Tesla closes below 600 for the first time since December


The Dow was up 238 points or 0.8 per cent; the S & P 500 was up 0.7 per cent to 3915.59.S & P 500 companies were now on track to post earnings growth for the fourth quarter as opposed to a prior forecast of decline, according to Refinitiv IBES data.LPL Financial lifted its our year-end 2021 fair value target range for the S & P 500 to 4050–4100 (4–6pc above the February 5 close). “The new target range is based on a price-to-earnings ratio of just below 21 times our 2022 earnings per share forecast of $US195.”Also bolstering sentiment in the US, a widening vaccination effort there. The US CDC said more than 41.2 million vaccine doses had been given by Sunday morning (Monday AEDT).“We continue to view the higher conversion of shots into arms as a sign that vaccine logistics are improving,” Morgan Stanley said in a note.The firm said that its virus modelling showed that the pandemic was contracting in 46 US states and that hospitalisations have reached a near-term peak for the first time since October, suggesting the holiday surges were abating.As for the President Joe Biden’s call for $US1.9 trillion in more virus spending, it continues to move forward.Todays agendaAdvertisementLocal: NAB January business conditions and confidenceThe Australian Financial Review has compiled all of the reporting dates for companies reporting in the interim financial 2021 earnings season. Click here for our calendar.No overseas dataMarket highlightsASX futures down 14 points or 0.2% to 6796 near 8am AEDTAUD +0.3% to 77.02 US cents (Peak 77.15)On Wall St: Dow +0.8% S & P 500 +0.7% Nasdaq +1%In New York: BHP +2.8% Rio +2.3% Atlassian +0.2%Tesla +1.3% Amazon -0.9% Facebook -0.6%GameStop -5.9% to $US60.00In Europe: Stoxx 50 +0.3% FTSE +0.5% CAC +0.5% DAX +0.02%Spot gold +1.2% to $US1835.98/oz at 12.25pm New York timeBrent crude +2.1% to $US60.58 a barrelUS oil +2.2% to $US58.08 a barrelIron ore +2.2% to $US160.50 a tonne2-year yield: US 0.11% Australia 0.10%5-year yield: US 0.48% Australia 0.44%10-year yield: US 1.17% Australia 1.26% Germany -0.45%US prices near 4.45pm in New YorkFrom todays Financial ReviewWA surplus pumped up by iron ore: Booming iron ore prices driven by Chinese demand will boost Western Australia’s budget coffers by $2.3 billion over the next four years, making WA Premier Mark McGowan one of the few cashed-up leaders on the planet.AdvertisementChanticleer: Super’s green push lures MSCI: The inexorable rise of Australia’s super sector is a big reason MSCI is making this only the second market where it will launch domestic share indexes.United StatesTrump impeachment: Evidence against Trump overwhelming: DemocratsBank of America sees bullishness and risk: “Although the put/call ratios remained complacent on the late January dip, the three-month VIX relative to the VIX generated an oversold fearful reading below 1.0 on 1/27/2021 and seven days later on 2/5/2021 moved to an overbought complacency level above 1.25.“This was the quickest move from tactical fear to complacency since a 10-day move in December 2015 and the first overbought on the three-month VIX vs VIX since late August, which was just before the weak seasonal period for the SPX in September and October. The current complacent overbought occurs with the risk of weaker February seasonality.”Morgan Stanley recommends an Alpha fix: ”The wild price swings of the past month are a function of two things in our view: 1) excess leverage in the financial system and 2) the market contemplating the transition of the economy from early to mid cycle as the reopening draws near.“The good news is that VAR (risk) shocks that happen when growth is accelerating (i.e. Mfg PMI greater than 52) tend to resolve quickly. The bad news is that they may become more frequent until leverage is reduced further and rates have adjusted higher. This fits our current market narrative quite well--modest returns at the index level (S & P 500) with much more opportunity for the average stock, particularly those with the greatest operating leverage to a recovering economy. In short, 2021 should be more about alpha than beta.”AdvertisementEuropeEuropean shares rose on Monday, led by economically sensitive cyclical sectors, as sentiment was lifted by hopes of a quicker recovery and multi-billion dollar deals in the region.The pan-European STOXX 600 index rose 0.3pc adding to gains of 3.5pc in the previous week.Dialog Semiconductor surged 16pc to its highest in over two decades and topped the STOXX 600 after Japanese chipmaker Renesas Electronics agreed to buy the Frankfurt-listed chip designer for €4.9 billion in cash.