Market Wraps

Morning Wrap: Wall St gives back gains, Fortescue goes ex-dividend, ASX to fall

Mon 05 Sep 22, 8:35am (AEDT)

ASX Futures (SPI 200) imply the ASX 200 will open 16 points lower, down -0.24%.

Wall St fails to hold onto early gains, US job growth was solid in August, China has 33 cities under partial or full lockdowns and Fortescue goes ex-dividend on Monday.

Let’s dive in.

Overnight Summary

Mon 05 Sep 22, 8:35am (AEDT)

Name Value Chg %
Major Indices
S&P 500 3,924 -1.07%
Dow Jones 31,318 -1.07%
NASDAQ Comp 11,631 -1.31%
Russell 2000 1,810 -0.72%
Country Indices
Canada 19,271 +0.67%
China 3,186 +0.05%
Germany 13,050 +3.33%
Hong Kong 19,452 -0.74%
India 58,803 +0.06%
Japan 27,651 -0.04%
United Kingdom 7,281 +1.86%
Name Value Chg %
Commodities (USD)
Gold 1,722.10 -0.03%
Iron Ore 95.55 -
Copper 3.386 -0.81%
WTI Oil 87.31 +0.51%
Currency
AUD/USD 0.6786 +0.01%
Cryptocurrency
Bitcoin (AUD) 29,243 -0.32%
Ethereum (AUD) 2,310 +0.18%
Miscellaneous
US 10 Yr T-bond 3.193 -2.21%
VIX 25 -0.35%

MARKETS

The likelihood of revisiting June lows continues to increase as US markets fade another positive open. Session highs include:

  • S&P 500 +1.3%

  • Dow Jones +1.17%

  • Nasdaq +1.36%

2022 is on pace to be the most bearish year in the history of the US AAII Investor Sentiment Survey, with bearish sentiment sitting at 45.9% compared to GFC levels of 45.2.

JP Morgan is waiting for "one of those 'flush days' where you have VIX spike to the 40-50 range, the market falls ~4% and you begin getting calls from relatives about which assets to sell," which it expects to provide a more 'comfortable' buying opportunity.

It's going to be a rather big week for economic news including an RBA rate decision on Tuesday, Eurozone rate decision on Thursday and several Fed speeches.

  • 10 out of 11 US sectors declined

  • Energy was the only green sector

  • Defensive sectors including Real Estate, Health Care and Stales led to the downside

  • 58% of US stocks declined

  • 64% of US stocks trade below their 200-day moving average (61% last Monday, 56% a week ago)

STOCKS

The forward 12-month P/E ratio for the S&P 500 is 16.7 - below the 5-year average (18.6) and below the 10-year average (17.0), according to FactSet. 

  • Lululemon (+6.7%) shares fell from session highs of 11.95% after smashing analyst expectations for the second quarter

    • Lululemon CEO: “We've been looking closely at our guest data and metrics to identify any shifts in spending patterns, behaviours or habits. And to date I am pleased to share that we are not seeing any meaningful variation in cohort behaviour or the metrics we track."

  • Broadcom (+1.7%) shares fell from session highs of 5.3% after posting better-than-expected earnings for the quarter and issued a strong guidance

  • Amazon (-0.2%) has abandoned 42 planned facilities around the US to cut costs

    • MWPVL estimates the company has either shuttered or killed plans to open 42 facilities totaling 25m square feet of usable space 

Other things of interest:

  • Hewlett Packard said “What we have seen during the quarter is a slowdown of consumer demand that really accelerated as the quarter progressed. We also have started to see some signs of slowing down in the commercial space.”

  • Bed Bath & Beyond's CFO passed away after jumping from New York’s Jenga Tower. This was two days after the firm announced plans to lay off 20% of staff and close 150 stores 

  ECONOMY

  • Germany’s trade surplus narrowed in July as exports fell at a faster pace than imports

    • Exports fell -2.1% month-on-month while imports fell -1.5%

    • Germany’s trade surplus has been shrinking at a rapid pace as a bleak macroeconomic environment weighs on the country’s dominant manufacturing sector

  • US non-farm payrolls rose 315,000 in August

    • Consensus expected a gain of approximately 300,000

    • “More runway for a soft landing,” says JPMorgan’s David Kelly. “We could just get away with this … Overall, this is very good news.” 

  • US unemployment rose to 3.7% in August from 3.5% in July

    • In-line with consensus expectations

    • The rise was mainly due to a jump in the labour force participation rate from 62.1% to 62.4% - tied for the highest level this year

  • US average hourly earnings rose 5.2% year-on-year in August

    • Consensus expected a gain of 5.1%

  • China’s major container port of Yangshan in Shanghai has suspended terminal operations as Typhoon Hinnamnor approaches the east China coast, according to state-affiliated media

    • The super typhoon has caused over 50 international flights and vessels to cancel or change their entry or exit plans at surrounding ports in Shanghai 

  • China has 33 cities under partial or full lockdowns, affecting more than 65m residents, according to Caixin 

  • Zambia received a $1.3bn IMF bailout after defaulting on its $750m euro bond

    • Zambia is the first African country to default on its debt in the COVID-19 era

    • The country still has a $1bn euro bond due in 2024 and another $1.25bn euros due in 2027

COMMODITIES

  • Iron ore futures fell -1.1% to US$95.4 a tonne and down -9.5% in the past week

    • “[Steel] spot prices stopped falling and stabilising in August, downstream demand recovered slightly,” according to the Shanghai Metals Market.

