Weekly Market Update – 27 July 2020

Busy, busy, busy.

Listen to the recording below:

A busy week with the US central bank meeting on Wednesday night and then major technology companies Facebook (FB), Amazon (AMZN), Apple (AAPL) and Alphabet (GOOG) all reporting over Thursday and Friday night respectively.

It feels like the coming week will shape market direction for the coming months since investors will be more informed on underlying corporate earnings and on the position of the Federal Reserve and future stimulus, both of which should be major market drivers.

As the chart from Morgan Stanley below shows, US equity markets tend to underperform in the lead-up to Presidential elections, falling around -5% on average through August – November periods in election years.

Source – Morgan Stanley

Australian corporate reporting season kicks off in a big way in the week of August 10th – a fortnight from today – with heavyweight companies such as Commonwealth Bank (CBA) and CSL (CSL) early to report.

Sadly, the local economy saw precious little in the form of additional stimulatory efforts from the Federal Government at last week’s Mid-Year Economic and Financial Outlook statement.
Whilst it was encouraging that the JobKeeper support packages were extended to the end of the March 2021, it was disappointing to see the packages cut by 20% or more and similarly the Jobseeker supplement cut for those facing unemployment.

The pending US$1tln second stimulus package to be agreed in the coming weeks in the US looks likely to take a similar path, reducing benefits to a proportion of an individuals pre-COVID 19 salary (likely 70%).

With diminishing government support, but economies still operating on restricted mobility, its understandable that our focus turns to the promise of vaccines and last week saw some optimism emerge around the prospect for vaccine success before the onset of the northern winter.

The leading COVID-19 vaccine trial being conducted by Vaccitech in Oxford England has shown early promise in terms of efficacy and safety markers, but its unlikely we will get proper trial news on this potential vaccine ahead of mid-September.

Similarly, the United States government committed significant funds to another leading vaccine candidate being developed by a consortium of Pfizer and German biotech group BioNtech in which they would receive 100m doses of the vaccine upon proven success and approval.

For now we remain hopeful and expectant of vaccine success for mass consumption early in Q1 and perhaps for prophylactic use for front line workers slightly sooner.

Looking ahead

Monday 27th – Friday 31st July

  • Monday: US Durable Goods (JUNE), US Dallas Fed Manufacturing Activity (JULY
  • Tuesday: AU ANZ Weekly Confidence, US Consumer Confidence (JULY), Richmond Fed Manufacturing Outlook (JULY)
  • Wednesday: AU CPI (Q2), US Federal Reserve meeting
  • Thursday: AU Building Approvals (JUNE), US GDP (Q2), US Weekly Jobless Claims, US Weekly Consumer Confidence
  • Friday: AU Private Sector Credit (JUNE), AU PPI (Q2), US Personal Income/Spending (JUNE), US Employment Cost Index (Q2), US Chicago PMI (July), US Michigan Consumer Confidence (JULY)

It’s a very important week ahead, particularly after we saw some negative investor reaction to major corporate results from favourites such as Tesla (TSLA), Netflix (NFLX) and Microsoft (MSFT).

Whilst many companies are reporting, the market will be squarely focused on results from each of Facebook (FB, Thursday night pre-market) and then Alphabet (GOOG), Amazon (AMZN) and Apple (AAPL) all Friday night pre-market.

On top of the major technology reports, the U.S Federal Reserve meeting on Wednesday night will be closely watched, albeit I expect little new actions to be undertaken by the Fed given the successful early actions taken and the resulting market improvements.

In Australia we will get June funds under management numbers from IOOF (IFL) on Thursday, but in a fortnight’s time Australian results season kicks into full swing (week of August 10th).

Friday 24th July, 5pm values

 IndexChange%
All Ordinaries 6148+4+0.1%
S&P / ASX 2006023-10-0.2%
Property Trust Index1227+7+0.5%
Utilities Index7721-46-0.7%
Financials Index4872-6-0.1%
Materials Index14172+2

Friday 24th July, closing values

 IndexChange%
U.S. S&P 5003215-9-0.3%
London’s FTSE6123-167-2.7%
Japan’s Nikkei22751+55+0.2%
Hang Seng24705-384-1.6%
China’s Shanghai3196-18-0.6%

Key dividends

Monday 27th – Friday 31st July

  • Monday: n/a
  • Tuesday: Div Pay-Date – Magellan ETF/EQMF’s (MGE, MGG, MHG, MHH)
  • Wednesday: n/a
  • Thursday: n/a
  • Friday: n/a

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

The information in this recording and article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this recording and article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this recording and article. Information in this recording and article is current at the date of this recording and article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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