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S&P/ASX 200 morning report – ASX bank shares in focus

The S&P/ASX 200 (INDEXASX: XJO) is expected to open higher today according to data from the Sydney Futures Exchange. Here’s what you need to know.

Stock market recap

The ASX 200 finished 1.5% lower following a spike in COVID-19 cases in Melbourne resulting in an extended six-week lockdown. The weakness was exacerbated by record numbers in the US, where a daily record of 60,000 cases was hit.

Every sector in the ASX fell, in fact, just 28 stocks added positive returns, except consumer staples with Woolworths Group Ltd (ASX: WOW) adding 1.1%. Telstra Corporation Ltd (ASX: TLS) also continued its strong recent run, adding 0.6%, with investors seemingly appreciating its important and ongoing role in a lockdown environment.

US markets recovered once again, the S&P 500 improving 0.8% and the Nasdaq 1.4%. Twitter (NASDAQ: TWTR) was a standout, jumping 7% after announcing a subscription platform and betting from the potential banning of Tik Tok in the US over the Chinese trade spat.

The FTSE 100 and Eurostoxx 50 both fell, hit by HSBC, falling 3%, as the US announced an effort to ramp up pressure on Chinese controlled currency regime.

My take on the ASX banking sector

The Australian Banking Association announced that each of the major banks would be extended the current six-month mortgage repayment holdings, used by some 800,000 families, a further four months into 2021. Whilst an important step for those people struggling in this difficult environment, it is ultimately delaying the inevitable rise in mortgage defaults.

In my view, the banking sector is more challenged than ever, with return on equity falling into single digits, price-to-book ratios unlikely to recover and record low bad debts part of history. The result, as we have already seen, is a rebasing of dividends at lower levels, the need for more capital to invest into technology and likely weaker than historic returns. ANZ Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX:NAB) were both down 2%.

Meanwhile, the ASX mining sector continues to lead the way, benefitting from a weaker currency and interrupted supply, the latest result being gold miner Northern Star Resources Ltd (ASX: NST) reinstating its dividend despite reporting production below expectations. Northern Star Resources shares were up 6.5%.

Green power

On the more positive side, two US solar companies agreed to merge, with Sunrun (NYSE: SUN) acquiring Vivint (NYSE: VVNT) for $3.2 billion in an all-equity deal. The consolidation was a positive result for both companies, up 22% and 38% respectively, in what is an incredibly competitive and low margin sector.

Electrolux (STO: ELUX-B) owners of Westinghouse and Kelvinator, added 1% in Europe after reporting 3% growth in June sales compared to 2019 and successful cost-cutting strategies.

Once again, Solomon Lew’s Premier Investments Limited (ASX: PMV) is on the front foot, announcing all metropolitan stores would close and that he would no longer be paying rent, placing further pressure on the likes of Scentre Group (ASX: SCG), which we raised yesterday.

Despite a recent run of volatility, it seems the days of markets moving up or down 5% may be gone for the time being, the same can’t be said for individual investors. Stay safe and invest carefully.

Drew is one of the founders of Wattle Partners. He is an experienced financial and investment adviser with expertise in self-managed superannuation funds, superannuation strategies, investment analysis and portfolio construction. Drew is a Partner at Wattle Partners.

The Golden Rules of Investing

We might be experts in retirement, but with combined financial advice experience of 35+ years, we’ve nearly seen it all. 

In mid-2023, our senior team at Wattle Partners Financial Planning put the finishing touches on a brand-new report “The Golden Rules of Investing“.

In this free report, we outline the key principles that determine all of the portfolio construction and investment decisions of Wattle Partners. Collated over decades, this paper should be seen as a work-in-progress, constantly under review in light of the ever-evolving nature of markets. 

You’ll find the free report on my Author page. Simply click the button below to view the Golden Rules.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.


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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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