The ASX 200 and All Ordinaries indices are tipped to open higher today, with Woolworths Ltd (ASX: WOW) shares making waves. Here’s what you need to know.
Trade on, Trade off
In a sign of how fragile this market recovery might be, global markets swung between gains and losses of 1% after White House Trade Adviser Peter Navarro initially suggested the trade deal with China was ‘over’. This was only to be retracted by President Trump minutes later via Twitter. The result was most global markets finishing strongly for the day on Tuesday, the ASX200 up 0.2%, the S&P500 up 0.5% and the Nasdaq up 0.7%.
European markets recovered strongly with the FTSE100 gaining 1.2% and Eurostoxx 1.8% after Manufacturing and Services PMI’s printed much higher at 46.9 and 47.3, respectively, increasing hopes for a V-shaped and central bank supported recovery.
The ‘trade deal’ tantrum did little to remove the feeling that this spectacular rally has become more speculative as long as it continues, and now is not the time to be chasing cyclical, higher-risk companies hoping for a recovery. Particularly if Victoria’s shutdowns continue to spread.
Woolworths boosts Qube
A number of my preferred Australian companies reported business-changing news on Tuesday, starting with Qube Holdings. Qube is an integrated port and logistics provider which also owns the Moorebank Intermodal Terminal in NSW.
Qube’s management announced that they had secured a major tenant for the automated warehouses that are expected to transform the company. That tenant was Woolworths. With construction due in 2023 and subject to an initial 20-year lease, Woolworths clearly sees the opportunity in automating their supply chain and drastically reducing their distribution costs.
It’s expected to benefit Qube to the tune of $1 billion with the added bonus that Woolworths’ major suppliers will likely seek additional space in the terminal. Qube’s share price moved 7.8% higher for the day.
Woolworths also provided an update on its operations, writing off a further $591 million partially due to staff underpayments and COVID-19 related costs, whilst reporting strong growth in food sales, up 8.6%, Big W, up 27.8% and Endeavour Drinks lifting 21.4%.
AMP digital transformation underway
Long-time ASX underperformer AMP moved 7.9% higher on Tuesday after announcing the sale of its AMP Life business had been approved by the New Zealand authorities, ensuring its digital transformation continues. This was welcome news after Australia reported imports fell 18% in May 2020 and exports slipped a similar 13%.
The Australian economy remains as exposed as ever to China, with exports increasing 7% for the month driven by a 79% increase in coal by the likes of BHP Group as energy demand ramped up once again.
Vintage and homemade goods selling platform Etsy rallied close to 8% as it remains one of the few remaining e-commerce platforms that hasn’t benefited from the rally. In what may be a sign of the recovery expanding into home building in the US, little-known flooring company Mohawk Industries Inc added 13%, with James Hardie Industries and Boral to similar opportunities in Australia.
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.