its production report, Alumina Ltd ((AWC)) gained 5.3%, copper miner OZ Minerals ((OZL)) 3.9%, and Champion Iron ((CIA)) 3.4%. A good spread across the sector. Not for gold though. Silver Lake Resources ((SLR)) fell another -8.1% to again top the index losers.

Despite oil prices having settled down again, energy fell -1.4% to be the worst performer, having had a good week last week on M&A speculation. Property was down -1.0%, which might reflect the likelihood of a Sydney lockdown extension, except staples fell -0.4% which doesn’t really comply.

Indeed, selling was fairly uniform in all other sectors, with the banks closing dead flat.

Speaking of covid restrictions, mask-marketer Redbubble ((RBL)) had a good day (+5.9%), while a2 Milk ((A2M)), which has had a bit of a revival recently, did not (-5.6%). Nerves have crept in regarding Beijing’s assault on US-listed Chinese companies, which revolves around keeping Chinese companies in China for the benefit of the Chinese, not foreigners.

Despite the latest five-year plan including encouraging foreign investment. That wound in your foot looks painful Xi. For a2 Milk, the risk is in being not Chinese.

No one wants to bet on Crown Resorts ((CWN)) anymore (-5.2%), and the air continues to leak out of the BNPL market, with Zip Co ((Z1P)) down -4.1%.

Looking to today, the futures are showing an enthusiastic 19 points up following modest gains on Wall Street, which would imply another assault on 7400. But given yesterday’s action, we may simply see a repeat.

Turning the Corner?

The UK reported 24,950 new cases last night, down from 39,950 a week ago and marking the sixth straight day of falls. Has the delta outbreak peaked?

Medical experts have warned, Gladys-style, that it’s too early to tell and it may just be a blip. The fear is now that all restrictions have been lifted, the UK will soon see the impact. But the news was not lost on Wall Street last night.

Dr Robert Gotlieb, Pfizer board member and go-to TV commentator has suggested the US outbreak will thus peak in three weeks’ time, given the lag between the two countries. In Republican states, anti-vaxxers are beginning to wake up to the fact that if you’re on death’s door with delta, it’s too late for a vaccination.

The UK news gave Wall Street a kick last night in what was otherwise looking like a flat to down session. While all three major indices again hit new highs The fact the Nasdaq only just scraped in reflects the fact all of FAAMG will report earnings this week, starting tomorrow.

Tesla reported after the bell last night and smashed earnings forecasts. The aftermarket share price response has nonetheless been muted (+1.2%), with the stock having run up to the result release (albeit down -25% from its high).

With all indices at new highs, the question again is can there be further upside on earnings beats? FAAMG has a habit of posting sizeable beats, so we’re about to find out.

US new home sales fell -6.6% in June to the lowest level since April last year. The reason? First home buyers have simply been priced out of the market. Over the same period, US house prices rose another 6%.

Sounds familiar.

Harking back to delta, Wall Street is also on edge to see whether the Fed will point to the outbreak as reason to slow its timing on tapering, that was always going to be slow anyway.

All will be revealed on Wednesday night.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1797.50	– 4.70	– 0.26%
Silver (oz)	25.18	+ 0.01	0.04%
Copper (lb)	4.36	+ 0.05	1.27%
Aluminium (lb)	1.13	+ 0.01	1.00%
Lead (lb)	1.09	+ 0.01	0.90%
Nickel (lb)	8.91	+ 0.18	2.04%
Zinc (lb)	1.35	+ 0.01	0.71%
West Texas Crude	71.91	– 0.16	– 0.22%
Brent Crude	74.84	+ 0.74	1.00%
Iron Ore (t)	202.95	+ 1.05	0.52%

Before a backdrop of assumed increased demand from infrastructure spending, supply issues, including floods in China and the virus in Indonesia, are underpinning ongoing metal price gains.

The US dollar was also a little lower last night. We don’t much focus on tin, but it hit a new all-time high price on the LME last night.

Iron ore appears determined to hold the US$200/t level, at least for now, until Beijing pulls out some new price-dampening ploy.

Government shenanigans are also impacting on oil prices, which last night went in opposite directions. WTI traders are worried about Beijing cracking down on domestic crude importers, while Brent is being boosted by concerns about a possible Russian ban on gasoline exports as domestic prices rise.

The Aussie is up 0.2% at US$0.7383.

Today

The US will see numbers for consumer confidence and durable goods orders tonight.

Oil Search ((OSH)) posts its production report, while Temple & Webster ((TPW)) and Virgin Money UK ((VUK)) report earnings.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ASX	ASX	Upgrade to Outperform from Neutral	Macquarie
BLD	Boral	Downgrade to Lighten from Hold	Ord Minnett
CIM	Cimic Group	Upgrade to Outperform from Neutral	Credit Suisse
CPU	Computershare	Upgrade to Outperform from Neutral	Credit Suisse
CRN	Coronado Global Resources	Upgrade to Outperform from Neutral	Macquarie
CWN	Crown Resorts	Downgrade to Neutral from Outperform	Credit Suisse
EVN	Evolution Mining	Upgrade to Outperform from Neutral	Credit Suisse
IMD	Imdex	Upgrade to Buy from Neutral	UBS
OSH	Oil Search	Upgrade to Neutral from Underperform	Credit Suisse
RHC	Ramsay Health Care	Upgrade to Buy from Accumulate	Ord Minnett
STO	Santos	Upgrade to Buy from Accumulate	Ord Minnett
WSA	Western Areas	Upgrade to Outperform from Neutral	Macquarie
		Downgrade to Underperform from Neutral	Credit Suisse

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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