Weekly Market Update – 23 Nov 2020

An irregular start to the trading week saw an ASX ‘market glitch’ prevent trading, which ultimately led to the suspension of daily activity at 10:25am last Monday morning.

However, the ‘shortened’ week did little to thwart investor optimism with the ASX rising every day except for Friday when it closed flat.

In fact, the first three weeks of November has the ASX200 on track to record its largest monthly gains since the index was established in March 2000.

Hardly a statistic you expect to see in a year crippled by a global pandemic.

But the numbers don’t lie and the ASX200 climbed +2.1% last week to take its monthly return to +10.3%.

Banks were the major driver of returns rallying +6.2% after APRAs chairman indicated the cap limiting banks’ dividend payments may be withdrawn soon as the economy recovers from the COVID-19 contraction.

Clearly this was well received by investors who suffered through ANZ and WBCs announcement to suspend their half-year dividend payments earlier this year, while NAB paid a significantly reduced half-year dividend at the same time it also raised equity.

Commonwealth Bank (CBA) was the best performing major bank last week, climbing +9.4% after APRA announced it was halving its $1b capital penalty imposed in May 2018 for corporate governance failures.

Vaccine developments

As winter in the northern hemisphere draws near, the gravity of the COVID-19 situation escalates.

We know this, particularly as Australians, because we have endured a COVID-19 winter. The potential damage in the northern hemisphere in the coming months remains a major concern.

America’s daily coronavirus infection rates have almost doubled in the past three weeks with 195,000 new positive cases announced last Friday, taking its total number of confirmed cases through 12 million. On top of this, Thursday’s death toll exceeded 2,000 – a statistic not seen since early May. 

Meanwhile in Europe, France is still seeing around 20,000 new infections per day with schools remaining open despite the country being in lockdown, the UK is likewise registering around 20,000 cases per day, which is down 50% from its peak 11 days ago whilst Italy is approaching all-time highs with 34,000 cases.

This is why further vaccine developments can’t come soon enough.

Further confirmation on a possible vaccine was released last week, with US vaccine developer Moderna reporting its candidate was proving more than 94% effective.

Last week, Pfizer and BioNTech reported its vaccine was running at 90% efficacy.

Positively, Moderna provided more extensive information than Pfizer, highlighting that its vaccine not only protected against disease, but against people becoming severely ill from COVID-19.

Importantly, Moderna’s trial also showed its vaccine remained stable and transportable in conventional refrigerators for a month and ordinary freezers for six months, which is a significant improvement on Pfizer’s, which requires transport and storage to occur in -70 degrees celsius.

We are not there yet, but we are making progress and with each development equity markets will continue to take comfort.

Economic data

It was a big week locally, with unemployment data and preliminary retail sales data headlining amongst other data prints.

We know from last week’s Business Confidence survey that business confidence has returned to its highest level since mid-2019 so it is perhaps little surprise that 179,000 jobs were created in October – as employers become more confident they are inclined to increase capital expenditure and employ more staff.

The headline unemployment figure rose from 6.9% to 7%, however this was a function of a higher participation rate. More people are actively seeking work, which saw the participation rate rise from 64.9% to 65.8%. This only lags the pre-COVID participation rate by 0.4%.

To round out these strong figures the underemployment rate – people who are working but looking for more hours – dropped from 11.4% to 10.4%.

It is hard not to be optimistic when you consider:

  • There are more people actively looking for work
  • Those who are working and wanting more work are starting to get more shifts
  • 179,000 jobs were created in October.

Preliminary retail sales data for October bounced +1.6% in October compared to the prior month as Victoria’s exit from 100+ days of lockdown drove the national data.

Retail sales in Victoria rose +5.2% from September with clothing, footwear and personal accessories leading the way. The re-opening of cafés and restaurants for dine-in experiences is likely to provide a further boost for spending in November and in the lead-up to Christmas.

The data is preliminary and the official release can be amended but at face value is another good result.

Finally, the Westpac leading index saw its strongest rise in four decades.

