Australian Market Preview 27 August

 

Tech majors led US markets higher again Wednesday. Salesforce surged 27% on a combination of better than expected Q2 results and an impending addition to the Dow Jones Industrial Average. Netflix (+12%) and Facebook (+8%) were also big winners in the US tech space.

Looking at the indexes, the tech-heavy NASDAQ closed up 1.73%, the benchmark S&P500 gained 1.02%, and the blue chip-laden Dow Jones Industrial Index rose 0.30%, 

Risk on assets were mainly in favour, but metals prices on the LME were somewhat mixed. Copper, Nickel, and Tin each saw approximately 1% gains, whilst Aluminium, Lead, and Zinc each saw minor falls. Copper also saw a 1.17% gain in New York.

Iron Ore prices bounced back. The key industrial metal was 0.93% higher on the Chinese Dalian Exchange, and were 2.08% higher in the Singapore-based $US price.

Looking at precious metals, rising inflation expectations were in focus. This helped Spot Gold improve 1.16% to US$1951/oz, whilst Silver gained 3.06% to US$27.29/oz.

Energy commodities were slightly lower. West Texas Crude lost 0.02% to US$43.44/barrel, Brent fell 0.32% to US$46.29/barrel, and Natural Gas was 1.90% lower.

In currency moves, the Australian Dollar improved 0.61% to 0.7238 as the US Dollar Index declined 0.01%.

Risk off bonds fell slightly, with the yields on the US 10 year Treasury Notes rising 0.9bp to 0.697%.

So with a mainly risk on move in overnight leads, where did the ASX200 Share Price Index end up? Well, it had a solid session, closing at 6095 compared to an overnight session high of 6102 and a low of 6064.

That's a 21.4 point discount to yesterday's ASX 200 close of 6116, and predictive of approximately a 0.3%-0.5% gain at the open for the S&P ASX200. 

 

The company reported this morning that underlying sales rose to 112% to $11.1b which translated into a 97% increase in revenue to $519.2m. This helped Afterpay trim its FY20 loss to $22.9m from $43.8m in FY19.

Total customers improved 116% to 9.9m, and the number of merchants introducing their product increased 72% to 55.4k.

The balance sheet was in a strong position with over $1.3b of cash and over $2b of liquidity available to continue to implement its growth strategy. Indeed, the company stated that it would accelerate its growth strategy into FY21.
 

The company reported this morning that group revenue rose 25% in the first half of 2020, which helped it to deliver underlying profits of $49.1m. This was 6% higher than the previous corresponding period.

The company noted that demand for their services remained strong and would underpin future growth in earnings. 
 

Bega Cheese (BGA), City Chic Collective (CCX), Flight Centre Travel Group (FLT), IGO (IGO), Macquarie Telecom Group (MAQ), Nine Entertainment Co. (NEC), Novatti Group (NOV), Regis Healthcare (REG), Ramsay Health Care (RHC), Sandfire Resources (SFR), Slater & Gordon (SGH), Strike Energy (STX), and Woolworths Group (WOW).
 

Adbri	ABC	Jefferies raises Adbri (ABC) price target from $2.10 to $2.50.
Japara Healthcare	JHC	Jefferies lowers Japara Healthcare (JHC) price target from $0.500 to $0.470.
Metcash	MTS	Jefferies raises Metcash (MTS) price target from $3.25 to $3.45. Retains buy rating. Expects strong growth in supermarket sector to continue.
Scentre Group	SCG	Jefferies raises Scentre Group (SCG) price target from $2.00 to $2.17.
Seven Group	SVW	Jefferies raises Seven Group (SVW) price target from $19.60 to $21.60.
Whitehaven Coal	WHC	Citi lowers Whitehaven Coal (WHC) price target from $1.750 to $1.600. Retains buy rating. Blames increasing risk that co. will have to raise capital, and therefore dilute existing holders.
Worley	WOR	Jefferies lowers Worley (WOR) price target from $11.00 to $10.70.

 

Today, we'll see data on private capital expenditure at 11.30am EST. Later this evening, we'll see data on US Gross Domestic Product (GDP), weekly unemployment claims, and to top it off - a speech from Federal Reserve Chairman Jerome Powell. 

Below is a summary of the key macroeconomic data releases from the past 24 hours.
 

Durable goods orders in the US surged 11.2% in July, up from June's 7.3% gain, and well ahead of the 4.3% economists were expecting.

Excluding the more volatile transportation orders, "core durable goods orders" increased 2.4%, a slower rate than the 3.6% increase from the prior month but better than the 1.9% increase the market was expecting. Excluding defence, orders were 9.9% higher. 

Durable goods are defined as products designed to last at least 3 years. This data is an important economic indicator because it represents orders for large, and generally expensive items such as industrial and farming machinery, and from a retail consumer's perspective, items like household whitegoods.

In this way, Durables goods data spans both businesses and consumers. It provides an insight into their confidence into the future - as one would not likely make such a typically large investment in durable goods without significant confidence on one's economic outlook.