Breakfast Briefing – Fri 28 Jan

A tech stock sell-off in the US as the Dow closes down seven points. SPI Futures pointing towards a positive open up 101 points. Catch up on the latest news with Henry's Breakfast Briefing.

• ASX 200 SPI Futures up 101.
• US markets volatile again. Dow closes down 0.02% 
• Nasdaq down 1.4%. Apple beats forecasts after hours.
• Oil down 0.7%. Gold off 2% as USD rises.
• Commodities slightly weaker. RMD results Q4.

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Transcript

*PLEASE NOTE: Transcripts are autogenerated and may contain errors.

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SUMMARY KEYWORDS

POINT, MARKET, RBA, BHP, INFLATION, PERCENT, MARCUS, BRIEFING, NIGHT, STOCKS, BIG, PRICE, SLIGHTLY, VOLATILITY, WEEK, FELL, FOURTH QUARTER, SWINGS, ROBIN HOOD, S&P

SPEAKERS

Henry Jennings

Henry Jennings  00:09

Good morning and welcome to the Marcus today Breakfast Briefing. My name is Henry Jennings. It is Friday the 28th of January. And as usual with all the information contained in this briefing, it is general advice only. So please do your own research. Contact your own financial advisor regarding any other thoughts, ideas or insights in this briefing. If you need to, you can always pause the PowerPoint slide here and read our disclaimer in full or you can head on over to the marcustoday.com.au website and read the disclaimer there. If you're not yet a member of Marcus Today, as well, you can always sign up there too, for a 14 day free trial. 

Henry Jennings  00:46

All right, well, another roller coaster ride in the US markets and a roller coaster ride in store for us today on the SPI futures and we'll get to that but the Dow Jones closed at the end of the day down seven points, or 0.02% anyone but think nothing happened last night. But we did have the Dow at one stage down 160. And at one stage the Dow was up 605. So make of that what you will but volatility to the max in the US currently. And we are seeing that those big swings on a daily basis the NASDAQ faring worse down 1.4% 189 points 13,353 Tesla, certainly not helping that situation after the conference call with Elon Musk, that stock falling heavily S&P 500 down half a percent so in the middle for diddle down 23 points or 4327. 

Henry Jennings  01:42

Interestingly though, throughout those all this volatility, the VIX index itself was actually down 3.57% or 1.2 31. So despite the volatility in the market, these massive intraday swings, we saw GDP out in the US last night. We are seeing that VIX index, under a smidge of pressure. 

Henry Jennings  02:03

Against all this we have SPI futures showing 101 We'll call that a Dalmatian at 1.5% 6810. So we did have a big sell off yesterday, after we had a 200 points swing from high to low in the market. So a big big move yesterday. Big big volume as well in the market, adding to the volatility as far as commodities go overnight. We did see Brent crude down slightly down point six 9% 6962 cents to 8934 WTI down 74 cents or 0.85% to 8661 does seem to be a smuggling of a Thor in the US Russia relations over Ukraine, but it is only a smuggling. Luckily, the Germans have decided throughout all this that they would send 5000 helmets to the Ukraine and no sign of any weapons. But at least they've sent helmets, which is something and Anthony Blinken continues to say that Europe is united in their stance against Russia. I don't seem to be very united given that the Germans do rely on 33% of their fuel comes from Russia. 

Henry Jennings  03:11

But anyway Be that as it may gold back into its trading range. There we go down 2% $36 6017 93.1 This is as the US dollar rises on the back of the Federal Reserve comments from Jerome Powell the other day, and the four or maybe even five rate rises in 2022. So the US dollar pushing higher iron ore up slightly 0.47% 65 cents to 138 75. We are obviously going into Chinese Lunar New Year next week, so markets will be on holiday in terms of the iron ore price for a little while. So that should cold in relatively stable in terms of the price.

Henry Jennings  03:54

Anyway, the Aussie dollar 70.28 In other commodities last night, still relatively benign and holding up relatively well. All things considered LME copper was down 1.9% nickel was down 1.7% Pretty much ordinary kind of knights and moves there and Aluminium 0.06 zinc up point seven, lead down one and Tin down 1.5% As far as mining stocks go though, Freeport McMoRan were down 3.5% Alcoa down 4.5% tech up, rather down 1.9 Anglo up 1.1 Glencore up one volley up 0.6, and Albemarle which is the biggest lithium stock in the world was pretty much unchanged. 

Henry Jennings  04:40

And interestingly last night, the footsie and we did have a question about the footsie on the Facebook discussion group. Why was it doing so? Well? It was at 1.1% last night, primarily. The reason is it has been an absolute dog recently, in recent times has been a serial underperform but it also is very much skewed to the mining and oil and gas industry. So that explains why that is holding up well hasn't really helped our market of course, which is very much skewed to the oil, gas and resources industry, we still have seen their index come back from 7600 to 6800. So that is a pretty big move 800 points over 10% in my book is a pretty nasty crash type scenario. I don't know what would constitute a crash, but it may not be a one day wonder 10% But it certainly has been over the period of a couple of weeks. 

Henry Jennings  05:34

As far as the US goes, here's the chart of the S&P tried hard to rally fell over, but at least it was off its lows towards the close. We also had Apple results after hours, and that has beaten on all expectations. So that is a positive for the market. I think the stocks up around 3% On the back of that so that will certainly push some optimism back into the US market. On the other side of the equation though Robin Hood has fallen quite heavily after hours on the back of their results. I haven't seen the update yet, but it is down. And we do know what happened to Robin Hood he might have been doing good and spreading the wealth from the evil to the poor, and the rich to the poor. But at the end of the day, he did come to a bit of a sticky end. 

