The Monday Report – 12 October 2020

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            [9] => BOQ
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            [11] => RIO
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This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Budget Week

The ASX200 was a tad flattish on Friday, showing 0.00% change but actually closing up a whole 0.2 of a point. That made five straight days of rallies for the week for the first time since June. The net gain was 5.4%, making it the best week since April when markets first started to rebound.

Gains on Wall Street helped underpin but really the week was all about the federal budget, beginning with confirmation of bought-forward tax cuts that drove Monday’s surge and culminating in a positive response to the full package on Wednesday and Thursday, before Friday’s breather.

The biggest sector move on Friday was that of healthcare. It fell -0.9% but had enjoyed strong sessions beforehand, particularly after CSL ((CSL)) announced it was setting up to manufacture the University of Queensland’s vaccine. Assuming it works.

The banks closed flat so it was left to energy (+0.7%), industrials (+0.6%) and materials (+0.5%) to provide the balance.

Industrials were led by construction company Cimic ((CIM)), which reported quarterly earnings and jumped 9.2% to top the index winners.

Also providing a quarterly update was 4WD parts specialist ARB Corp ((ARB)), which was worth 6.3%, while fund manager Janus Henderson ((JHG)) gained 5.9% on merger speculation.

The biggest loser on the day was Harvey Norman ((HVN)), which went ex-dividend and fell -3.5%.

The weekend has brought mixed news on the virus – Victorian kids begin going back to school from this week but Captain Dan has warned the hoped for date for lifting all restrictions will likely be pushed back given stubborn double-digit daily cases, while just when we thought it was safe go back to normal, the NSW case-count is rising again.

I’d like to tell you what the SPI Overnight did on Saturday morning but I can’t – the ASX has introduced a new website. I typed “SPI Overnight” into the search box and it came back with “no results”.

If they’ve managed to make the new site even worse than the previous one, they deserve a medal.

Not going to happen

The virus is going to disappear, it’s already disappearing, said Trump over the weekend. Meanwhile the US average weekly case-count continues to rise, not to mention what’s going on in the rest of the world.

But it’s okay – Trump’s now immune, or so he believes.

The White House on Friday night upped the ante, lifting its “bid” on fiscal stimulus to US$1.8trn from US$1.6trn, to the Democrats stubborn “offer” of US$2.0trn. Trump nonetheless said he would like to see a “bigger” package than either party is offering.

So why not just take the US$2trn then?

Pelosi and Mnuchin “met” again by phone, and now it seems the stumbling block is one of funds to go towards “crushing” the virus, in Pelosi’s words. But for all the talk and the numbers, the chances of anything being achieved before the election are basically nil.

The White House can offer what it likes, but the Republican-led Senate still has to agree. Senate leader Mitch McConnell poured cold water on the situation on Friday night in noting some Republican senators don’t want any further stimulus and besides, the Senate is currently focussed on confirming the new Supreme Court nomination, so no time for other trivialities.

Last we heard, the Republicans were still offering US$1trn.

How has this impacted Wall Street? Positively of course. The S&P500 closed up 3.8% for the week and the Dow is now back into the green for the year.

The argument is that the stimulus issue is moot as while nothing may transpire before the election, the “blue wave” possibility continues to grow as the latest polls come in. It is presumed that if Biden wins and the Democrats sweep Congress, they’ll waste no time in rushing through a package of whatever size they want.

And as the Biden-Trump gap continues to widen, the prospect of a challenged result becomes more remote. That removes uncertainty, and that’s a good thing.

So Wall Street remains confident. Although it should be noted that from the open on Friday night the theme of the week was ongoing – buy everything. But after McConnell said his bit, suddenly the week’s market leaders – energy, materials, industrials – turned tail, leaving a more familiar scene of Big Tech driving gains to the close.

Big Tech of course being the prime defensives.

Whatever may transpire, it’s not good for the US dollar it would seem. It fell -0.6% on Friday night.

Commodities

Hence it was a positive session for base metals, and particularly for gold.

With China back on board, iron ore has sparked back into life.

The oils pulled back a bit but posted a strong week as Hurricane Delta approached landfall.

It was another sleepless night for Philip Lowe. The Aussie is up 0.8% at US$0.7224.

The Week Ahead

Tonight in the US is the Columbus Day holiday, of sorts. Banks and the bond market will be closed but the stock market will be open, albeit on light volumes.

The US will see CPI data tomorrow night, along with industrial production, retail sales and consumer sentiment on Friday.

Locally, the September jobs numbers are out on Thursday, but these are pre-budget data.

The AGM season steps up a gear this week. Commonwealth Bank ((CBA)) and Telstra ((TLS)) are on the list for tomorrow and BHP Group ((BHP)) and CSL ((CSL)) for Wednesday.

Bank of Queensland ((BOQ)) reports earnings on Wednesday.

We’re now seeing the first of last quarter’s sales and production reports from the resource sector. Whitehaven Coal ((WHC)) reports on Thursday and Rio Tinto ((RIO)) on Friday.

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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