ASX 200 (XJO) Friday – 6 ASX shares to watch

The S&P/ASX 200 (INDEXASX: XJO) is expected to take a backwards step at the open this morning. Here’s what ASX investors need to know.

ASX 200 climbs, Macquarie pounces

The ASX 200 added 0.4% on Thursday, almost entirely on the back of the iron ore and mining sectors. Fortescue Metals Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) were the leaders, adding 13.3% and 4.9% respectively after the price of iron ore surged to a seven-year high overnight.

The rally came after Brazilian producer Vale (NYSE: VALE) cut output expectations and flagged a shortage of supply, sending the spot price to US$137 per tonne. The energy sector similarly benefitted from supply cuts, with Origin Energy Ltd (ASX: ORG) heading 1.8% higher.

Macquarie Group Ltd (ASX: MQG) is leveraging off its strong Australian business, announcing the acquisition of US wealth and asset management Waddell & Reid for $2.3 billion. The wealth management division will be sold for $300 million with the US$68 billion asset management division boosting Macquarie to US$465 billion.

The company operates under the IVY Investments brand which offers a broad range of equity-focused investment strategies. In my view, the acquisition is a positive move, capitalising on a weak US economy and further solidifies Macquarie’s annuity-like income. Macquarie shares finished 0.2% higher on Thursday.

Kogan share price rallies on NZ acquisition

The Australian economy saw a strong increase in its trade surplus, which ultimately reflected price movements between imports and exports, given that service trade has effectively reduced to zero with borders closed. The surplus grew to $7.5 billion for the month on the back of a 14% surge in ore shipments (primarily iron ore), which made up the entire $1.7 billion monthly gain. To this point, experts remain hopeful that our iron ore exports remain immune from the Chinese trade impasse, this result simply reflects how reliant we are.

Kogan.com Ltd (ASX: KGN) announced the acquisition of NZ-based online retailer Mighty Ape for $122.4 million and continues to splash the cash. The company delivered earnings of just $9.9 million in 2020 so the pressure is on management to extract synergies and deliver cash flow to investors. The Kogan share price rallied 7.7% on the news.

Qantas Airways Limited (ASX: QAN) delivered a trading update, predicting that international travel would not return until at least July 2021, but that domestic capacity should reach 80% by March. Despite this, another 8,500 job cuts were announced. At present, I’m not confident the Qantas share price reflects the real underlying risks ahead.

US markets edge higher, oil production cuts agreed

US sharemarkets continue to move higher but are now facing what experts have described as ‘the most difficult time in the public health history’ of their nation. The US death toll reached a one-day record and with hospitals overwhelmed, Los Angeles was the latest state to shut down their economy. Despite the news, the S&P 500 was flat, while the Dow Jones and Nasdaq both moved higher by 0.2%.

The oil price recovered on an agreement by OPEC to increase production at a slower rate than expected, whilst beleaguered plane manufacturer Boeing (NYSE: BA) bounced after receiving a huge order from Ryanair (ETR: RY4C).

President Trump has also ramped up his pressure on China as his term comes to an end, with legislation requiring US company audits set to be approved whilst travel visas for Communist Party members have been restricted.

On a company-specific level Costco (NASDAQ: COST) continues to benefit from the shift to online and click and collect spending, reporting same-store sales growth of 14.6% in November, with e-commerce sales 70.9% higher than 2019.

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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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