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S&P/ASX 200 to fall – A2M, ALL & UMG shares in focus

The S&P/ASX 200 (ASX: XJO) is expected to open lower on Thursday according to the latest SPI futures. Here’s what’s making headlines across share markets.

ASX delivers third straight day in the green

The ASX 200 experienced another positive, albeit somewhat mixed, day on Wednesday with the banking sector (+1.7%) forcing the market higher by 0.5%. The ASX travel sector was the key detractor as an outbreak in South Australia combined with profit-taking hit confidence.

Investors continue to return to the banks as a normalise in interest rates supports profits whilst the doomsday scenario of 30% property price falls appears to be off the cards for the time being. Commonwealth Bank of Australia (ASX: CBA) was the big winner yesterday, adding 2.9%.

Casino operator Crown Resorts Ltd (ASX: CWN) entered a trading halt late in the session after the NSW State Government announced the Barangaroo casino opening would be halted until 2021 on the back of potential money laundering revelations.

Market darling a2 Milk Company Ltd (ASX: A2M) was among the worst performers, falling 4.8% despite the outgoing chairman reiterating revenue expectations at the company’s AGM. Investors appear to be concerned about the lack of transparency into Chinese Daigou sales, a lucrative part of a2 Milk’s business.

Chinese pressure hitting United Malt, Aristocrat slashes dividend

United Malt Group Ltd (ASX: UMG), which was demerged from Graincorp Ltd (ASX: GNC) earlier this year, highlighted the growing impact on global barley producers from China’s more aggressive stance against Australia. That said, processing volumes are back to 90% of pre-COVID levels with full-year profit falling just 3% to $57.4 million. Processing revenue fell just 1% with warehouse and distribution work falling 6% and the dividend cut to 3.9 cents. The United Malt share price finished 3.0% higher on the news.

Poker machine designer and operator Aristocrat Leisure Limited (ASX: ALL) released its FY20 results, slashing its dividend by 70% from 34 cents to 10 cents per share despite being a major recipient of the government’s Job Keeper regime. Revenue fell 5.9% to $4.1 billion with falling margins resulting in a 46.7% fall in profit to $476.6 million. The Australian business was the hardest hit, with revenue falling 72% compared to 53% in the Americas as stringent lockdowns and social distancing capped customer limits. The company has recovered quickly from March lows but there remains significant uncertainty ahead.

Aristocrat share price chart

Source: Rask Media 1-year ALL share price chart

US markets continue to weaken, Tesla stock races higher

US markets were broadly weaker overnight as investors tire of spiking COVID cases across the country. The S&P 500 fell 1.2% and the Nasdaq 0.7%. Tesla Inc. (NASDAQ: TSLA) was once again the leader, adding 10.2% along with a number of lower-cost retail-focused stocks, including Target (NYSE: TGT).

Management of Target reported a 20.7% increase on 2019 sales for the third quarter, double the consensus estimate on the back of incredibly strong e-commerce sales figures where Target has a sector-leading platform.

In further positive signs for the US economy, housing starts for single-family homes reached their highest rate since 2007, hitting 1.53 million in October, a 14.2% increase on 2019.

Meanwhile, Europe has once again begun to outperform the US, having entered lockdowns more quickly, with this week’s progress on a Brexit deal offering hope for a smoother than expected exit.

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.

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Disclosure: At the time of publishing, Drew does not have a financial or commercial interest in any of the companies mentioned.

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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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