The S&P/ASX 200 (ASX: XJO) is expected to open higher this morning according to ASX futures. Here’s what’s making headlines.
ASX share market recap
The banking sector was among the weakest on Tuesday, falling 1.4%, with the ASX 200 finishing the day flat. The Australian house price index fell 1.8% on the previous quarter, sending the Commonwealth Bank of Australia (ASX: CBA) share price down 1.7% as investors grow more concerned about Victoria’s slow roadmap and the impending cuts to JobKeeper and JobSeeker payments.
The RBA minutes offered little in the way of support, seemingly waiting for the Federal Government’s October budget before announcing any more ‘unconventional’ policies. The central bank noted the AUD’s recent rally to a near two year high, confirming it wasn’t of concern (yet) and continues to trade in line with commodity prices.
BHP Group Ltd (ASX: BHP) benefitted from better than expected Chinese industrial production, which was 5.6% higher than 2019 levels, on the back of manufacturing, energy and a mining recovery. Retail sales also surprised, a broad-based contribution sending them 0.5% higher, the first improvement since December.
Telstra meets investors, Qantas under review
Telstra Corporation Ltd (ASX: TLS) fell another 2.1% on Tuesday after holding its AGM, reiterating guidance for a fall in earnings to $6.5 to $7.0 billion assuming all goes to plan for the remainder of the financial year. Negative sentiment remains an issue for management despite the company generating $1.8 billion profit in FY20 and offering a consistent dividend.
Reports are suggesting Scentre Group (ASX: SCG) will look to the wholesale hybrid market to cover its estimated $1.8 billion capital shortfall, preferring this over a heavily diluted capital raising.
Elsewhere, Qantas Airways Limited (ASX: QAN) management announced the intention to reduce their $40 million in office costs, along with potentially moving their HQ from the expensive Sydney Airport (ASX: SYD) in Mascot to the new Greater Western Sydney digs. It seems governments are yet to fully appreciate the elasticity of businesses like Qantas, in that they require substantial investment to get back up and running but have a substantial runway (pun intended) before revenue looks anything like what it was pre-COVID-19.
Global rally continues
Robust Chinese economic data and signs that German business confidence was returning to previous levels boosted most global markets overnight. The S&P 500 finished 0.5% higher, the Nasdaq regained its ascendancy, climbing 1.2%, and the Euro Stoxx closed at a three week high, 0.7% higher.
It was a rotation into more cyclical or ‘value’ companies driving the market, with communications, discretionary and real estate businesses driving the rally.
The likes of Louis Vuitton Moet Hennessey (EPA: MC) and Hermes (EPA: RMS) are key beneficiaries of a faster than expected recovery in China and signs that economies are slowly moving back to normal with the substantial policy support. There has been little sign of a similar trend in Australia yet.
Apple Inc. (NASDAQ: AAPL) launched a long-awaited new Apple Watch overnight, virtually of course, whilst chip giant Nvidia (NASDAQ: NVDA) is facing some pushback over its acquisition of key competitor ARM Holdings.
The Federal Reserve meets today and Australian unemployment is due tomorrow.
This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.