Weekly Market Update: 26th of October 2020

ASX Update

The ASX200 pushed above 6,200 for the first time since early March at the start of the week, however, it was unfortunately short-lived. By the close of trade Tuesday the market was back below to significant level and remained there – finishing the week at 6,167, more or less where it started the week. A sharp decline on Thursday morning after a rocky night on Wall Street caused a 1.5% drop but recovered most of the losses by the close. Light trading volumes added to the directionless theme of the market.

Qantas added 2.7% higher after their AGM revealed border closures had only cost the company $100M in the last 3 months (FY2021 First Quarter) but was optimist that ‘travel bubbles’ will be launched next year to places such as Taiwan and South Korea.  The company is currently operating at less than 30% of pre-covid levels, this was expected be at 60% by now.

Meanwhile, Webjet outlined in their AGM that the business has reduced its cash burn rate resulting in a net tailwind. The company reduced costs from $10.5M a month to $9M. The stock was up 5% on a flat day.

Two new companies made their debut on Friday; Adore Beauty added 2.5% on listing and CleanSpace gained for than 60% on its first day – the company makes personal protective equipment as well as respirators. 

Top/Bottom Performers (in the ASX 200)

Top Gainers:

• Bluescope Steel Ltd +9.2% (BSL.AX)
• Challenger Ltd +7.8% (CGF.AX)
• Cimic Group Ltd +7.5% (CIM.AX)

Top Losers:

• Avita Therapeutics -4.9% (AVH.AX)
• Amcor Plc -4.7% (AMC.AX)
• AMP Ltd -4.6% (AMP.AX)

Globally

US markets struggled to find direction this week as investors wait on the confirmation of the stimulus bill. White House Speaker Nancy Pelosi signaled optimism that a stimulus bill can be approved. She also admitted that it may take a while for legislation to be written and signed. For the week, the Dow lost 0.9%, the S&P500 declined 0.5% and the Nasdaq dropped 1.1%.

Play of the Week – Travel Companies Rebound

This week’s AGMs highlighted that travel companies are very hopeful on a reopening next year, whether it be instate or even overseas in a COVID-safe bubble of approved countries. As cases in Melbourne dwindle, the state eyes-off a reopen and the Australian PM urging states to open up by Christmas – this could very well be possible. 

Companies such as Flight Centre and Qantas will directly benefit from this occurrence but also carry large fixed costs if there are any delays. However, businesses such as Webjet and HelloWorld will also see the same upside benefit but fortunately have lower fixed costs and therefore less risks if there are delays to reopening. 

Commodities

• Gold ended the week flat to $1900US despite the US dollar pulling back around 1%. 
   
• Oil dropped 2.2% to below $40 a barrel as European coronavirus cases hit multiple record highs.  
   
• Iron ore trades at $121.

Looking Ahead…

In Australia, we will see bank profits released, AGMs continue and quarterly updates. In the US, GDP growth for Q3 will be in the spotlight whilst earnings season continues, with Alphabet, Apple, Amazon, and Facebook due to report their quarterly results.