The Morning Report

Updated: Thursday 28/01/2021

GLOBAL MARKET WRAP

The S&P 500 fell 101pts overnight to close 2.6% lower at 3,748, as sentiment deteriorated following mostly weak quarterly earnings and an unchanged Federal Reserve policy rate decision. The Communication Services sector was the weakest performer (-3.8%). The US 10-year treasury yield fell 2bps to 1.01%, while the USD Index rose 0.5% to 90.59 this morning.

Coronavirus update – The latest data from the World Health Organisation (WHO) showed the number of confirmed coronavirus cases was 99,864,391 rising by 468,808 yesterday. The UK’s Home Secretary, Priti Patel, outlined new rules for tighter border controls amid unprecedented pressure on the UK health service due to COVID-19. Patel said those who want to leave the UK will need to make a written declaration explaining why they need to travel.

US: As was widely expected, the Federal Reserve decided to leave the policy rate target range unchanged at 0.00-0.25% at its January meeting, while the QE program was also maintained at $80 billion of Treasuries and $40 billion of Mortgage-Backed Securities. Policymakers noted the pace of the recovery in economic activity and employment has moderated in recent months and that further recovery will depend significantly on the course of the coronavirus, including progress on vaccinations.

Durable goods orders rose 0.2% in December, missing expectations of 0.9% growth. New home sales are expected to lift 1.9% in December after contracting 11.0% in November, while jobless claims are expected to come in at 875,000 for the 16 January week, down from 900,000 in the prior week.

Japan: Retail sales are expected to contract 0.5% in December, while the yearly rate is expected to fall from 0.7% to -0.4%.

LOCAL MARKET WRAP

The ASX 200 fell 44pts yesterday to close 0.7% lower at 6,781, with the Energy sector the weakest performer (-3.4%). The SPI Futures Index is trading 73pts lower this morning at 6,632. The 10-year treasury yield fell 2bps to 1.09% and the AUDUSD fell 1.1% to 0.7661 this morning.

Coronavirus update – The total number of cases rose by 7 yesterday to 28,786, with 0 locally acquired cases and 106 active cases. A number of coronavirus restrictions will be eased in Greater Sydney from Friday, as authorities admit the coronavirus may have been eliminated in NSW after several summer clusters. However, despite the state going ten consecutive days without community transmission of COVID-19, masks will remain mandatory in some settings.

Reliance Worldwide Corporation Limited (RWC) provided an interim update yesterday with 1H21 net sales of $642 million, up 17% vs pcp on a constant currency basis (ccy), while 1H21 EBITDA is expected to be in the range of $164-167 million, up ~30% vs pcp. Americas delivered 1H21 sales growth of 22% ccy, driven by strong demand in the repair and remodel sectors. APAC sales rose 10% vs pcp, with external sales up 8% reflecting strong Australian new housing construction and remodel markets, while EMEA sales recovered over the half following the relaxation of COVID-19 restrictions. RWC also reduced net debt by $76 million since 30 June 2020, lowering its leverage from 1.57 times to 0.88 times. RWC shares rose 6.6% to close at $4.37.

Beach Energy Limited (BPT) provided a quarterly update yesterday with 2Q21 production of 6.20 MMboe, down 3% vs pcp and down 8% on the prior quarter. Sales volumes declined 8% from the prior quarter to 6.44 MMboe, while sales revenue fell 5% from the prior quarter to $344 million, due to volume declines partially offset by higher realised oil pricing. Sales volumes were lower across all products, impacted by scheduled maintenance at the Otway Gas plant, unscheduled downtime at the BassGas and Kupe projects, and natural field declines. BPT shares fell 5.1% to close at $1.76.

CPI rose 0.9% in 4Q20, beating expectations of 0.7%, as the yearly rate rose 0.2% to 0.9% (0.7% expected). This marked the highest reading in three quarters, benefiting from a rise in tobacco excise and the introduction, continuation, and conclusion of childcare fee subsidies and home building grants.

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