Daily Market Digest Thur 6 Jan: Pathology stocks fall as Aus Govt votes in rapid antigen, tech stocks see carnage, Pfizer due for boost
Summary: Asian and Australian markets follow US lower as the Fed hints interest rates hikes could come quicker and faster. US tech stocks crumble, taking selling in tech and profitless stocks to a 10 year high. Pathology companies fall from record highs as the Australian Fed Gov says Aussies can take rapid antigen tests over PCR. Pfizer’s booster is approved and its share look ripe for a rally. Plus, why lithium, EVs and oil stocks are revving up.
Firstly - what you need to know now and consider
- Beware of mounting tech and profitless stock selling: Professional investors spent December selling high-growth, high-valuation stocks ahead of the US Fed hiking rates in 2022, AND overnight, SELLING INTENSIFIED after the Federal flagged the chance of earlier and faster interest rate hikes. Sales in profitless tech stocks hit its highest level in 10 year. The technical indicators suggest the Nasdaq for instance is susceptible to another pull back on the hourly and daily chart.
- In Australia, Afterpay, which was the biggest tech stock in Australia has today fallen 9.7% to $72.66, its lowest price since September 2020 as trading volume in the stock doubled its 20-day average, showing that investors are running for the hills out of stocks that carry high -debt and don’t make a profit. Afterpay shares have tanked 35% year-on-year and Morgans cut Afterpay’s price target by 31% following the founders and insiders reducing their holdings in the buy now pay later giant. It also follows Tencent Holdings reducing its stake in Afterpay to 4.86% last year. Afterpay shares on the hourly, daily and weekly chart suggest further selling could come for holders of Afterpay. However the RSI indicators the stocks has been oversold. So beware if you are trading this.
- Health companies are in focus again for two reasons, firstly Pfizer and BioNTech’s booster got US approval to be used in teens (people aged 12 to 17). The CDC has already approved Pfizer-BioNTech’s booster and Moderna’s booster for those over 18, and said they are preferred over Johnson & Johnson. Pfizer’s shares have been hovering around the same level since late October, however now the daily and weekly technical indicators such as the MACD and the RSI look interesting suggesting, Pfizer shares could be due for a rally.
- The second reason healthcare stocks will be in focus for the rest of the week is because The Australian government wound back testing requirements - so people will now be able to take a rapid antigen tests without the need for a PCR test. Meaning, pathology giants like Sonic Healthcare and Australian Clinical Labs will be tested by investors and both shares in SHL and ACL are likely to fall further from their record all-time highs.
- Oil stocks again a focus with the price of oil trading bat $77.17 (Crude WTI ), and now facing further upward pressure as Mexico plans to halt crude exports by 2023. If this proves true it will remove one of the largest oil sellers from the market and push long-date oil prices higher. Our group thinking is that the price of oil could soon hit $100 a barrel as demand improves while weather extremities worsen.
- In other big news, Lithium and battery minerals and electric vehicle stocks have also been thrust into the limelight this year as some of the best performers so far in 2022. Pilbara Minerals, and Alkem on the ASX are both of are up over 1% in 3 days. The battery minerals and EV ETF ACDC is flat, while overseas, the gains are far more exciting. For the worlds biggest auto makers; Toyota shares are up 5.7%, and VW shares are up 8.3% year to date. One of the reasons is that last month, within five days of each other - both Toyota Motor Corp and Volkswagen laid out mass production plans to splurge $170 billion over the coming years to preserve their claim on an industry and transition from internal combustion engines to electric. Interestingly VW and Toyota sold 10 or 11 cars for every one Tesla sold in 2021. Despite that, Tesla is the most valuable listed car company.
Secondly, watch companies with Australian analyst rating changes
- PDL: Pendal Group Raised to Outperform at Credit Suisse; PT A$7.20
- APT: Morgans cut its PT on the stock by 31%.
- PME: Pro Medicus Cut to Reduce at Morgans Financial Limited
Thirdly, watch companies in the news
- Paladin shares pump 4% putting uranium companies back in the limelight; Uranium prices appear likely to rise as Kazakhstan, the world’s largest producer of the radioactive metal, struggles to cope with deadly protests that pose the biggest challenge to the country’s leadership in decades.
- Serbia Seeks Safety Assurances on Rio Tinto Lithium Project: Serbia won’t let Rio Tinto mine its lithium without assurances that the company’s $2.4 billion project in the Balkan country is environmentally safe even as it offers huge economic benefits, a top government official says. Rio, committed the funds in July with plans to tap into one of Europe’s largest lithium deposits as global demand grows for battery material.
- BHP (AU): ‘Thirsty Copper Mines Turn to the Sea as Chile Water Debate Rages
- Ramsay Health Care (RHC AU): will recruit 550 graduate nurses next month in effort to combat chronic labor shortages: Australian
- Aristocrat's Playtech Bid Likely to Be Rejected: Playtech Adjourns Holder Vote on Aristocrat Offer to Feb. 2. Playtech’s current share price (731.5p) suggests investors will reject Aristocrat’s 680p/share bid, even if a rival offer from JKO Play fails to materialize, writes Ivor Jones, an analyst at Peel Hunt (hold).
- The Bank of Queensland’s ROE May Stick at 8% Due to Weak Revenue and Branch Assets: BOQ's ‘Revenue-to-Assets Inferior’.
- Shareholder Events: WMC AU
Markets - The numbers
- Global Markets; In the US Dow Average down 0.2% to 36,713.26, the Nasdaq fell 3.3%. In Europe FTSE 100 rose 0.6% to 7,341.66. The German Dax rose 0.7%.
- Commodities: Iron ore futures are up 1.2% to $125.75. Gold spot up 0.3% to $1,819.70, Brent futures up 1.0% to $80.79/bbl
- Currencies: Euro up 0.3% to $1.1320, Aussie up 0.1% to 0.7244 per US$, Kiwi little changed at 0.6813 per US$
- Bonds: U.S. 10-year yield rose 4.6bps to 1.6929%. Australia 3-year bond yield rose 0.5bps to 1.15%, Australia 10-year bond yield rose 4bps to 1.79%
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.