“There are many other European shares which had fallen out of favour for international investors and this (the deal) indicates that global investors particularly American, Japanese or Chinese investors are looking to invest in such names,” said Chris Bailey, European strategist at Raymond James.France’s Veolia Environnement said it is launching an offer for all of waste and water management company Suez, valuing it €11.3 billion after dropping efforts to win the backing of the Suez board.The French firms closed lower as new legal hurdles awaited the deal and amid a government warning of an increasingly hostile takeover battle.Cyclical sectors including basic resources, banks and chemicals rose between 0.8pc and 2.2pc, and were among top gainers on the main index. Technology shares gained 1.5pc.AdvertisementAsiaChina stocks closed higher on Monday as the country reported zero new local cases of the novel coronavirus and investors cheered Beijing’s latest reform measures for the stock market.The blue-chip CSI300 index rose 1.5pc to 5564.56, while the Shanghai Composite Index added 1pc to 3532.45 points.Leading the gains, the CSI300 materials index jumped 5.3pc and the CSI300 healthcare index added 2.4pc.In Hong Kong, the Hang Seng index gained 0.1pc at 29,319.47, while the China Enterprises Index was unchanged at 11,560.01 points.China reported no new locally transmitted mainland COVID-19 case for the first time in nearly two months, official data showed on Monday, adding to signs that it has managed to stamp out the latest wave of the disease.Mainland investors continued to pour in, buying net of more than $HK12 billion worth of Hong Kong stocks on Monday via the Stock Connect, according to Refinitiv data.CurrenciesAdvertisementOil rose, boosted by supply cuts among key producers and hopes for further US economic stimulus measures that can boost demand.“Managing to breach $US60 again feels like the market is finally resurfacing after the long struggle and (taking) a proper breath,” said Rystad Energy’s vice president for oil markets Paola Rodriguez Masiu. “It offers a feeling of normality again.”In a sign that prompt supplies are tightening, the six-month Brent spread hit a high of $US2.54 on Monday, its widest since January last year.OCBC economist Howie Lee said the world’s top exporter Saudi Arabia sent a “very bullish signal” last week when it kept monthly crude prices to Asia unchanged despite expectations for small cuts. CRU/OSP“I don’t think anybody dares to short the market when Saudi is like this,” he added.Bitcoin jumps to record on $1.9b Tesla investment: The cryptocurrency leapt as much as 15 per cent after Tesla made the disclosure in a regulatory filing, with prices exceeding $US44,000 for the first time.Stephen Innes, Chief Global Market Strategist at Axi: ”There was a bit of a squeeze for EURUSD on Friday after a week of negative momentum, and a break of 1.2050 for the first time since early December. The main pick up in interest was from fast money and momentum accounts selling the gap.“However, despite the position reduction reflected in the latest CFTC data, the bulls are still dominating.Advertisement“But the dollar hasn’t rolled over as nominal US Treasury yields are already close to the threshold when the historical correlation of US yields to FX flips from the negative dollar view (rising yields as symbolic of an improving cyclical position) to positive for the US dollar (rising yields as a disruptive force as they start to reflect fears of monetary tightening).”CommoditiesIron ore futures rose on Monday, with China’s benchmark contract extending a run of strong gains for a third session, buoyed by a positive demand outlook for the steelmaking ingredient in the world’s top steel producer.However, trading in iron ore spot and futures thinned as China heads for a week-long Lunar New Year holiday from Thursday.Iron ore’s most-traded May contract on China’s Dalian Commodity Exchange ended daytime trading 2.9pc higher at 1028 yuan ($US159.21) a tonne, after earlier hitting 1033 yuan, its strongest level since January 28.The most-active March iron ore on the Singapore Exchange climbed 2.8pc to $US155.15 a tonne by 0727 GMT.Australian sharemarketSuper funds abandon index-hugging as Vanguard pivots: A shift in mindset is being detected among the country’s big institutional investors and especially Vanguard’s clients-come-competitors in the super sector.AdvertisementChanticleer: Why Vocus needs to get past due diligence this time: Its investors have seen takeover bids evaporate before and will not want this to repeat with Macquarie’s embryonic offer.ASX closes 0.6pc firmer, buoyed by iron ore and Afterpay record high: Iron ore producers rallied strongly to lift the benchmark to another 11-month high and buy now, pay later companies shone.Street TalkAussie streetwear retailer Culture Kings swept up in $600m-plus PE bidMIRA asks lenders to help bankroll Vocus playCarlyle’s Accolade Wines keen on NZ’s Villa Maria


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