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ASX 200 (XJO) Tuesday – ASX travel shares & A-REITs in focus

The S&P/ASX 200 (INDEXASX: XJO) is expected to open higher this morning according to the Sydney Futures Exchange. Here’s what ASX investors need to know.

ASX share market recap

The ASX 200 finished 0.2% lower to open the week, increasing the likelihood of the first negative month since March. The A-REIT sector was among the few positives, with Scentre Group (ASX: SCG) and GPT Group (ASX: GPT) finishing over 2% higher as Victorian coronavirus cases continued to decline and hopes for an economic reopening increased.

Webjet Ltd (ASX: WEB) and Qantas Airways Limited (ASX: QAN) were the other beneficiaries, adding 6.6% and 6.4% respectively, after discussions with New Zealand on a trans-Tasman bubble were announced.

The financial sector lost ground, falling 0.6%, after the strong gains on Friday as investors’ attention once again returned to the economy.

Small-cap lithium miner Piedmont Lithium Ltd (ASX: PLL) rallied 83% after announcing it had signed a five-year supply agreement with global electric car leader Tesla Inc (NASDAQ: TSLA). The company’s mine is based in North Carolina with the deal to represent at least one-third of sales over its term.

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a2 Milk share price crushed

Specialist ‘feel good’ milk producer A2 Milk Company Ltd (ASX: A2M) unexpectedly downgraded its expectations for the financial year, flagging a fall in first-half revenue to between NZ$725 million and NZ$775 million. The midpoint of this range represents a 7% drop from revenue recorded in the first half of FY20. a2 Milk’s full-year result is expected to land in the range of NZ$1.8 billion to NZ$1.9 billion, with an important caveat that future COVID-19 impacts are limited.

Management flagged a slowdown in the Daigou channel, which represents a large but difficult to measure portion of Australian sales and involves foreigners buying and on-selling product in their home countries, typically China. That said, a2 Milk’s direct Chinese sales are expected to remain strong, suggesting a change in approach may be warranted. The a2 Milk share price fell 11.5% on the news and dragged the Consumer Staples sector down 2.2%.

Elsewhere, potential COVID-19 treatment producer, Mesoblast Ltd (ASX: MSB) stood out once again, increasing 12%, whilst Ardent Leisure Group Ltd (ASX: ALG), the owner of Dreamworld, received a fine of $3.6 million relating to deaths in 2016.

Overseas markets rise, Tik Tok ban on hold

Global markets staged a strong recovery overnight. The S&P 500 finished 1.6% higher and the Nasdaq rose 1.9%, but European markets led the way adding 2.8%.

The major contribution came from British bank HSBC Inc (LON: HSBA), which rallied 8.9% after its largest shareholder Ping An Insurance increased its holding. This came following a fourth straight month of growth in Chinese industrials profits, the first step in the ‘wall of worry’ facing investors.

The rally was broad-based, with just 32 constituents of the S&P 500 finishing lower, travel and energy companies delivering the largest gains on the growing hope of stimulus.

The recent banning of Tik Tok app downloads by the White House has been questioned by the Federal Court, blocking the decision by suggesting it exceeded their authority. This should support Chinese tech companies in the months to come.

The week ahead sees Chinese industrial production results, British and US GDP along with the long-awaited debate between President Trump and Joe Biden on Wednesday.

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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