ASX hits (another) all-time high as mortgage debt rises and AMC shares sell more shares

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For the third day in a row, the Australian stock market closed at a new all-time high despite falling commodity prices and renewed concerns about inflation in overseas markets.

The ASX 200 closed 0.5% higher at 7,295, despite a shaky start when it briefly dipped into negative territory.

He managed to climb 7,301 points before he pulled back a bit. Overall, it was a successful week as the benchmark index jumped 1.6% since last Friday.

Some of the biggest gains came from Origin Energy (+ 5.4%), Bendigo and Adelaide Bank (+ 5.1%), Harvey Norman (+ 3.1%) and BlueScope Steel (+ 3%).

The largest growth was provided by the large banks Commonwealth Bank (+ 1.3%), Westpac (+ 1.4%), ANZ (+ 1.5%) and NAB (+ 1.4%).

The worst performing gold stocks were Silver Lake Resources (-8.2%), Ramelius Resouces (-7.7%), Perseus Mining (-5.6%) and Resolute Mining (-6.1%) after a sharp falling prices for precious metals. spot price.

Mining giants BHP (-1.7%), Rio Tinto (-1.9%) and Fortescue Metals (-2%) also fell sharply after each posting strong gains this week.

The Australian dollar fell to 76.6 US cents (down 1.2 percent) on a much stronger dollar after the United States posted slightly better expectations overnight.

Spot gold fell to $ 1,869.39 an ounce (down 2 percent), while copper fell below $ 10,000 an ounce (down 3 percent).

On the oil markets, Brent crude futures have remained stable at $ 71.38 a barrel after rising sharply over the past two days.

Real estate buyers take on record high debts

Meanwhile, the Bureau of Statistics (ABS) has given new hints that the real estate market will continue to rise in price (to the dismay of early home buyers).

The total volume of mortgage lending in April rose to a record level of $ 31 billion (an increase of 3.7 percent over the previous month).

This was an even more impressive jump (68 percent) over the same period last year, when much of Australia was isolated. It was moved by:

  • Landlord tenants borrowing $ 23 billion in April (all-time high). This is 4.3 percent more than in the previous month and 70 percent more than in April 2020.
  • Investors borrowing $ 8.1 billion (highest since mid-2017). That’s a 3.7% increase since March and a whopping 63% growth since April last year.

“Incredibly low interest rates continue to drive demand for housing finance, which in turn is driving home prices up,” said Gareth Aird, senior economist at Commonwealth Bank.

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“Lending to early home buyers has been declining for three consecutive months, suggesting that affordability constraints are severe.”

However, one of the weaknesses was that home loans fell sharply for the second month in a row – by 11.4% in April (to USD 3.2 billion) after falling by 14.8% in March (compared to previous months). ).

“This was the first monthly decline since the HomeBuilder grant was introduced in June 2020,” said Katherine Keenan, head of finance and welfare at ABS.

“However, the cost of construction commitments remained high.”

ABS noted that the drop coincided with a cut in HomeBuilder’s grant from $ 25,000 to $ 15,000 effective Jan. 1 and closing new applications from Apr. 14.

So far, the Reserve Bank and financial regulator APRA have spoken out and said they will essentially step in when risks to financial stability or lending standards arise, but not to lower house prices.

“We do not expect APRA to reintroduce macroprudential measures in 2021 to cool the housing market, mainly because we do not think that the volume of home loans will grow fast enough for the regulator to act,” said Mr Aird.

“The first evidence indicates that the baton from early home buyers has passed to investors.

“This means that investors will play a more dominant role in driving further house price increases, and this may cause some discomfort for APRA.”

Analysts believe AMC is worthless

Shares of unprofitable movie theater chain AMC Entertainment fell 20.4% overnight (to $ 51.34) following a rollercoaster trading session.

The recent surge in movie theater stocks has been compared to GameStop, a struggling video game retailer that made huge strides earlier this year as traders bought up its shares, betting against hedge funds that were betting against them.

Since the beginning of the year, AMC shares are up more than 2,400%, so it was decided to take this opportunity by issuing more shares to raise additional funds for the company.

Exterior of the AMC Cinema in Manhattan, New York.
AMC Entertainment is up over 2,400% since the beginning of the year.(

REUTERS / Carlo Allegri

)

AMC issued two rounds of new share issues in just three days, raising over $ 587 million.

In a statement, AMC warned investors: “We believe that recent volatility and our current market prices reflect market and trading dynamics unrelated to our core business or macroeconomic or industry fundamentals, and we do not know how long this dynamic will last.

“You have a company that is currently selling shares through a rally because those prices won’t last forever, so why not use this opportunity to solidify your balance sheet and raise some money,” said Dennis Dick, a trader at Bright Trading LLC in Las Vegas.

A number of Wall Street analysts have said that AMC is already overvalued, and many institutional traders have said they are avoiding stocks, a popular destination for traders who congregate on Reddit WallStreetBets and other forums.

The rise in streaming and competition facing movie theaters means the U.S. economic recovery after the coronavirus shutdown is unlikely to boost AMC’s performance, said David Trainer, CEO of investment research firm New Constructs.

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“AMC’s business has gone in the wrong direction since before the COVID-19 pandemic.

AMC’s stock continued to rally as it was touted on the Internet by encouraging small investors to buy stocks and options to buy certain “meme stocks.”

Such investors care little about the fundamentals of the business and target stocks with high short interest in order to get bearish investors to roll back their bets at a loss.

The staggering gains have hurt those betting on AMC stock, although some analysts say bearish investors have largely remained resilient.

Number of jobs raises concerns about inflation

Meanwhile, Wall Street closed in the red, with the high-tech Nasdaq Composite down more than 1% (to 13,615).

The Dow Jones lost 0.1% (to 34,577), while the S&P 500 fell 0.4% (to 4,193), down from near-record levels.

“Higher rates and inflation are kind of a package deal that investors are now watching,” said Chuck Carlson, CEO of Horizon Investment Services.

Analysts say the performance of major stocks has been muted in recent days, as concerns about the high value of many stocks after months of rallies in US markets have given some investors pause.

“The market is digesting strong economic data with some inflationary pressures and is considering whether this timing of the Fed’s cut will change and how to factor that into stock prices,” said Brad Neumann, director of market strategy for Alger in New York.

Strong data could force the Federal Reserve to cut its crisis support earlier than it promised – in particular its massive bond buying program (colloquially called digital “money printing”).

The latest data from the US showed that last week the number of Americans who filed new jobless claims fell to 385,000.

While this is still extremely high, it is the lowest rate since the COVID-19 pandemic began more than a year ago.

In addition, there was a sharp rise in hiring last month, according to the ADP’s National Employment Report, fueled by strong demand amid a rapidly recovering economy.

The US economy added 978,000 jobs in May, the largest increase since June 2020.

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