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ASX 200 (XJO) morning report – Westpac & Brickworks shares in focus

The S&P/ASX 200 (INDXASX: XJO) is set to edge higher when the market opens this morning according to ASX futures. Here’s what you need to know as we close out another volatile week.

ASX 200 recap

The market looks to be ending the week on a negative note, the ASX 200 falling 0.8% on Thursday, following a weak global lead. This was well above the lows of the session, at one point hitting -1.7%, with no sector spared.

Westpac Banking Corp (ASX: WBC) headlined the bad news, announcing it had agreed to the single largest fine penalty in Australian corporate history, a $1.3 billion hit. The fine related to the bank’s 23 million breaches of the anti-money laundering and associated financial crimes court case. Interestingly, Westpac shares finished just 0.2% lower, with the fine equivalent to one-quarter of profit. Shareholders are the ones paying the price after the bank’s decision to cut its dividends earlier this year.

Brickworks Ltd (ASX: BKW) delivered more positive news, a 93% increase in profit to $299 million, on the back of its investment in TPG Telecom Ltd (ASX: TPG) following the merger with Vodafone. Excluding the one-off profit, the company remains in reasonable shape, growing revenue by 4% and slightly increasing the dividend as its US brick investments begin making a real contribution to the business.

Featured video: How to analyse ASX ETFs like VDHG & ESPO

A-REITs offer shelter, budget deficits ahead

The A-REIT sector, down 0.2%, offered shelter from the broader market sell-off, with investors once again turning to the perceived security.

Home Consortium Ltd (ASX: HMC), which owns a series of healthcare, big box and other retail assets, announced progress on the demerger of its $800 million Daily Needs REIT. Shareholders will receive units in the separate trust, allowing management to continue their investments in the burgeoning health and aged care portfolio; some experienced dealmakers are behind this one.

As the impasse continues in the US, Treasurer Frydenberg reiterated that a budget surplus has been de-prioritised at least until unemployment is back below 6%, which may take several years to achieve.

Yesterday’s speech comes just two weeks out from the most anticipated budget in decades, with tax cuts, incentives and infrastructure spending high on the agenda. Despite the Victorian breakout, Australia is well-positioned for recovery as the rest of the world deals with their own second waves.

US markets edge higher

US markets finished positive on Thursday, but well off their highs, the S&P 500 up 0.3% and the Nasdaq 0.4%. It was reported that the Democrats have crafted another much needed US$2.4 trillion stimulus bill in the hopes they can speed up the U-shaped recovery. This follows strong words from the Federal Reserve on the growing need for Government intervention.

Financials led the market higher, Goldman Sachs Inc. (NYSE: GS) adding 4.8%, suggesting Australian banks should be supported.

The Euro Stoxx finished lower after the French Government became the latest to impose restrictions, falling 0.7%. Airbus SE (EPA: AIR) was among the worst, down 3.5% as it appears travel will be pushed back even further.

Meanwhile, it seems going green isn’t a good move for one of the worlds’ largest fossil fuel companies, BP Plc (LON: BP) hitting a 25-year low after announcing it would be net-zero carbon emissions by 2050.

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.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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