The S&P/ASX 200 (INDEXASX: XJO) index is expected to open slightly higher today with the Sydney Futures Exchange pointing to a +5 open this morning.
Peak Coronavirus?
It was a mixed day for the ASX to begin the week, opening strongly before giving up gains and finally ending up 1.5% on the outperformance of the information technology and healthcare sectors.
The biggest detractor was an unexpected capital raising and dividend cut from the National Australia Bank Ltd (ASX: NAB) (more on this below). The US has once again provided a strong overnight lead for the Australian market, hitting its highest point since March 10 as more States announced a loosening of restrictions from as early as this Friday. The European Index also rallied over 2.6% as Spain, Italy and France signalled their intention to reopen their economies as COVID-19 deaths slowed. Interestingly, US retail businesses are demanding a uniform reopening policy across the states given the complexity and difficulty that would result.
Hands out again…
The National Australia Bank unexpectedly brought forward their earnings report, announcing a 51% fall in cash profit to ‘just’ $1.44bn and stunning the market with a $3.5 billion capital raising.
The bank is seeking to increase CET 1 capital from 10.4% to 11.2% in order to offset expected increases in bad debts. Management noted that some 70,000 homeowners and 34,000 businesses had taken advantage of the repayment deferral options.
NAB also announced a 60% cut to the interim dividend, dropping to just 30 cents per share, as flagged by the falling share price. The offer will be at a 10% discount to trailing prices of around $14.15 per share. NAB was joined by integrated ports and logistics provider Qube Holdings Ltd (ASX: QUB), whih entered a trading halt as they shore up their own balance sheet.
US reporting season update
The Down Jones traded 1.5% higher overnight driven by positive news in debt markets and continuous support from Government fiscal policy. Walt Disney Co (NYSE: DIS) shares added close to 5% after announcing that it would be releasing the latest Star Wars movie early on Disney+ to capitalise on the shutdowns, whilst Coca-Cola Company (NYSE: KO) bounced 3% as the gradual wind back may release what has been a circa 25% fall in global sales.
Germany’s Deutsche Bank was a rare highlight, announcing on Sunday night that its revenue had remained flat for the March quarter at $6.4 billion whilst taking a $500 million credit provision. Wednesday sees the likes of Google/Alphabet, Caterpillar, Starbucks and Mondelez report in the US, in what will be a real insight into the state of the economy.
The morning update is written by Drew Meredith, Director of Wattle Partners.
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