Banks Drive Markets Higher

Weekly Market Wrap Jun 1, 2020 / Reading Time: 3 mins
By Joshua Barker Reading Time: 3 mins

First Week of June
Despite a late week sell-off from concerns of the US-China tensions sparking back up, the Australian Market enjoyed its best week almost two months. The ASX200 was led higher by its traditional heavyweights, the big four banks. National Australia Bank (NAB.AX) moved nearly 15% higher for the week after revealing the resounding result of its retail raising – the company increased the number of new shares issued by 2.5 times and the plan was still more than twice oversubscribed.

Travel companies also enjoyed a strong week after an early boost on speculation of New Zealand opening its borders once again. The Technology Sector enjoyed a strong start to week after Afterpay (APT.AX) hit 5 million active users in the US market but the momentum quickly fizzled out with the All Technology Index finishing the week flat as funds flowing from the names that have been resilient in order to pick up, the now, undervalued banks. For the week passed, the ASX200 added 3.5% to close at 5,755.

Australian Market

  Travel companies also enjoyed a strong week after an early boost on speculation of New Zealand opening its borders once again. 

The Technology Sector enjoyed a strong start to week after Afterpay (APT.AX) hit 5 million active users in the US market but the momentum quickly fizzled out with the All Technology Index finishing the week flat as funds flowing from the names that have been resilient in order to pick up, the now, undervalued banks. 

For the week passed, the ASX200 added 3.5% to close at 5,755.

Top/Bottom Performers (in ASX200)

Top Gainers:

  • Southern Cross Media +62.1% (SXL.AX)
  • Virgin Money UK +23.2% (VUK.AX)
  • Boral Limited +21.0% (BLD.AX)

Top Losers:

  • Technology One -7.4% (TNE.AX)
  • Worley -7.2% (WOR.AX)
  • Saracen Minerals -5.4% (SAR.AX)

Globally

 Markets struggled to move higher towards the end of the week on political concerns between China and the US. Profit-takers came in Thursday to pre-empt Trump taking a swipe at China in regards to China going back on its word about Hong Kong but in his address on Friday this did not eventuate and markets took a breather headed into the weekend. 

 The Dow and the S&P 500  gained 3% for the week, bringing their Monthly advances in May to 4.2% and 4.5%, respectively. The tech-heavy Nasdaq rose just 1.7% this week, underperforming for the first week since the Coronavirus sell-off, however for the month the index strongly outperformed with a rally this month of 6.7%

Play of the WeekTransitioning into Deep-Valued Areas

 This week saw very different companies as the Top performers compared to any other week of the recovery so far, both here in Australia and over in the US market. 

 Tech Stocks such as Facebook, Netflix and Amazon finished the week in the red despite a higher market whereas the heavily hit Banking Stocks (which haven’t had much of a rally at all previously) all moved higher. CitiBank increased 7%, JP Morgan added 8% & Morgan Stanley moving almost 10% throughout the week. 

 The week ahead will be interesting to see if this divergence continues or will the outperformers gain back their number one spot.


Protests and violent riots spread across America.

Violent incidents in dozens of cities after the death of George Floyd, a black Minneapolis man who died after a white police officer pressed a knee into his neck for more than eight minutes. Some demonstrators broke off to rampage through shopping districts, including Rodeo Drive in Beverly Hills and State Street in Chicago, and set fire to police cars and public buildings. After the Covid-19 deaths of more than 104,000 Americans, unprecedented government intervention and massive disruptions to business and everyday life, the scenes of unrest across the country were a bleak contrast to the recent optimism of the markets.    

Commodities

Commodities lifted despite trade tension heating up.

Oil: jumped 5% on Friday’s to close out the commodity’s best historic monthly performance, currently at $35US – increasing nearly 90% in May. (US WTI Crude)

Gold: remained a traditional safe-haven, moving higher for the week to $1755US.

Iron Ore: moved higher once more, adding 1.3% to $92.50.

Looking Ahead…

 The week ahead is filled with large data point around the world, as the start of a new month bring with it fresh data for the previous month. Chinese PMI Data is due Monday whilst the RBA Cash Rate will be Tuesday. Economic Growth figure by way of GDP for the March Quarter is released Wednesday – Economists are expecting a 0.3% decline indicating a technical recession but any large deviation from this will have an impact on markets.  

US-China Tensions are also likely to dominate news headlines, Trump will hold further press conferences in the beginning on the week that will give the market direction. Finally, US will release Jobs data for the month of May.