The S&P/ASX 200 (INDEXASX: XJO) is on track for a steady start this morning with ASX futures pointing to a flat open. Here’s what ASX investors need to know.
ASX 200 adds 1.2%, employment recovering
The ASX 200 rallied strongly on Thursday, overcoming news that a coronavirus outbreak in NSW had now reached 17 people. The driving factor was the release of the mid-year budget update and better than expected unemployment figures.
Starting with employment, the Australian economy added 90,000 new jobs in November, 74,000 of which were in Victoria. This sent the unemployment rate down to 6.8%; a remarkable turnaround. Interestingly, the SEEK Limited (ASX: SEK) share price rallied 3.4% on the news, despite the fact that lower unemployment is typically bad for business.
The mid-year budget was also a highlight, with a $16 billion improvement on the forecast deficit on the back of a significant increase in iron ore royalties and associated taxes. The materials sector finished 1.6% higher behind BHP Group Ltd (ASX: BHP), which added 1.8%.
There are ominous signs at A2 Milk Company Ltd (ASX: A2M), with the company entering a trading halt unexpectedly as management noted that they had ‘become aware of information’ that may require a change in earnings guidance. With some 48% of total infant formula sales made to China, it doesn’t look good.
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Infrastructure in play at Transurban & Sydney Airport
Transurban Group (ASX: TCL) yesterday announced the sale of 50% of its key Washington-area US toll roads for A$2.8 billion. The buyers? Australian Super and Uni Super of course. The default nature of contributions is seeing billions flood into Australian Super each year, even during the pandemic, with the company gobbling up assets around the world. Transurban shares rallied 1.2% on the announcement, with the proceeds to be used to refocus on the Australian market.
Sydney Airport Holdings Ltd (ASX: SYD) fell 1.1% on news of the NSW outbreak and after providing an update to the market. Despite the slow recovery, November traffic at the airport remains 90% below last year’s levels, with management electing not to pay a final dividend for the first time in its history.
The capital raising market remains as busy as ever, with Uniti Group Ltd (ASX: UWL) and Zip Co Ltd (ASX: Z1P) both getting away oversubscribed raisings. In the case of Zip, the group raised $120 million at $5.34 to fund BNPL acquisitions in the UAE and Europe whilst doubling down on its fast-growing US QuadPay business. Whilst there remains execution risk, I much prefer businesses raising money to grow, rather than pay off debt.
Global markets push higher, nothing comes free
Overseas markets all moved higher overnight, the S&P 500 and Nasdaq adding 0.6% and 0.8%, respectively. It was the stark opposite of Australia, with an unexpected rise in unemployment claims to 885,000 for the week boosting hopes that the government will be forced to approve their fiscal stimulus package before the Christmas break.
Lesser known food producer General Mills (NYSE: GIS), which makes muesli, cereal and other basic food products, offered an interesting insight into the post-pandemic economy, announcing a 19% increase in third-quarter profit as more people stayed and cooked at home. Management also suggested that cash strapped consumers, hardest hit by the lockdowns, may see this growth continue as they seek to cut costs in the years ahead. This may bode well for Woolworths Group Ltd (ASX: WOW).
There is a saying in life that nothing comes for free. This couldn’t be more relevant when speaking of popular US share trading app Robinhood, which is seeking to IPO next year. The company has settled a US$65 million fine from the US regulator over misleading communications to its users. According to reports, the platform’s free brokerage policy may have actually left investors worse off as their buy and sell orders were executed at ‘inferior’ prices to other brokers even when brokerage was included.