The six-month annualised growth rate which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose to +3.25% in October, indicating that growth in the Australian economy will be significantly above trend in both the September and December quarters.

Of course, this mainly reflects the severity of the preceding contraction which saw the index growth rate drop to an extreme low of -5.5% in April, but it is further confirmation that the immediate future looks a little brighter.

US Retail Sales

Retail sales in the US were weak, increasing by +0.3% compared to expectations of +0.5% and looking to slow even more.

Reductions in spending due to COVID-19 and declining household incomes due to Americans losing government financial support are likely to drive similarly weak sales in the coming months, despite Christmas shopping season approaching.

On top of this sales data for September was revised downwards to reflect a +1.6% gain instead of the previously reported +1.9%.

Hoping this sales trend will be short lived is e-commerce giant Amazon (AMZN), who continues to diversify its already diversified business by announcing the launch of a digital pharmacy which will sell prescription medication.

AMZNs foray into the healthcare sector will see its customers able to order generic and prescription medication through its online pharmacy with Amazon Prime members able to receive two-day deliveries and doctors able to send prescriptions directly to AMZNs pharmacy services.

Whilst AMZN shares fell -1% for the week, shares in pharma giant CVS Health (CVS) fell -6.5%.

Best performer last week

Unibail-Rodamco-Westfield (URW) added +25% last week to extend the previous week’s gain of 31%. As hopes of a COVID-19 vaccine continue to grow, shopping centres whose business models have been dramatically impacted by the virus continue to be well bid by investors.

Vicinity Centres (VCX) and Scentre Group (SCG) have both climbed +15% in the past fortnight and 30-40% for the month.

Looking ahead

Monday 23rd November – Friday 27th November 2020

  • Monday: AU Markit Manufacturing PMI (NOV)
  • Tuesday: US Markit Manufacturing PMI (NOV)  
  • Wednesday: AU Construction Work Q3, US Durable Goods Orders (OCT)
  • Thursday: AU Private Capital Expenditure Q3, US Personal Spending (OCT)
  • Friday: US Existing Home Sales (OCT)

Friday 20th November, 5pm values

All Ordinaries 6740 +131 +2.0%
S&P / ASX 2006539 +134 +2.1%
Property Trust Index1453 +10 +0.7%
Utilities Index6878-32-0.5%
Financials Index 5457 +318+6.2%
Materials Index14160 +70 +0.5%

Friday 20th November, closing values

U.S. S&P 5003558-27-0.8%
London’s FTSE6351+35+0.6%
Japan’s Nikkei25527+141+0.6%
Hang Seng26452+295+1.1%
China’s Shanghai3378+68+2.1%

Key dividends

Monday 23rd November – Friday 27th November 2020

  • Monday: Div Ex-Date – Amcor (AMC), Elders Limited (ELD); Div Pay-Date – CGFPB (CGFPB), Janus Henderson Group (JHG)
  • Tuesday: Div Ex-Date – N/A
  • Wednesday: Div Ex-Date – GrainCorp Limited (GNC), OFX Group (OFX), WBCPF (WBCPF); Div Pay-Date – Brickworks Limited (BKW), Bank of Queensland (BOQ), CGFPA (CGFPA)
  • Thursday: Div Ex-Date – ALS Limited (ALQ)
  • Friday: Div Pay-Date – WAM Capital Limited (WAM)


Mark Johnson – Chairman of Investment Committee(03) 8825 4738
Guy Silbert – Investment Manager(03) 8825 4750
Jordan Lisle – Dealer & Research Assistant(03) 8825 4749

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

Mark JohnsonT: (03) 8825 4738Cameron MorcherT: (03) 8825 4737
Livio Caiolfa T: (03) 8825 4748Michelle BromleyT: (03) 8825 4751
Marcus AingerT: (02) 9134 6292Nicole LewisT: (03) 8825 4734
Dylan CresswellT: (03) 8825 4707Garry FrizzoT: (07) 4019 2410
Michael CooperT: (07) 3010 8597Nicholas MillerT: (03) 8825 4722
Jarrod RoddaT: (03) 8825 4729

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