ASX 200 (XJO) morning report – ASX oil shares & Tesla stock in focus

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

ASX share market recap

ASX Ltd (ASX: ASX) managed to open on time on Tuesday after significant issues to begin the week, though management flagged some ‘settlement’ issues had also arisen, sending the share price 1.5% lower.

In terms of the ASX 200 it was more of the same, finishing 0.2% higher despite great news regarding the Moderna (NASDAQ: MRNA) vaccine. The key beneficiaries were the ASX banking and energy sectors.

The financials were led higher by the National Australia Bank Ltd (ASX: NAB) which gained 1.6%, with an improving global outlook pointing a more positive future. The traditional banking model relies on management delivering a consistent or growing ‘net interest margin’, reflecting the difference between the cost of their borrowings (our bank balances) and the interest they charge.

Obviously, interest rate near zero makes this incredibly difficult, so signs of a vaccine suggest higher interest rates and improving profits ahead. That said, it’s unlikely dividends will return to previous levels overnight.

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Is the oil price pushing past fair value?

As highlighted yesterday, the energy sector led the way on Tuesday, with the hope of a vaccine sending the oil price sharply higher. Oil Search Limited (ASX: OSH) added 5.1% for the session alone, however, the likes of Macquarie are now suggesting that many companies in the sector may be trading above fair value and ahead of a sustainable level for the oil price.

All the action was in the property sector, with Centuria Industrial REIT (ASX: CIP) and Charter Hall Group (ASX: CHC) both on the acquisition trail. Centuria announced a $125 million capital raising to fund the acquisition of three cold storage distribution facilities for $171 million. Charter Hall, on the other hand, entered a deal to purchase $353 million worth of Bunnings stores in partnership with VFMC and Telstra Super. The deal was done at a yield of 4.63%, while CHC shares finished 5.9% lower.

Crown Resorts Ltd (ASX: CWN) has buckled to regulatory pressure, banning junket operations to Australian casinos following anti-money laundering issues. Crown shares added 1.5% on the news, but there is a difficult period ahead for the travel-reliant sector.

Tesla joins the S&P 500 index, US markets weaker on virus surge

US markets will offer a weaker lead to the ASX today, with the S&P 500 and Nasdaq down 0.5% and 0.2%, respectively. The weakness has stemmed from an incredible spike in COVID-19 cases and responses in many states across the country aimed at once again restricting movement.

Investors are being forced to weigh up the short-term economic damage with the eventual recovery should a vaccine become available.

Tesla Inc. (NASDAQ: TSLA) was the highlight, rallying 8.2% after it was finally added to the S&P 500 index which will require passive funds and ETFs to buy up shares before December 2021.

Amazon.com Inc (NASDAQ: AMZN) continues to flex its muscles, announcing a potential entry into the highly profitable pharmaceutical sector, sending companies like CVS (NYSE: CVS) and Walgreens (NASDAQ: WBA) down over 8% each.

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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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