The S&P/ASX 200 (INDEXASX: XJO) is expected to open higher on Tuesday according to the Sydney Futures Exchange. Here’s what ASX investors need to know.
ASX 200 market recap
The ASX 200 delivered its strongest day in four months, adding 2.6% on Monday despite the public holiday in NSW and much lower volume as a result.
The positive news was threefold: the government announced that tax cuts would be brought forward and backdated to 1 July 2020; they also flagged further infrastructure stimulus; and finally, news emerged that President Trump’s health was on the improve.
Such is the lack of investment news flow that the health of the US President, who is currently expected to lose, has been enough to turn sentiment.
The biggest beneficiaries were the energy sector, up 4.5%, with Oil Search Limited (ASX: OSH) jumping 7.5% after oil futures rallied on hopes of more US fiscal stimulus. Viva Energy Group Ltd (ASX: VEA) shares fell 12.1% after going ex-dividend, one of only nine stocks that finished lower.
Oil remains a highly leveraged play on a ‘COVID-normal’ global economy. In my view, when balanced with the growing second wave in Europe, it’s a little too much risk to bear at the present time.
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QBE faces more court action, building supplies stronger
With a busy day ahead, starting with the RBA’s interest rate decision and the Federal Budget to be delivered tonight, the building supplies and infrastructure sector offer a leading indicator of where the money will flow.
Fletcher Building Ltd (ASX: FBU) added 5.2% and Boral Limited (ASX: BLD) 2.4% yesterday as the economic recovery hopes are pinned on infrastructure and housing construction.
Whilst a reasonable start, there is an incredible amount of pain throughout small and large businesses exposed to any part of the travel, education or retail sectors. Without targeted stimulus beyond the construction sector, any economic recovery is likely to be slower than expected.
The NAB Business Confidence Index improved, from -8 to -4, the only sector still lacking confidence being financial and property services; National Australia Bank Ltd (ASX: NAB) shares rallied 4.0%.
Finally, QBE Insurance Group Ltd (ASX: QBE) remains mired in court action across the global. It was reported that bankrupt US retailer Century 21 is challenging QBE’s decision not to pay out on its business interruption insurance.
Trump to leave hospital, Airbnb to IPO
Global markets followed the Australian lead, the Nasdaq adding 2.3% and the S&P 500 1.8% at the time of writing. The rally came following news that President Trump was recovering well and set to leave the hospital following treatment.
Despite the hospital stay, the President was able to place additional pressure on Congress to deliver a much-needed stimulus package, which supported the energy, technology and healthcare sectors.
In a sign of the desperation for new ideas, Regeneron Pharmaceuticals (NASDAQ: REGN) rallied 8.0%, leading the Nasdaq, after it was reported that the President was being treated with an experimental drug produced by the company.
Airbnb is set to overcome an incredibly difficult year to list on the stock market in December. The company is looking to raise US$3 billion after sacking 2,000 staff amid the worst of the crisis.
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.