Weekly Market Update – 09 August 2021

Strong data pushes market indexes to new all-time highs.

Global equity markets climbed higher for the week, with the MSCI World Index gaining 0.89% in AUD Terms.

Despite the continuous surge of Delta COVID-19 case variants worldwide, investors continue to seemingly brush off worries as global markets notch yet another gain for the week.

Both the Dow, Nasdaq, and S&P 500 recorded new all-time highs as data out from the July job’s report showed a strong then expected rebound.

Earnings out from the US last week saw the Chinese E-Commerce giant Alibaba (BABA) report alongside the likes of ridesharing and food-delivery giant Uber (UBER).

BABA’s shares remained relatively flat for the week, following the company’s mixed results of revenue coming in below forecasts and EPS beating, the company also announced it would boost its share buy-back program from $10 billion to $15 billion.

UBER results beat estimates through an increase in gross bookings of ride and food deliveries, though the company continues to remain unprofitable reporting a net loss of $US509 million.

Long anticipated commission-free broker Robinhood Markets Inc (HOOD) saw investors scrambling to the stock last week, in which it notched a 50%+ gain on Wednesday up to a high of $85 during trade.

All eyes are now on the upcoming Federal Reverse leaders meeting to discuss policy and stimulus measures which is scheduled to take place later this month.

RBA surprises market; continues tapering off despite the Delta variant surge

The RBA has once again kept interest rates on hold at a record low of 0.10 percent, marking the 8th consecutive meeting the rate has been left untouched.

Contrary to market expectations, the bank announced that it would continue to pursue its plans of winding back its weekly bond purchasing program from $5 billion to $4 billion per week amidst lockdown and stay-at-home orders across several Australian states.

Despite this, Lowe conveyed somewhat of an optimistic outlook for the next 12 months, stating that policy support from the Government alongside the ongoing vaccine rollout would greatly assist in getting Australia’s economy back on track.

The board said that their experience to date from virus outbreaks is that once the outbreak is contained, the economy bounces back rather quickly with spending recovering strongly.

Governor Phillip Lowe acknowledged that Australia’s economic recovery had been stronger than previously anticipated, though, noted that the recent highly infectious Delta strain outbreaks would slow recovery progress enough to likely see GDP decline for the September quarter.

Following this, in the RBA’s Statement on Monetary Policy on Friday, the bank amended its growth forecasts to factor in current movement restrictions, with the bank now expecting annual GDP growth to be 4% over the current year (previously 4.75%), though, the bank upgraded its outlook on the 2022 year-end with a growth rate of 4.25% (previously 3.5%).

Once again, the RBA stated that the cash rate would not be touched until inflation is sustainably between its 2 per cent and 3 per cent target range, which Lowe commented is not expected until 2024.

US payrolls beat consensus expectations

Job data out from the US this week was strong to say the least. 

Non-farm payrolls rose by 943,000 in the month of July after adding 938,000 in June. This represented the largest gain in non-farm payrolls since August of 2020. 

The leader of these gains came largely from jobs created in the Leisure & Hospitality sector, which added more than a third of the total figure, rising by 380,000 in the month of July. 

Economists’ estimates for July’s job data had come in at around 845,000 new jobs, so the robust number posted continues to show signs of economic recovery within the US. 

The Labor Department also reported a better-than-expected unemployment rate of 5.4%, which was a 0.5% decrease from June’s figure of 5.9% and above consensus estimates of 5.7%. The total unemployed count now stands at 8.7 million. 

Despite these numbers depicting an optimistic view going forward, it is worth keeping in mind that the figures remain well above their levels prior to the pandemic, which was an unemployment rate of 3.5% and a total unemployed count of 5.7 million. 

ASX Weekly Wrap

The ASX200 realised three consecutive days of gains last week, and further posted a strong Friday session which notched a total 1.65% gain for the week. This was the market’s best performance since May. 

Both the S&P and the All Ords recorded new all-time highs, closing to 7538.4 and 7806.5 points respectively as investors evidently brushed off the current COVID situation unfolding. 

