Weekly Market Update: 19th of October 2020

ASX Update

The ASX 200 fell 34 points or 0.5% to 6177 on Friday, retreating from 7-month highs in the previous session, but closing 1.2% higher for the week. Risk sentiment waned after the IMF panel warned of permanent damage to the economy unless countries are given further economic support. 

Consumer confidence soared to its highest level in more than two years on the back of the Morrison government’s big spending Federal Budget. Westpac’s closely watched measure of consumer sentiment jumped by 11.9% in October, with optimists out-numbering pessimists for the first time since 2018. The index has now lifted by 32% over the last two months to the highest level since July 2018.

Top/Bottom Performers (in the ASX 200)

Top Gainers:

• Unibail-Rodamco-Westfield +23.2% (URW.AX)
• Link Administration Holdings Ltd +21.6% (LNK.AX)
• G.U.D. Holdings Ltd +12.5% (GUD.AX)

Top Losers:

• Flight Centre Travel Group Ltd -9.1% (FLT.AX)
• Mesoblast Ltd -7.7% (MSB.AX)
• Webjet Ltd -7.2% (WEB.AX)

Globally

Wall Street closed mixed on Friday with the Dow rising after three consecutive drops, as economic data surpassed expectations but fiscal uncertainty lingers. Retail sales jumped 1.9% in September and soundly beat consensus estimates of 0.7%, while consumer confidence for October also came in better than expected.

Pfizer said it would apply for emergency use of its Covid-19 vaccine as soon as it reaches safety milestones. For the week, the Dow gained 0.1% and the S&P 0.2%, notching its third straight weekly gain. The Nasdaq added 0.8%, posting a four-week winning streak.

Play of the Week – Vaccine Hopes

Much of the market’s expectations are based on the timeline of a vaccine being developed and produced to the masses. Global markets have been pricing in for a while now that the US pharma firms would develop a final vaccine and that could at least start being produced by the end of this year. 

The recent federal budget, that caused local markets to rally off 5-month lows, makes the key assumption in its models that here in Australia we will have a vaccine dosage to every Australian by the end of 2021. This assumption would have been largely based on the precedent assumption that Australia would have its own vaccine by the middle of next year – as made by the company CSL. 

However, with delays in the initial production, this timeline could be pushed back even further. US pharma company Eli Lilly recently paused their trials citing a safety concern. Johnson and Johnson also paused their trails too after a volunteer fell ill. This is the main uncertainty of the markets right now.

Commodities

• Gold settled just under $1,900 an ounce, declining 1.6% for the week after the US dollar experienced its best week in three. 
   
• Oil gained 0.3% to $40.70 as a larger-than-expected draw in US crude oil inventories last week helped to boost sentiment. 
   
• Iron ore currently trades at $121. 

Looking Ahead…

Next week, investors’ focus will turn to the final US Presidential Debate between Trump and Biden and third-quarter earnings results with IBM, Netflix and Tesla reporting. Here in Australia, we will see further updates from the RBA by way of the monetary policy.