Australia’s S&P/ASX 200 index (ASX: XJO) is tipped to open in the green on Monday morning according to the latest data from the Sydney Futures Exchange. Here’s everything you need to know.
Buying in the dips?
It was a mixed end to the week for the ASX200, falling 1.9%, but it recovered from intra-day lows of 3.4% as US markets showed investors were ‘buying the dip’. The S&P 500 and Dow Jones recorded gains of 1.3% and 1.9%, respectively, even as the likes of California and Beijing reported outbreaks and the threat of a second wave of COVID-19 infections mounts.
The result was a negative return for the week of 2.5% with energy (-6%) and real estate (-3.5%) among the hardest hit whilst consumer staples (-0.2%) are once again showing their diversification benefits.
It’s clear that certain sections of the market have run ahead of themselves, with a recent spike in volatility likely here to stay. There is also a substantial amount of capital in cash ‘on the sidelines’ with both retail and professional investors, many of whom missed out on the remarkable recovery. Therefore, I expect any sharp falls to be followed by some solid buying in the months ahead.
Monday’s trading is looking positive despite more tensions in the US and spiking infection rates in both Africa and the Middle East.
Featured interview: Pete Wargent, where to for Australian house prices in 2020?
Out with the old, in with the milk…
June saw the long-awaited Standard and Poor’s index announcements with many investors positioning in advance of the statement.
The particular highlights were poker machine manufacturer Aristocrat Leisure moving into the ASX 20 at the expense of Amcor, A2 Milk pushing AMP out of the ASX 50 and NextDC leaving Unibail Rodamco Westfield in its dust. URW, which owns Westfield’s overseas and primarily European shopping mall assets, was similarly the worst-performing company for the week, dropping some 17% as investors grow increasingly concerned about sustainable rental income post-COVID 19.
TPG Telecom was a rare gainer on Friday, adding 1.9% after floating a potential 50-cent per share special dividend should the merger with Vodafone go ahead later this year.
Shares to watch on Monday
As predicted several in the middle of the economic shutdown, Seek appears to be at the forefront of the economic recovery, announcing job advertisements for the week ended June 7 had increased 60%. This compared positively to growth rates of 30%, 40% and 50% in the preceding periods.
Zip Co reported monthly revenue growth of 78% to $15.6 million with transaction volumes up a similarly strong 63% to $189 million. Z1P now has similar transaction volumes and revenue as Afterpay but is valued at just $3 billion versus $14 billion for the latter, with the added benefit that the company undertakes credit assessments on its borrowers.
Lastly, childcare centre operator G8 Education signalled a $250 million devaluation of their property assets, which I consider to be a natural result of COVID-19 and a sign of things to come for many sectors of the property market.
If you’re looking for things to read this morning — and actionable share and ETF ideas — try these stories:
- Is Vanguard’s VAE ETF the best ETF for Emerging Markets?
- What you need to know about FEMX ETF & MVOL ETF before buying
- 3 reasons to follow the Magellan MHG ETF (ASX: MHG)
This report was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.