The strongest performing sector was the Technology space, which was up 2.07 per cent. This was largely off the back of Afterpay (APT)’s climb in share price following the announcement that the US Fintech Square lodged a $39 billion offer to acquire all Afterpay (APT)’s shares. 

The worst performing sector for the week were the miners, which saw the likes of Rio Tinto Ltd (RIO), BHP Group Ltd (BHP) and Fortescue Metals Group Ltd (FMG) experiencing a disappointing week of trade following Iron Ore slipping -9.16% to a price of $US173.50 per tonne as a result of weaker steel demand from China. 

Earnings for the week had a mixed result. 

REA Group Limited (REA) fell -4.7% on Friday following the company’s earnings report which saw double digit growth in the major metrics with full-year revenues and earnings per share (EPS) up 13 and 21 per cent respectively as the recovery in the residential property market continues to drive growth. REA’s full year dividend was also increased by 19 per cent, to a total of $1.31 per share. 

Similarly, ResMed CDI (RMD) released earnings produced double digit increases in quarterly revenue and further increased its yearly dividend. Despite this, the stock remained relatively flat as concerns arose surrounding the supply shortage for semiconductors chips used in their sleep-treatment devices. 

Within our SMAs the best performer was Newscorp (NWS) which climbed 10%+ over the week, setting a new all-time-high as the company released its earnings and delivered a healthy result of $525.6 million in net profit. The growth was largely driven by the company’s 40% increase in subscribers on the prior year to its Foxtel streaming service which includes the likes of Kayo & Binge. 

Looking forward, Commonwealth Bank of Australia (CBA) is expected to report this coming Wednesday, with the likes of Telstra Corporation Ltd (TLS) and Goodman Group (GMG) reporting on Thursday to round off this upcoming week of earnings. 

Looking ahead

Monday 9th August 2021 – Friday 13th August 2021

  • Monday: CN Inflation Rate (JUL) 
  • Tuesday: AU NAB Business Confidence (JUL), AU Building Permits (JUN)
  • Wednesday: AU Westpac Consumer Confidence (AUG), US Inflation Rate (JUL), US Core Inflation Rate (JUL)
  • Thursday: AU Wage Price Index (Q2) UK Balance of Trade (JUN) 
  • Friday: AU Unemployment Rate (JUL)  

Friday 6th August, 5pm values

 IndexChange%
All Ordinaries 7806+142+1.9%
S&P / ASX 2007538+145+2.0%
Property Trust Index1559+1+0.1%
Utilities Index6046+104+1.8%
Financials Index6610+198+3.1%
Materials Index18053-304-1.8%

Friday 6th August, closing values

 IndexChange%
U.S. S&P 5004436+41+0.9%
London’s FTSE7122+90+1.3%
Japan’s Nikkei27820+536+2.0%
Hang Seng26179+218+0.8%
China’s Shanghai3458+61+1.8%

Key dividends

Monday 9th August 2021 – Friday 13th August 2021

  • Monday: Div Pay-Date – Metrics Income Opportunities Trust (MOT) Metrics Master Income Trust (MXT) 
  • Tuesday: Div Pay-Date – Centuria Industrial REIT (CIP) Centuria Office REIT (COF) 
  • Wednesday: Div Ex-Date – Australian Foundation Investment Co Ltd (AFI)
    Div Pay-Date – SPDR S&P 500 ETF Trust AUD (SPY) Metcash Limited (MTS) 
  • Thursday: Div Ex-Date – Challenger Capital Notes 2 (CGFPB) Rio Tinto Limited (RIO) 
  • Friday: Div Ex-Date – Bendigo and Adelaide Bank Limited Floating Rate Capital Notes (BENHB)
    Div Pay-Date – Charter Hall Long WALE REIT (CLW) 

Contact

Mark Johnson – Chairman of Investment Committee(03) 8825 4738
Guy Silbert – Investment Manager(03) 8825 4750

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 4707Nicholas Miller T: (03) 8825 4722
Jarrod Rodda T: (03) 8825 4729Gina McIntoshT: (07) 3557 2557

The information in this 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 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 article. Information in this article is current at the date of this 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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