The S&P/ASX 200 (ASX: XJO) is expected to edge lower when the market opens on Thursday as US markets offer a weaker lead. Here’s what’s making headlines.
ASX 200 snaps seven-day winning streak
The ASX 200 couldn’t keep its unbeaten run going, falling 0.3% on Wednesday, overcome by a combination of factors. The ASX materials sector was among the biggest detractors, falling 0.9% after the unexpected announcement that Chinese steel mills were ordered to refuse Australian coal. Whitehaven Coal Ltd (ASX: WHC) shares fell 4.0% on the news.
The impact on the coal sector, which is an important part of Australian exports and with them our tax receipts, isn’t unexpected given China’s push to be carbon neutral by 2060. Rather it is the threat of this expanding into the almighty iron ore market that most concerns investors.
Whilst disappointing, BHP Group Ltd (ASX: BHP) has little to be concerned about at this point in my view given the quality of its products and broader supply issues.
Elsewhere, Flight Centre Travel Group Ltd (ASX: FLT) and Qantas Airways Limited (ASX: QAN) fell 7.7% and 2.1%, respectively, as hopes of a border reopening have effectively been dashed with a spike in NSW community transmission of COVID-19 cases. Despite best efforts, it seems this will be a daily driver of market sentiment for many months to come.
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Bank of Queensland cuts dividend, Zip keeps growing
The Bank of Queensland Ltd (ASX: BOQ) share price overcame sector weakness to jump 5.2% on the company’s full-year update. The bank reported a 30% fall in profit to $225 million and cut its dividend by 82% to just 12 cents per share, but this was well ahead of expectations. Revenues increased 3% in the second half, suggesting the group’s focus home state may be faring better than the rest of the country.
Meanwhile, BNPL leader Zip Co Ltd (ASX: Z1P) released its third-quarter update, which was a little ‘behind’ expectations. Whether this says more about expectations or the business itself is another question. Zip delivered record quarterly revenue of $71.7 million, an 88% increase, a 96% increase in transaction volume and a 114% increase in customers following its acquisition of QuadPay in the US. That equates to 628,000 new users in the quarter alone.
Interestingly, the incredible growth rates are coming from customers leaving credit cards behind, rather than for the free credit on offer. Zip shares fell 4.0% in response to the update.
Stimulus unlikely, US markets weaker
The S&P 500 and Nasdaq finished weaker on Wednesday, down 0.6% and 0.8%, after it became evident that any stimulus before the election was increasingly unlikely. Treasury Secretary Mnuchin delivered the news at a conference overnight.
Third-quarter earnings continued, focused around the banks, with mixed results. Investment banking remains a profitable business with Goldman Sachs (NYSE: GS) delivering a record earnings result in the quarter, doubling 2019 levels. Revenue increased 30% year-over-year with equity and fixed income trading key, and on balance sheet investments increasing strongly; shares improved slightly.
The more traditional Wells Fargo Bank (NYSE: WFC) fell over 6% after failing to meet expectations. The biggest pressure coming from falling net interest margins pushed lower by zero rates, an issue our own banks now face.
We await Australian unemployment today, with the markets suggesting 35,000 jobs lost and an increase to 7.1%. From a Victorian perspective, I’m expecting this to disappoint once again as lockdowns really bite.