Australian Market Preview 1 July


A snapshot of overnight moves and a look to the upcoming Australasian session.



Market Moves

2020-07-01_Market_Movers.png

 

Wrap
Overnight, US markets saw modest, but continued gains. The tech-heavy Nasdaq was 1.9% higher, whilst the benchmark S&P500 rose 1.5%, and the Dow Jones Industrial Index rose 0.9%. Importantly, the so-called 'fear gauge', the volatility index (VIX), saw its second large fall in a row, down 4.3%.

US investors focussed on better than expected consumer confidence data (see report in Macro Economy below), and a possible (albeit only a couple of days old) levelling off in confirmed new cases of covid-19. The country is still seeing over 40 thousand new cases per day however.

Metals prices on the LME were mixed. Aluminium (+0.2%) and copper (+1.2%) continued their recent good form, whilst lead (-1.1%), tin (-0.3%) and zinc (-0.9%) were lower.

Iron ore prices logged a modest recovery from Monday's 2%-plus losses, up 1% in the $US price.

Gold edged slightly higher, with spot gold now trading at US$1782.60 an ounce.

Crude oil rebounded 0.9%, but natural gas was down 0.6%.

The ASX200 Share Price Index was 7 points lower yesterday, closing the evening session at 5885. That's a 12 point premium to yesterday's ASX 200 close of 5898. This implies that the ASX 200 should trade roughly in line with yesterday at the open.

The best performer from the ASX 200 yesterday was fast food retailer Collins Food (CKF), up 12.7%. The company reported a 9% jump in full year revenue and a 5% increase in net profit after tax. CKF also reported that Australian restaurants held up well during the covid-19 shutdowns with approximately stable same-store sales, but European stores saw declines in sales of up to 28%. Looking forward, the company noted that sales appeared to be returning to pre-covid-19 levels.

The worst performer from the ASX200 yesterday was WiseTech Global (WTC) which fell 2.2%. WTC confirmed that CEO Richard White sold 2.4 million shares, representing approximately 0.76% of the total issued capital in the company. Typically this is a negative sign for a company, as who knows its prospects better than the CEO? However, it is also worth noting that Mr. White still owns a substantial 46.9% of WTC shares.

Today, investors will focus on trading updates from Oilsearch (OSH), Suncorp (SUN), Cellnet (CLT), and Cash Converters (CCV).

Construction and engineering company Lendlease Group (LLC) also updated the market on recent trading conditions, noting that net profit after tax would be in the range of $50M - $150M. This is well down on FY19’s $313M. LLC shares closed the session at $12.37 yesterday, that’s down 36% from its $19.28 pre-covid-19 peak.

On the economic data front, local markets will look to the release of the Australian Industry Group (AIG) manufacturing data, and building approvals locally, and the Caixin Manufacturing PMI from China (expected 50.7). 
 
For the record…
Given it was the end of the quarter, and the end of FY2020, here are a few interesting little snippets regarding the performance of some ASX sectors in the June quarter:

Materials (XMJ) +29% - best quarter's performance on record.
Financials (XFJ) +12% - best quarter's performance since March 2013
Energy (XEJ) +27% - best quarter's performance since June 2008

And in the USA:

Nasdaq + 30.6% = best quarter's performance since 2001 (i.e. since Dot-com Bubble)
Dow Jones Industrial Average +17.8% = best quarter since 1987 (i.e. post Stock Market Crash)
 

 

Macro Economy

 
China
Data Tuesday showed that the China Purchasing Managers Index (PMI) rose to 50.9 for June, up from May's 50.6 reading and ahead of expectations of a 50.4 print. The services sub-index printed an impressive 54.4 versus May's 53.6. Both readings confirm that internally, the Chinese economy is closing in on its pre-Covid levels.

The only fly in the ointment is external demand. The export orders sub-index was 42.6 compared to 35.3 in May. Given the index is still well below the 50-point mark indicating expansion, the Achilles heel in the China recovery story at the moment appears to be the rest of the world.
 
Australia
The ABS Tuesday reported that total payroll jobs increased 1.0% between mid-May and mid-June, but remained 6.4% below pre-covid levels. Total wages paid rose by 0.2% in the week, after a 0.3% increase the week before.

"The recovery in payroll jobs between mid-April and mid-June represents around 30% of the jobs initially lost," said ABS head of labour statistics Bjorn Jarvis. "Between mid-May and mid-June, the easing of restrictions saw payroll jobs increasing faster for the under 20s, up by 4.1%."
 
USA
2020-07-01_Consumer_confidence.png
 
Data from the Conference Board showed that consumer confidence continues to recover in the wake of the first wave of the covid-19 pandemic. The Consumer Confidence Index in June rose 12.2 points to 98.1, up from 85.9 May and ahead of median market estimates of 91.8.

The sub-index for present situation rose to 86.2, up 17.8 points, and the sub-index for expectations rose to a 4-month high of 106.

The cut-off date for the survey was June 18, so it was still early stages of the possible current second wave of infections.
 
 



Back