    • “However, in late August, steel mills intentionally controlled the output … On the demand side, the orders may increase amid the expectation of the traditional peak season.” 

  • Oil prices snapped a three-day losing streak but down -7.3% in the past week

    • Brent crude closed the session 1.25% higher at US$93.3 a barrel, down from session highs of 3.4%

    • “The rebound comes as nuclear talks between Iran and the US appear to have stalled, with the former claiming they had sent a “constructive” response to proposals and the latter quickly deeming them “not constructive”,” said Oanda senior market analyst, Craig Erlam

  • Gold managed to hold the US$1,700 level 

US Sectors

Mon 05 Sep 22, 8:35am (AEDT)

Sector Chg %
Energy +1.81%
Materials -0.09%
Financials -0.83%
Consumer Discretionary -0.84%
Industrials -0.99%
Utilities -1.07%
Information Technology -1.29%
Consumer Staples -1.39%
Health Care -1.44%
Real Estate -1.68%
Communication Services -1.86%

Industry ETFs

Mon 05 Sep 22, 8:35am (AEDT)

Description Last Chg %
Commodities
Copper Miners 28.71 +1.18%
Silver 16.38 +1.16%
Nickel 27.0406 +0.95%
Gold 157.87 +0.88%
Steel 51.31 +0.49%
Strategic Metals 92.35 +0.13%
Aluminum 51.9048 -0.19%
Uranium 22.27 -0.40%
Lithium & Battery Tech 72.28 -0.77%
Industrials
Global Jets 17.06 -0.23%
Aerospace & Defense 100.55 -0.42%
Healthcare
Cannabis 16.21 -0.53%
Biotechnology 123.22 -1.65%
Description Last Chg %
Cryptocurrency
Bitcoin 12.15 +0.25%
Renewables
CleanTech 16.0569 -1.10%
Solar 82.79 -2.36%
Hydrogen 14.17 -3.39%
Technology
Cybersecurity 25.72 +0.08%
Sports Betting/Gaming 14.82 -0.74%
E-commerce 17.47 -0.97%
Robotics & AI 20.14 -0.99%
Electric Vehicles 23.02 -1.09%
Semiconductor 362.83 -1.10%
Cloud Computing 16.62 -1.20%
Video Games/eSports 46.26 -1.36%
FinTech 23.25 -1.38%

ASX Morning Brief

The market is in quite a dire place. The constructive pullback we've been looking for after a powerful breadth thrust and rally between July and August has failed to eventuate.

Instead, we're seeing the market slice through key areas, aggressive intraday selling and high volatility.

Hydrogen rolling over: It's not a good look when one of the best performing ETFs we track starts to roll over.

Global X hydrogen ETF
Global X Hydrogen ETF (Source: TradingView, Annotations by Market Index)

Likewise with Solar: The Invesco Solar ETF was another major winner after the 'US Inflation Reduction Act' was signed into law. Now, it's gone full circle and at risk of closing the gap.

Invessco Solar ETF
Invesco Solar ETF (Source: TradingView)

Lockdowns and iron ore: Investors will keep a close eye on China's lockdowns and the wrath of economic data due this week that could confirm the trend of sluggish economic activity. Things are looking pretty ugly from a technical perspective, as a name like Rio Tinto (ASX: RIO) breaks its 2-month range. Fortescue (ASX: FMG) is also going ex-dividend on Monday for $1.21. Based on its last close of $17.20, this represents a yield of 7.03%.

Rio price chart
Rio Tinto price chart (Source: TradingView, Annotations by Market Index)

Key Events

Stocks going ex-dividend:

  • Mon: ADH, AFG, ALU, BEN, CTD, FMG, GOR, ILU, KSL, MAD, MCP, NHF, ORA, RHC, SNZ, SSG, YAL

  • Tue: BSL, CSL, CUV, EFN, LGL, NST, ORG, SHL, SUL, VEE

  • Wed: AMC, ASB, AUB, AVJ, BXB, CVW, HLS, IEL, IFL, MEZ, MPL, PAC, PBP, SEK, UNI, VEA 

  • Thu: APM, ASX, BLX, CEN, CLX, EBO, EHL, GEM, GLB, LBL, MHJ, MND, MVF, OCL, PME, PPT, PWR, RMC, RWC, SFC, SIQ, SKT, SRG, WDS

  • Fri: ALI, AMO, NEC, NTD, SEQ, WTC

ASX corporate actions occurring today:

  • Dividends paid: RDY

  • Listing: None

  • Issued shares: AGE, ALL, CAU, CNJ, CTQ, DC2, DGL, ELT, EMH, FPH, HHR, HPI, JLG, KLS, MAT, MFG, MGF, MGX, MP1, MRI, NAB, NBI, ORI, PPE, RAD, RUL, T3D, TTT, VUK

Other things of interest (AEST): 

  • Australia Retail Sales July at 11:30 am

  • China Caixin Services PMI August at 11:45 am

  • Eurozone Retail Sales July at 7:00 pm

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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