The Monday Report – 09 November 2020

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This story features MACQUARIE GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: MQG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Only one driver

Friday’s session on the ASX200 was all about the election, as it had been for most of the week but for RBA stimulus and some earnings results. The local market tracked Wall Street in a more measured sense, ultimately rising 4.4% for the week compared to 7%-plus for the S&P500 and 9%-plus for the Nasdaq.

The index opened strongly on Friday morning and then fell in a bit of a hole after the first twenty minutes – around the time Trump made his now much condemned “fraud” accusations. At that stage Biden was ahead, tentatively, and only yesterday did the news services call the result.

The ASX200 quickly rebounded from the dip to restore the day’s strength before fading away a bit to the close, as one might expect on a Friday.

With the election dominating the scene, little regard is being paid to the still-accelerating global case-count, offset by Australia’s performance, and Chinese state media declaring “Australia will pay tremendously for its misjudgement”, its “misjudgement” being to be allied to the US.

Earnings results were nevertheless in focus again on Friday.

Macquarie Group’s ((MQG)) half-year report was worth 2.3%, while National Bank ((NAB)) kicked on another 1.3% from its result on Thursday.

Amcor ((AMC)) rose 4.1% on its quarterly, but the star of the day was News Corp ((NWS)), up 13.7% on its quarterly. The interesting element of News’ result was REA Group’s ((REA)) quarterly update, which resulted in a -0.5% dip. In the last few years, if News has performed well it’s only because of its major shareholding in REA.

News Corp came in second on the winners board behind Tabcorp ((TAH)), which jumped 15.8% on private equity takeover speculation, while third went to Treasury Wine Estates ((TWE)). It rebounded 9.9% after falling heavily on Thursday on Chinese threats (see above). UBS nevertheless upgraded the stock to Buy on a valuation basis.

Nine Entertainment ((NEC)) was the biggest loser with -3.0%, having beaten Fox to the rugby rights. And then the Wallabies turned around and delivered the unthinkable.

Sector-wise, materials was the stand-out performer in rising 2.2% on a big jump in the gold price. Next best were industrials on 1.2%, while healthcare, utilities and IT all closed in the red – the latter due to a -2.7% fall for Afterpay ((APT)).

Wall Street took a breather on Friday night with no result confirmed, so we’ll have to wait to tonight to see whether Biden’s victory will move the market any further after such a strong week.

Take a breath

Wall Street closed flat on Friday, which is unsurprising after having posted its strongest week since the April rebound. At that point Biden was looking good but not yet confirmed.

Could tonight be a “sell the fact”? The other issue to consider is the Senate, which is still in the balance. With two run-offs required in Georgia, the final result will not be known until next year.

The good news on Friday was the US added 638,000 jobs in October when 503,000 were expected, and the unemployment rate dropped to 6.9% from 7.9%. The bad news is only 10 million of the 22 million jobs lost in the pandemic have returned. Most of the jobs regained in October were in the leisure, hospitality and retail segments.

The other bad news is America’s daily case-count is now running above 120,000, which rather puts those leisure, hospitality and retail jobs on the line. With Trump refusing to concede and a Senate still up in the air, whether or not Biden can do anything regarding the virus before January 20 is unclear.

Highlights from case-counts on Friday were US 120,000, France 58,000, Japan 1,000, Korea 145, Australia zero, UK into lockdown, Greece into lockdown. There is much faith being placed in the timely approval of a vaccine.

As we have learned, Australia will go ahead and pre-emptively begin producing the Oxford University vaccine from this week. Meanwhile, Melbourne’s restrictions have again eased further.

Much depends on how Wall Street reacts tonight, and perhaps only then non-election issues will return to the fore.

Commodities

Copper was the standout on Friday night.

Stock markets may not be paying much attention to the case-count, but oil markets are.

Short-covering in the Aussie may have run its course. The currency is steady at US$0.7272 with the US dollar down another -0.4%.

The SPI Overnight closed up 15 points on Saturday morning.

The Week Ahead

More counting, more law suits, more acrimony, more of what America does best.

That includes a holiday on Wednesday for Memorial (Armistice) Day, which rather splits the week.  The US CPI for October is due on Thursday and PPI on Friday, along with consumer sentiment.

China will report inflation numbers tomorrow.

The monthly NAB business confidence survey is out tomorrow and Westpac’s consumer confidence survey on Wednesday.

The RBNZ meets on Wednesday.

In the local market, the AGM calendar remains full again this week. Link Administration ((LNK)), Telstra ((TLS)) and Woodside Petroleum ((WPL)) host investors days this week, CSR ((CSR)) hosts a “strategy briefing” and Ampol ((ALD)) a “capital markets day”.

Incitec Pivot ((IPL)) and James Hardie ((JHX)) report earnings tomorrow, AusNet Services ((AST)) and EclipX Group ((ECX)) on Wednesday and Graincorp ((GNC)) and Xero ((XRO)) on Thursday.

Commonwealth Bank ((CBA)) will wrap up the bank reporting season with a quarterly update on Wednesday.

ANZ Bank ((ANZ)) goes ex today.

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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