Daily Market Reports | Feb 06 2024
This story features AMCOR PLC, and other companies.
For more info SHARE ANALYSIS: AMC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
| World Overnight | |||
| SPI Overnight | 7554.00 | – 33.00 | – 0.43% |
| S&P ASX 200 | 7625.90 | – 73.50 | – 0.95% |
| S&P500 | 4942.81 | – 15.80 | – 0.32% |
| Nasdaq Comp | 15597.68 | – 31.28 | – 0.20% |
| DJIA | 38380.12 | – 274.30 | – 0.71% |
| S&P500 VIX | 13.67 | – 0.18 | – 1.30% |
| US 10-year yield | 4.16 | + 0.13 | 3.25% |
| USD Index | 104.50 | + 0.58 | 0.56% |
| FTSE100 | 7612.86 | – 2.68 | – 0.04% |
| DAX30 | 16904.06 | – 14.15 | – 0.08% |
By Greg Peel
Whiplash
Up, down, up, down, up, down. Has the local market lost its mind? It is typical to see consolidation around a new high, but not with extremes of volatility. What, fundamentally, has changed over the past five sessions?
Yesterday, there were two main drivers of weakness – the US dollar and Aussie bond yields. The local bond market has been almost as crazy as the stock market, with the ten-year yesterday jumping 12 points to 4.09%. That’s ahead of today’s RBA, at which the cash rate will be kept on hold.
The US dollar has surged these past couple of sessions on a jump in US yields, driven by Powell’s push-back against a March rate cut and strong US jobs data. That has impacted commodity prices, which are already vulnerable due to China’s perilous economic state.
Materials led the market down yesterday with a -2.7% plunge. Gold miners were hit particularly hard. Energy fell -1.1% and utilities -1.5%.
Real estate has been one of the most volatile sectors of late, uncharacteristically for what should be boring yield plodders. It fell -0.8% yesterday on bond yields.
The consumer sectors suffered a similar fate, with discretionary down -0.9% and staples -1.0%.
Communication services, industrials and tech all saw falls. The banks fell as well, but only by -0.2%, which in the context was a good result, while healthcare was the only sector to close in the green (+0.1%).
Today is shaping up as the first session in many in which the ASX200 might string two sessions together in the same direction. And one in which the index is following Wall Street and not belying it. The futures are down -33 points this morning.
The RBA decision will come out this afternoon, along with a press conference from Michele Bullock, and a Statement on Monetary Policy, as the RBA shifts to being a Fed mini-me. Note also that if you wish to be RBA governor one day, you’re only allowed one “l” in your name (ask Philip, or Michele).
The SoMP will provide what we might call the RBA’s version of the Fed “dot plots”, being projections for rates, inflation, unemployment etc ahead. We’ll also get to see how many dissenters there are among the ranks (but not who they are).
This will all need to be absorbed after 2.30pm today.
Ahead of the RBA we’ll see data on December quarter retail sales volumes. These will inform just how weak the Australian consumer was over the traditional retail bonanza quarter, without the noise of inflation.
Acrophobia
On Friday night Wall Street cheered a strong jobs number, which suggests a strong economy, and ignored a jump in bond yields. Last night brought a strong services PMI number, bond yields jumped again, but this time Wall Street was more cautious.
The US services PMI rose to 53.4 in January from 50.5, when 52.0 was expected. The US ten-year yield jumped another 13 points.
Commentators have pointed to a (US) 60 Minutes interview with Jerome Powell on Sunday night as having an impact on sentiment. In it he said the Fed will probably cut rates three times this year but it’s unlikely to be be as early as the next meeting in March.
Which is exactly what he said following last week’s Fed meeting, so nothing new there. March is now considered a low probability for a cut, but the market is still pricing in at least four cuts this year, Previously, six were expected.
The Dow was down over -400 points last night, driven by weakness in McDonalds on its earnings result, and Boeing on ever more issues with its planes. The loss was reduced by the close.
The S&P500 was mildly lower, and seems to be balking at a move through the psychological 5000 level. It’s scary up there.
We’re now about halfway through the US corporate earnings result season, and, as usual, beats have exceeded expectations. Misses have been heavily punished. Most of the big names are first-half reporters, and there’s only one Mag7 stock yet to come, being Nvidia. Of the six reporting to date, only Tesla has missed, but result responses have varied.
It’s a quiet week economically in the US, before next week when the January CPI is released.
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 2025.00 | – 14.70 | – 0.72% |
| Silver (oz) | 22.26 | – 0.39 | – 1.72% |
| Copper (lb) | 3.77 | – 0.04 | – 1.12% |
| Aluminium (lb) | 0.99 | – 0.01 | – 1.48% |
| Nickel (lb) | 7.18 | – 0.13 | – 1.82% |
| Zinc (lb) | 1.09 | – 0.01 | – 1.22% |
| West Texas Crude | 72.75 | + 0.47 | 0.65% |
| Brent Crude | 78.01 | + 0.68 | 0.88% |
| Iron Ore (t) | 128.94 | + 0.31 | 0.24% |
The bounce-back in US yields has pushed the US dollar index sharply higher, and that is weighing on commodity prices.
The previously announced cut to the reserve requirement ratio (RRR) for Chinese banks came into effect yesterday. Didn’t help.
The Aussie is back to plumbing the depths thanks to the greenback. It’s down -0.5% at US$0.6483.
Today
The SPI Overnight closed down -33 points or -0.4%.
RBA and December quarter retail volumes today.
Amcor ((AMC)) and Region Group ((RGN)) are among those reporting earnings today.
The Australian share market over the past thirty days…
| Index | 05 Feb 2024 | Week To Date | Month To Date (Feb) | Quarter To Date (Jan-Mar) | Year To Date (2024) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 7625.90 | -0.95% | -0.71% | 0.46% | 0.46% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AGL | AGL Energy | Downgrade to Neutral from Outperform | Macquarie |
| BBT | BlueBet Holdings | Downgrade to Speculative Buy from Add | Morgans |
| IGO | IGO | Downgrade to Neutral from Buy | UBS |
| IMD | Imdex | Downgrade to Sell from Hold | Bell Potter |
| NUF | Nufarm | Downgrade to Neutral from Outperform | Macquarie |
| SYA | Sayona Mining | Downgrade to Neutral from Outperform | Macquarie |
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CHARTS
For more info SHARE ANALYSIS: AMC - AMCOR PLC
For more info SHARE ANALYSIS: RGN - REGION GROUP