The S&P/ASX 200 (ASX: XJO) and the broader Australian share market is expected to open higher on Monday morning, with the Sydney Futures Exchange pointing to a positive open of 82 points.
Strong finish for US markets
A strong finish the US market, up 1.4% on Friday, but down 1.3% for the week, should provide a positive lead to the ASX this week, which fell 3% last week.
The events of the past six weeks had not occurred in history: a 30% market fall in 22 days and negative oil prices. The events of the week of 20 April will likely go down in history and may never be seen again. Oil investors were in a position where they would not only be required to purchase underlying oil, but also pay someone to take their futures off their hands. Yet, it was the energy sector that posted the only gain for the S&P 500 for the week.
Looking forward, it’s an important week for economic news with Australian inflation, US and European GDP results due, with expectations of falls between 3% and 5%.
Volatility begets opportunities
Looking across the globe, the importance of company selection appears to be increasing with huge divergence in stock performance. American Express (NYSE: AXP) reported and provided some insight into the sentiment of consumers, with 6% and 7% increases in January and February, respectively, offset by a 23% fall in March. The credit card company also increased its bad debt provisions tenfold to account for potential write-offs.
Australia’s small-cap darling Speedcast International (ASX: SDA) hit rock bottom, declaring Chapter 11 Bankruptcy in the US, whilst Australia’s own Mesoblast Limited (ASX: MSB) announced spectacular success on a treatment for COVID-19 patients on ventilators; the share price rallied 40% as a result.
Australian stocks lag peers
Australia’s market remains the main global laggard as the optimism of US markets and hopes of a V-shaped recovery are offset by our tourism and education-driven economy. That being said, several State Government’s announced an important first stage of rollbacks of restrictive social distancing measures and launched the COVID-SAFE tracing app. This is the first sign of normalcy returning.
The European Union finally agreed on a $580bn plan to protect EU businesses through much-needed loans. However, French PM Emmanuel Macron’s push for these to be treated as grants rather than loans remains a point of contention.
Amid this huge global stimulus, Bank of America analysts increased their gold price target to USD$3,000.
The morning update is written by Drew Meredith, Director of Wattle Partners.
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