Henry Jennings  06:25

Major stories last night stocks drop in roller coaster ride for Wall Street while we did see the Dow at least pull its head above water flatline for a little while before closing down seven points. The US economy though grew at 6.9% in the fourth quarter that was above forecast 6.9% GDP growth and 7% inflation there's a certain near symmetry about those two numbers. market pricing now five fed hikes this year and it's driving bonds and stocks lower and spurs the rally in that US dollar which is hurting the gold price at the moment but in Aussie dollar terms it won't be hurting it quite so much. 

Henry Jennings  07:06

Strong tech results easing broader concerns those Apple numbers certainly will be helping sentiment in the market. And we may see yet another volatile day on Friday but certainly it has perked up SPI futures which are up 101 points and more aggressive bets that the Bank of England will hike next week. priced in by markets following the Feds hawkish tilt towards the RBA meeting will be very shortly as well and all eyes will be on the RBA to see how they managed to do the backflip with pike and the degree of difficulty they cop. 

Henry Jennings  07:37

The poll expects the RBA to scrap Q E on February the first and wait until rate hikes in November. Well, we'll see about that. But certainly inflation here at three and a half percent may prompt the RBA to start sending some signals earlier. Remember the RBA has three main weapons three main mandates, that is to keep unemployment as low as possible to keep growth as high as possible. And to keep inflation in the two to 3% band are currently three and a half percent is the rate of inflation so slightly above that band, but it has said in the past that is happy to run the economy hot given that the inflation rate was way below the two to 3% band for so long. In the average long term, then that three and a half percent may be a bit more sustainable than certainly the a US 7% and even yesterday we saw New Zealand with a 5.9% read on their inflation rate which was the highest in 31 years. So it'll be interesting RBA time.

Henry Jennings  08:42

And the BOC the Bank of China's hawkish hold puts its credibility on the line amid inflationary pressures and hot housing market. The US has sent a written response to Russia's demand old school no longer by Twitter, or by an Instagram post of Putin. They are now sending real letters very old school from Joe Biden. But it is still favouring a diplomatic path forward and the Chinese authorities are considering a proposal to dismantle Evergrande or never grand by studying the bulk of its assets and industrial product profits in China grew at the slowest pace for more than a year and a half, strengthening the case for the PBOC support. Interestingly, at the moment it was we're seeing the US talking rate rises and that coming to pass we're also seeing China cutting rates and stimulating their economy. Plenty more on that on in Henry's Take today. And Madonna has begun clinical trials of its Omicron specific COVID vaccine. 

Henry Jennings  09:41

What's on today plenty happening as usual. We've got fourth quarter PPI here we've got New Zealand January consumer confidence wasn't good Chinese Keishon and manufacturing PMI for December and the Japanese January CPI US GDP 6.9% Let that sink in a little 6.9% inflation at 7% interest rates at point one of a percent spot the odd man out there Tesla down 11.6% after their conference call with Elon Musk a number of new models have been put on hold due to the chip shortage concentrating on other things now the reasonably priced Tesla the lowest price Tesla what they were going to call model two has now been put on hold probably won't be seen that in Australia for some years to come even after it comes out elsewhere. 

Henry Jennings  10:33

Apple was down 0.3 of a percent in normal trade but the results after hours did beat expectations and so far is up around 3% Amazon up 0.6 Netflix up 7.5% for Netflix US banks slightly easier but nothing too dramatic JP Morgan down 1.8 Citigroup down 0.9 Goldman down 0.5 Bank of America down 0.9 Wells Fargo down 0.7 Berkshire down 0.5 and block the artist formerly known as square and afterpay of course folded very much putting the word into the block was down 4.8%. So that one really is struggling resume has posted a 12% rise in net profits in the fourth quarter. Gross Margin though fell 2.3% of 57.6. But it does look quite a positive read there. The other thing about Tesla which was interesting going back slightly is that is now prioritising its humanoid robot, which is an interesting move from Elon.

Henry Jennings  11:41

 BP BHP rather was up 2.1% In ADR terms still looks as if there's a lot of index reweighting going on at the moment with that big jump in the weighting of BHP following the jewel listed structure collapse, which will be effective next week. Marcus has a big article today on the BHP dualist structure and what it means for BHP share health holders and the Woodside deal of course, RIO at 1.4% in the US and Morgan Stanley says BHP could get around 4 billion for m&a activity is inflation for you, Sinhala S M one has lifted its milk price forecast 15.6% due to inflationary pressures, and Santos the CEO Kevin Gallagher says they are moving quickly on a sell down of png LNG to totaal. Soon it could raise 2.3 Billion US according to some analysts and the early funds co founder David Cooper, may be in line for the Magellan CEO role, which certainly would bring some stability to that fund manager which surprisingly has held up relatively well compared to others it did literally yesterday, as if there was a switch between Magellan and GQ G which

Henry Jennings  12:55

toppled over. And finally, the city says the vifor deal will increase EPS by 2% for CSL 

Henry Jennings  13:06

Question of the day today, what is the sign for you that the market has bottomed? We've spent a lot of time last year talking about signs that the market has topped. And there's plenty more in Henry's tape today about creating invisible friends when you've got no more hard assets to buy. But what is the sign for you that the market has bottomed? 

Henry Jennings  13:27

That's it for me today. Thanks very much for listening. You can head on over to the Facebook discussion group. It's a fantastic group great ideas and great contributions. members helping members is the motto. You can also subscribe to any one of the four or all of the four Marcus Today podcasts either Marcus Strategy On The Desk podcast, this podcast with Breakfast Briefing at the End Of Day am I On The Couch podcast and this week I caught up with Nick Gryphon, and James sunniness from Monroe partners talking about decarbonisation, and the opportunities that presents for investors and also, let's face it, what the hell is going on in the markets at the moment. 

Henry Jennings  14:03

That's it for me today. It's Friday