ASX 200 (XJO) set to fall – your Friday morning report

The S&P/ASX 200 Index (ASX: XJO) is expected to finish on a disappointing note this week, with futures pointing to a weak opening on Friday.

Budget revealed: debt to hit $850 billion

Treasurer Frydenberg provided his long-awaited budget update yesterday, which was just that, an update. It offered little in the way of guidance into the future. The Government are predicting unemployment will peak at 9.25% across the country, with ballooning deficits adding $250 billion to the debt pile.

What was the reaction? Well, markets rallied, with the ASX 200 finishing up 0.3%, along with the Australian dollar, which moved to $0.71 US cents. The rally was driven by the property sector (+1.9%) and retailers (+1.3%) behind Scentre Group (ASX: SCG) and Wesfarmers Ltd (ASX: WES), which added 3.3% and 1.0% respectively.

Overseas markets were mixed, with the week’s tech gains lost in a single session as the Nasdaq fell 2.3% on the back of weakness in Amazon Inc (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT). Both companies were down around 4%, hit by an unexpected spike in unemployment benefits.

Meanwhile, European markets held onto gains, the Euro Stoxx adding 0.03%, behind a strong earnings report from consumer goods leader Unilever NV (AMS: UNA), as profit increased 3.8% on stronger hygiene sales.

Featured video: How to diversify more than just your portfolio

Coca-Cola Amatil pops

Coca-Cola Amatil Ltd (ASX: CCL) was one of the day’s leaders, adding 5.4% after announcing an improvement in sales in June. The loosening of restrictions saw the final quarter of the financial year down 23% on 2019 and a focus on the ‘disciplined management of costs’ going forward. Management also surprised with a potential $190 million write-down on its Indonesian business. Desperate operating in what should be a recession-proof business, CCL has barely recovered its losses from March and remains one to avoid given its challenged growth profile.

Newcrest Mining Limited (ASX: NCM) moved 1.9% higher after delivering a 7% increase in quarterly gold production, to 573k ounces. More importantly, it benefited from the US dollar gold price hitting a near-decade high of $1,875; that equates to $2,633 in Aussie dollars. With a mining cost of around $1,339, the company is making solid margins, hence the growing attractiveness of the mining sector for dividends.

No dividends from ASX banks in August?

Concerns abound for the impending economic cliff, with the Government’s JobKeeper and JobSeeker policies delaying the inevitable until at least next year. Whilst many experts are suggesting Australia’s stimulus of around ~16% of GDP is excessive, they seem to forget that our economy is one based on immigration and commodities, with limited expertise in the ‘new economy.

Growing vacancy rates in both commercial and residential properties are placing pressure on loan repayments, at the same time that hundreds of thousands of mortgages are on pause. The growing issue has some banking analysts, including Citi, suggesting the Commonwealth Bank of Australia (ASX: CBA) and Suncorp Group Ltd (ASX: SUN) may choose not to pay a dividend in August. It seems a reasonable time to be underweight banks given the uncertainty.

Ending on a positive note, market lightning rod Tesla Inc (NASDAQ: TSLA) may be nearing an entry into the S&P 500 index, adding 5% to its US$300 billion valuation this week after beating analyst estimates. It delivered a rare quarterly profit of US$105 million on revenue of US$5.15 billion; the share price is up close to 300% this year.

This article 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.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.