The S&P/ASX 200 Index (ASX: XJO) is poised for a positive start on Tuesday as ASX futures point to a strong open. Here’s what’s happening on the ASX and in global markets.
Monday’s ASX round-up
The ASX 200 managed to fight off the widespread implications of Victoria’s ‘State of Disaster’ announcement, finishing flat for the delay despite nearly all businesses now being forced to close down. The banking sector was unsurprisingly among the hardest hit, with ANZ Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) both falling 4.1% as the shutdowns do not bode well for mortgage repayments, property prices or any sort of near-term recovery.
Interestingly, more than half of the companies in the ASX 200 finished higher for the day but were not sufficient to offset weakness in the banking and retail sectors. Given the severity of these announcements, it’s likely the Commonwealth Bank of Australia Ltd (ASX: CBA) will take a very conservative approach with its dividend announcement on the 12thof August.
After several months of underperformance, the truly defensive names once again came to the fore, CSL Limited (ASX: CSL) and Telstra Corporation Ltd (ASX: TLS) outperforming by adding 2.6% and 1.5% respectively; both remain core portfolio holdings in my view.
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Microsoft in talks to acquire Tik Tok
Despite facing a record 1.9 million new coronavirus cases in July, double the prior monthly record, US markets continue to move higher, offering insight into the stark difference in approaches in the Northern Hemisphere. The S&P 500 and Nasdaq finished 0.9% and 1.5% higher, respectively.
Microsoft Inc. (NASDAQ: MSFT) was a strong gainer following its decision to pursue an acquisition of the fast-growing Chinese-owned Tik Tok social media platform. President Trump has threatened to shut the company down by 15 September if it isn’t sold; pursuing a China-like attack of foreign companies. In my view, this would mark an exciting sidestep for Microsoft, the stock was up another 5.6%.
In Europe, HSBC Holdings (LON: HSBA) became the latest and largest bank to drop a bombshell, estimating loan losses of as much as US$13 billion and announcing first-half profit had fallen 50% to US$5.6 billion. Meanwhile, the Euro Stoxx still managed to finish 2.3% higher, behind a combination of luxury and manufacturing names, as manufacturing data moved into growth once again.
Tabcorp reveals profit hit
Tabcorp Holdings Ltd (ASX: TAH), down 1.7%, was the latest company to join the chorus of earnings downgrades, offering a $1 billion write-down of goodwill from previous acquisitions and a 31% fall in profit for 2020 to $267-$273 million. The company has been hit heavily by forced store closures and gamblers tightening their belts; it may no longer be the recession-proof business that investors first thought.
Whilst a few days late, Electronic Arts Inc. (NASDAQ: EA) delivered one of the best earnings reports of the season, announcing 70% year-on-year revenue growth in the June quarter. The software company designs video games including the world-leading FIFA, Sims and Madden NFL sports titles, with the latter seeing 140% user growth as populations isolated from each other, with limited live sport, turned to the next closest option. The company has been a long-term holding in our preferred global equity fund, Munro Global Growth, one of the leaders thus far in 2020.
To finish on a positive note, Tesla Inc. (NASDAQ: TSLA) founder Elon Musk managed to deliver the unthinkable via his SpaceX program, returning two NASA astronauts home safely overnight.
This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. He may maintain positions in the securities mentioned. To get in contact with Drew, click here to visit the Wattle Partners website.