Written by Sergeo Domtchenko
It seems that the Aussie markets have hit a rough patch. Bouncing around between substantial gains and losses, the ASX 200 finished the week 0.25% higher at 5404.8 points. Culminating the seventh time in eight weeks that the index saw overall weekly gains.
The ASX 200 failed to achieve two successive days of straight gains. Making investors still ponder whether the false bull run is over?
Does this mark the end of the false bull recovery?
Before we race to any conclusions, our readers must understand this week’s Market Sensitive Events (MSEs). MSEs provide investors with explanations on why the market moved either up or down for the week.
Market Sensitive Events over the Past Week
- The first stage of self-isolation restrictions was relaxed across Australia.
- Iceland announced it would reopen its tourism industry on the 15th of June.
- Newly released data continues to support a slowing in the overall infection rate of Coronavirus cases in Australia.
- Global oil prices surged this week, with WTI futures rising by 49.5% to be trading at U.S. $29.65 (at the time of writing).
- The ANZ Business Sentiment survey (business outlook) rose again this week, rising by over 39% for the past six weeks.
- CBA shares rose by 2% on Wednesday, despite a 44% fall in profitability and credit provisions rising to A$1.5 billion.
- Data released by the Chinese Bureau of Statistics suggests a 0.6% increase in manufacturing output during April.
- Xero shares slumped as revenue growth and earnings before EBITDA failed to meet market expectations by over 6%.
- Over 550,000 jobs were axed during April in Australia.
- Retail, automotive , and petrol sales nosedived by 16.4%, 17.4%, and 28% respectively for April in the U.S.
- 70% of U.S. rental households failed to make their monthly rental payments in April.
- Worrying new data suggests that 40% of people that are on the U.S. Job Seeker subsidy are earning more than their weekly employment wage.
- The global death toll from Coronavirus exceeded 300,000.
- The $AUD failed to maintain its positive momentum this week; currently trading at 64 U.S. Cents.
Is this the end of the false bull run?
Short answer: Yes, I expect markets to trade in the red this week (opinion, not advice).
This week marked the first time that there was any correlation between the U.S. Earnings Season and market performance. In conjuncture with the publication of mediocre retail and economic data in the U.S. and China, this sent chills down the spines of investors. Also, the IMF announced that the Coronavirus pandemic had cost the global economy more than U.S. $100 trillion. Furthermore, with the RBA forecasting Australia’s GDP contracting by 8% this year, it’s highly unlikely to see substantial gains across global markets this week.
Nonetheless, it is still vital you are across the significant COVID-19 developments — Lets breakdown what we know.
Newly released data continues to show a slowing in the number of new COVID-19 cases. This has been reflected in the rise across global equity markets for the past few weeks. Markets will continue focusing their attention on possible treatments/trial results and any developments in the reopening of countries. Sorrento Therapeutics (NASDAQ: SRNE) looks to develop a viable treatment for COVID-19 by July potentially However, the fear of a 2nd wave of Coronavirus will be playing on the minds of many investors.
2. U.S. Earnings Season
The likes of companies such as Panasonic, Komatsu, Ryanair, Walmart, and Lowe’s will be releasing quarterly financials this week. Last week marked the first time that was any correlation between the U.S. Earnings Season and market performance. It will be interesting to see whether this trend continues into this week.
3. Local Company Earnings & Announcements
Domestic companies such as Australian Agricultural, CSR, and James Hardie Industries will be releasing quarterly results. Investors will be keeping a close eye on the impact that COVID-19 has had net profitability and dividend policies. Will worst than expected results put the brakes on Australian indices?
4. U.S. – China Trade Talks
Before the outbreak of the COVID-19 pandemic, the U.S. – China Trade War was a significant constraint on global markets. Further discussions for developing a Phase Two deal were supposed to commence last week. However, comments from Donald Trump this week suggest that he has no intention of retaining China as a trading partner. Could the tension between the powerhouses be the catalyst that sends global markets into another bearish trend?
Source: Twitter – @realDonaldTrump.
Movers & Shakers for the Past Week
|Stock||Trading Price||Weekly Gain|
|Pilbara Minerals Ltd (ASX: PLS)||$0.24||19.51%|
|Southern Cross Media Group Ltd (ASX: SXL)||$0.16||18.52%|
|Resolute Mining Limited (ASX: RSG)||$1.08||14.21%|
|Saracen Minerals Holdings Limited (ASX: SAR)||$5.05||13.23%|
|St Barbara Ltd (ASX: SBM)||$2.92||11.88%|
|Incitec Pivot Ltd (ASX: IPL)||$1.98||-9.59%|
|Jumbo Interactive Ltd (ASX: JIN)||$11.86||-9.81%|
|Unibail-Rodamco-Westfield (ASX: URW)||$3.79||-10.40%|
|Challenger Ltd (ASX: CGF)||$4.24||-10.92%|
|Corporate Travel Management Ltd (ASX: CTD)||$10.53||-11.81%|
ASX Announcements to Watch This Week
- Monday: QUEBEC will be releasing its 2020 financial reports.
- Tuesday: OFX Group will publish its full-year earnings results.
- Wednesday: Australian Agriculture Company, CSR, and James Hardie all release their 2020 financials.
- Thursday: Dropsuite will hold its AGM.
- Friday: Sydney Airport will hold its AGM.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Sergeo Domtchenko, Associate of YIG.