ASX 200 (XJO) to fall – COL, APT & HUB shares in focus

The S&P/ASX 200 (INDEXASX: XJO) is set to sink at the open on Thursday after overseas markets tumbled lower overnight. Here’s what you need to know.

ASX share market recap

The ASX 200 staged a solid comeback on Wednesday after a weak opening, finishing 0.1% higher. The strength came from the consumer staples and IT sectors, up 1.8% and 3.0% respectively, with some new and old names contributing.

On the newer side was grocery retailer Coles Group Ltd (ASX: COL), which provided a trading update to investors. As anyone in Melbourne knows, the highlight of the lockdown has been the nearly daily visits to the supermarket. This was reflected in Coles’ trading update, with first-quarter sales up 10.5% on 2019 to $9.6 billion and online sales growing 57%. Excluding Victoria, grocery sales were slower at 7.7%. Similarly, liquor was a highlight, up 17.8%, benefitting from the mass closure of restaurants and bars.

Coles shares finished 2.3% higher on the news, but I personally continue to prefer the dominant competitor, Woolworths Group Ltd (ASX: WOW) in the sector which also added 1.9%.

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Afterpay posts bumper quarter, HUB24 acquisition spree

Wednesday saw the release of quarterly inflation data, which triggered the market rally. The result was a return to increasing pricing, up 1.6% on the previous quarter, when prices fell 1.9%. The increase was almost solely due to the normalisation of childcare costs following the removal of subsidies.

The Afterpay Ltd (ASX: APT) share price breached the $100 level and stayed there after the BNPL provider released its first-quarter update. Afterpay announced another 115% increase in sales in the first quarter of the financial year, growing to $4.1 billion. These sales of course represent the trade using the platform, not Afterpay’s revenue, nevertheless this was 9% higher than the previous quarter.

Afterpay’s growth outlook is becoming clear, Australia a pedestrian 63% compared to the US, 229% and the UK, 346%. Active customers also doubled to 11.2 million, 45% of which are millennials; Afterpay shares finished 7.3% higher.

Meanwhile, investment platform provider, Hub24 Ltd (ASX: HUB) announced three acquisitions yesterday as it seeks to gain further market share, buying competitor Xplore Wealth Ltd (ASX: XPL) and Easton Investments Ltd Ltd (ASX: EAS), which owns a series of accounting firms. HUB24 shares remain in a trading halt pending a capital raising.

S&P 500 suffers greatest fall in two months

US and European markets suffered their worst fall in two months, the S&P 500 down 3.5% and the Nasdaq 3.7%. The trigger was not necessarily spiking COVID-19 cases, but the reinstitution of lockdowns in Europe. With Australia close to controlling the virus, this will be an interesting test of the resilience of our market and whether our reliance on China will once again be a positive.

Microsoft Corporation (NASDAQ: MSFT) once again smashed expectations, showing the digitisation of the global economy is unlikely to slow down even as we move past the pandemic. The company delivered a US$13.9 billion quarterly profit on US$37.2 billion in revenue, which was a 12% increase on 2019. The key drivers were the company’s commercial cloud, or Sharepoint business, growing 31%, whilst the XBOX platform unit also grew at 30% for the quarter with a new console set for delivery. Despite the result, Microsoft stock fell 4.3% on a weaker outlook.

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