The Monday Report – 16 November 2020

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

By Greg Peel

Ups and Downs

I had tipped a Friday sort of Friday and that’s pretty much what we got on the ASX. Sector moves were smaller than those seen over the rest of the week and largely cancelled each other out. Of more interest was a swathe of individual corporate news.

The worst performing sector on the day was property (-1.2%), led by profit-taking in UR Westfield ((URW)), which fell -6.2% to top the losers’ board. The stock nevertheless closed up 31% for the week. Other REITs which shot up earlier in the week on the vaccine news also retreated.

Countering the fall in property were telcos (+1.0%) as investors continue to weigh Telstra’s ((TLS)) three-way split intentions.

Utilities (-0.9%) and energy (-0.6%) fell back with the oil price as the vaccine impact on those sectors eased off, along with industrials (-0.6%) and the banks (-0.3%).

GrainCorp ((GNC)) was the best index performer on the day on its earnings result, rising 9.1%. The silver went to PolyNovo ((PNV)), up 8.6% on news the FDA has approved the company’s pivotal trial investigation device exemption.

Whatever that means.

The next top three performers were all gold miners, although the materials sector only closed up 0.1%.

Outside the index, 3P Learning ((3PL)) is in play, with a new private player moving to gazump an earlier takeover offer. It rose 13.3% as the board told shareholders to sit tight and wait for a winner.

Jumbo Interactive ((JIN)) signed a ten-year agreement with Lotterywest and rose 8.3%.

Lovisa Holdings ((LOV)) gained 14.5% after announcing it had acquired the European retail store network of German wholesaler Beeline for sixty euros. That is not a typo. This should add around 80 new stores for Lovisa across six European countries. While acquired for a peppercorn, the stores are expected to cost -E50m to refit and all French and UK stores are currently closed.

Timber company Midway ((MWY)) has been caught up in China’s tedious thumbscrew tactics, but insists the ban on log imports will not impact on its core woodchip exports. It fell -7.7% anyway.

Investors were no doubt happy to square up and play it safe going into a weekend in which anything might happen Stateside, from surging cases to further lockdowns to Trump inanities.

And we saw all of the above.

Looking across the abyss

The US daily case-count is now running over 150,000, New York City is considering reclosing schools, and Trump has claimed the Pfizer vaccine as a personal triumph all of his own making. A different administration would still be years away from a vaccine discovery, apparently.

Trump has also acknowledged a Biden victory but not its legitimacy, as “fake news networks” call Arizona and Georgia for Biden. He will not concede.

The Biden administration has insisted it will not reintroduce a national lockdown, but it will press through a stimulus package.

Last Monday saw Wall Street adjust to the vaccine news with a mass scramble into virus losers (cyclicals, value) and mass exodus from virus winners (growth, mostly tech). After a few ups, downs and comebacks throughout the week, the Dow ended up 4.1% for the week, the S&P500 gained 2.2% to a new all-time high, and the Nasdaq fell -0.6%.

The Russell small cap index gained 6.1% to a new all-time high – its first since 2018.

Yet all along the case-count has grown exponentially, and the first re-implementation of restrictions has begun. But Wall Street is pricing in the future – a future beyond a tough winter and into a re-growth spring, in which a vaccine will save the world.

An announcement from Moderna is due any day.

The Dow was also boosted on Friday night from positive earnings results from Disney and Cisco – both virus winners to a degree. In Disney’s case it’s a matter of its streaming service going a long way to offset losses in cinemas and theme parks, albeit the company posted its first net loss in 40 years. Cisco was a winner on its video conferencing systems.

An interesting point to note is recent data indicate the US consumer is going back into stockpiling mode. But whereas last time major staples producers were caught short, this time they insist they are well prepared and well supplied. Including toilet paper.

Michigan Uni’s latest consumer sentiment survey showed a big drop to 77.0 from 81.8 two weeks ago.

Yet, whereas New York City’s original stay-at-home order was as good as 100% effective, the current stay-at-home advisory is proving only around 50% effective. At least New Yorkers are wearing masks.

Commodities

Oil prices closed lower on Friday night on the weekly US inventory data, but gained 8% for the week. The S&P500 energy sector gained 16% for the week, which underscores just what faith investors are placing in a vaccine.

A lower US dollar supported most metal prices, as well as gold.

Just when we thought a return of the US dollar safe haven trade may be our currency’s saviour, the Aussie is back up 0.5% at US$0.7271.

After local investors played it safe on Friday, the SPI Overnight closed up 51 points or 0.8% on Saturday morning.

The Week Ahead

Japan reports September quarter GDP today and China reports October industrial production, retail sales and fixed asset investment today.

The US reports industrial production and retail sales tomorrow.

Australia will see October jobs numbers on Thursday.

Locally it’s another big week of AGMs, and of out-of-cycle earnings results.

Elders ((ELD)) reports today, Aristocrat Leisure ((ALL)), ALS Ltd ((ALQ)) and United Malt Group ((UMG)) on Wednesday, Nufarm ((NUF)) on Thursday and Orica ((ORI)) on Friday.

Oil Search ((OSH)) holds a strategy day on Thursday.

Macquarie Group ((MQG)) goes ex-div today.

The Australian share market over the past thirty days…

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