Australia’s S&P/ASX 200 index is expected to open flat on Friday with Splitit Payments Ltd’s (ASX: SPT) new partnership with Mastercard (NYSE: MA) making local headlines.
International stock markets continued their recent trend on Thursday, forgiving recent COVID-19 outbreak spikes and poor unemployment to finish slightly down. The ASX 200 dropped 0.9% with every sector but utilities falling, the Dow Jones was 0.2% lower and the FTSE 100 fell 0.5%.
Featured interview (2019): Will Australia enter a recession?
Naturally, the pressure was mixed but consumer-facing businesses were hardest hit as Australian unemployment increased to 7.1% following a further 227,000 job losses in May.
The spike was substantially higher than the 79,000 losses predicted by ‘expert’ economists, putting more pressure on their ability to forecast such unique conditions. When the participation rate, being the number of people wanting work, is included the unemployment rate was another 3.5% higher at 11.6%. This stands out as the biggest issue for the Government with the likely need for further targeted stimulus and tax reform into 2021.
Retailers strike back
Australian retailers Shaver Shop Group rebounded 15% on Thursday after reinstating their previously ‘deferred’ dividend as they experienced 22.3% sales growth compared to 2019 and a 164% increase in online sales for the first half.
The story was similar at Temple & Webster Group, a business which sells quality furniture direct to consumers via the internet. TPW announced a second-half increase in revenue of 90%, with June sales up 100% and online sales persisting into June even as retail stores reopened. For me, the standout was a rare profit of $7.1m for the first half.
These companies along with Baby Bunting Group offer more compelling opportunities than Kogan which currently trades at all-time highs.
Iron ore down and out
News from Brazil that iron ore miner Vale had been authorized to reopen a number of mines sent the iron ore price under $100 per tonne for the first time in weeks, resulting in a 4.2% fall in Fortescue Metals Group shares as Rio Tinto fell 1.3%.
What is clear from these moves is the true value of BHP’s product diversification across multiple commodities.
BNPL sector under the microscope
Closer to home, the Buy Now Pay Later (BNPL) sector remains as hot as ever, with Splitit shares doubling in a single session after announcing it had entered into a joint venture with Mastercard, which included the combined launch of instalment payment products and data sharing.
Spotify is quickly establishing itself as the global leader in audio streaming as they seek to replicate the Walt Disney model of owning as much content as possible. Management confirmed the acquisition of Kim Kardashian West’s podcast and will work with Warner Bro’s to bring a series of superhero and cartoon episodes to customers. As I wrote recently, the likes of Spotify and Shopify, which is now Canada’s biggest company, represent the new era of blue-chip companies.
If you’re looking for today’s actionable investment stories, try Jaz Harrison’s analysis of the BetaShares ETHI ETF (ASX: ETHI):
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.