Daily Market Reports | Sep 14 2022
This story features RAMSAY HEALTH CARE LIMITED, and other companies.
For more info SHARE ANALYSIS: RHC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 6850.00 | – 159.00 | – 2.27% |
| S&P ASX 200 | 7009.70 | + 45.20 | 0.65% |
| S&P500 | 3932.69 | – 177.72 | – 4.32% |
| Nasdaq Comp | 11633.57 | – 632.84 | – 5.16% |
| DJIA | 31104.97 | – 1276.37 | – 3.94% |
| S&P500 VIX | 27.27 | + 3.40 | 14.24% |
| US 10-year yield | 3.42 | + 0.06 | 1.78% |
| USD Index | 109.94 | + 1.65 | 1.52% |
| FTSE100 | 7385.86 | – 87.17 | – 1.17% |
| DAX30 | 13188.95 | – 213.32 | – 1.59% |
By Greg Peel
Oh Well
The ASX200 made two attempts yesterday to crack the 7000 mark before finally winning at the close. This set the market up for a solid technical kick-on were Wall Street to react positively overnight to US inflation data.
The futures closed down -159 points this morning.
Yesterday’s rally was driven by the banks (+0.9%), with materials having a quieter session (+0.5%). All sectors closed in the green bar two, with cyclicals the best performers.
The losers were healthcare (-0.8%) after KKR walked away from its Ramsay Health Care ((RHC)) takeover plans, sending that stock down -10.4%, and technology (-0.3%), on expectations Dye & Durham will also walk away from its takeover offer for Link Administration ((LNK)) due to UK legal issues, sending that stock down -20.1%.
No point in expanding further.
In economic news, the NAB business confidence survey for August showed business conditions and confidence continue to tick up further into above average levels, with the conditions index rising 1 point to +20 and confidence 3 points to +10.
Westpac jumped the gun and released its September consumer confidence survey yesterday, when it’s typically on the Wednesday. The confidence index improved to 84.4 from 81.2 which the Westpac chief economist called “a little surprising” given the cost of living, but as this is a 100-neutral index, consumers remain pessimistic.
The Aussie dollar has plunged -2.2% overnight, which only serves to fuel domestic inflation – higher cost of imported goods. Commodity prices, other than gold, held up remarkably well given the surge in the US dollar.
The good news is the ASX200 rallied 280 points from last Thursday to yesterday so there is a buffer against today’s inevitable drop. But sentiment has taken a hit.
Not what the doctor ordered
The US headline CPI rose 0.1% month on month to August when economists had forecast a -0.1% fall. The annual rate ticked down only to 8.3% from 8.5% in July.
The core rate rose 0.6% when economists had forecast a 0.3% gain. The annual rate rose to 6.3% from 5.9%.
If there was any doubt the Fed would hike by 75 points next week there no longer is. Indeed, there is talk of 100, or at least of 75 being followed by another 75 in October.
Don’t fight the Fed.
Wall Street had become optimistic on the inflation front as oil prices fell – down -10.6% from July. But the stickier elements of inflation are causing the pain.
Food prices were expected to come down on falls in raw products (and fuel costs), but grocery prices actually rose in August and are up 13.5% year on year – the biggest rise since the 1979 oil shock. Maybe tonight’s PPI will confirm lower raw product prices, suggesting grocery prices will fall on a lag.
Rents/housing rose 0.7% in the month to be up 6.3% year on year – the biggest gain since 1990. Healthcare was up 5.3% year on year – 1993.
Indeed, the price of everything in the CPI basket rose last month, the only exceptions being used car prices and airfares. But these are only small percentages of the overall calculation. Rents are one third.
While the subsequent plunge on Wall Street was not unexpected, rumour has it institutions had taken a big bet on lower inflation in August by buying leveraged call options, which had to be quickly sold (or abandoned, leaving the call sellers to quickly sell their long-stock hedges). This apparently exacerbated the falls, which at the index levels were the biggest on the day since June 2020, and close to March 2020.
Further exacerbating the rout was the fact the Big Tech names were among the worst performers. Apple, for example, rose over 3% on Monday night on strong iPhone 14 pre-orders, and fell almost -6% last night.
That impact is evident in the full -5%-plus fall for the Nasdaq.
The US ten-year yield rose 6 points to 3.42%, but the two-year rose 14 points to 3.75%. The inversion gap had been quietly reducing lately but has blown out once more.
The US dollar had also been pulling back from 20-year highs, but last night shot up 1.5% on expectations the Fed will go harder and faster on rate hikes, just as they have been saying they will.
The good news, a la Australia, is that the S&P500 has not fallen by as much as the four-day rally to last night, and remains above the critical technical level of 3900.
For now. Sentiment has been improving on Wall Street but has now been shattered. Talk of retesting the June low had been fading, but is back in earnest.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1701.90 | – 22.50 | – 1.30% |
| Silver (oz) | 19.31 | – 0.45 | – 2.28% |
| Copper (lb) | 3.67 | + 0.03 | 0.95% |
| Aluminium (lb) | 1.14 | + 0.00 | 0.08% |
| Lead (lb) | 0.88 | + 0.00 | 0.19% |
| Nickel (lb) | 10.97 | + 0.13 | 1.19% |
| Zinc (lb) | 1.49 | + 0.02 | 1.54% |
| West Texas Crude | 87.31 | – 0.47 | – 0.54% |
| Brent Crude | 93.49 | – 0.74 | – 0.79% |
| Iron Ore (t) | 102.13 | + 0.52 | 0.51% |
As noted, commodity prices have held up well in the face of a surging US dollar, but if inflation is going to linger, commodities are a hedge (until demand retreats).
Note the LME has elected not to close on Monday night for the funeral.
Gold was hit by the US dollar/bond yield combo.
The Aussie is down -2.2% at US$0.6737.
Today
The SPI Overnight closed down -159 points or -2.3%.
US August wholesale inflation numbers are out tonight. Can they provide any relief?
The UK releases August CPI and PPI data tonight.
Breville Group ((BRG)), Costa Group ((CGC)) and Lovisa Holdings ((LOV)) are among today’s stocks going ex. Not that you’ll notice.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AKE | Allkem | Downgrade to Hold from Add | Morgans |
| PDL | Pendal Group | Downgrade to Accumulate from Buy | Ord Minnett |
| S32 | South32 | Downgrade to Neutral from Buy | Citi |
| WTC | WiseTech Global | Upgrade to Neutral from Underperform | Macquarie |
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: BRG - BREVILLE GROUP LIMITED
For more info SHARE ANALYSIS: LOV - LOVISA HOLDINGS LIMITED
For more info SHARE ANALYSIS: RHC - RAMSAY HEALTH CARE LIMITED