Government Support in Focus

Weekly Market Wrap Jul 20, 2020 / Reading Time: 3 mins
By Joshua Barker Reading Time: 3 mins

Fourth Week of July

ASX Update

The ASX200 added 114 points or 1.9% to 6,033. On the back of the Government announcing a $1.5B infrastructure plan including adding the ‘JobTrainer’ to the support package. However, further restrictions were imposed, as NSW Premier tightening numbers at restaurants, cafes, & bars after an outbreak linked to a Victorian visiting a popular hotel/club – Victoria also announcing a new record of 428 daily coronavirus cases.

Both BHP and RIO enjoyed strong weeks, gaining ~3.5% and ~5% for the week. But it was Fortescue shined, gaining over 10% and nearing on a $50B market cap as its strongest week since June 2019 pushed share price to all-time highs.

Abnormally, in an overall positive week, the local Technology Sector declined 3.5% for the week – with this being evident in the final day of trade with Tech was the only negative sector. The Buy-Now-Pay-Later Sector dragged the index down with heavyweight AfterPay losing almost 10%, ZipCo losing 25% of its value, and Splitit down ~15%.

Low trading volume persisted again this week, although local school holidays and international summer holidays may be a factor, there still seems a certain caution of buying the market.

Top/Bottom Performers (in ASX200)

Top Gainers:

  • Alumina Ltd +12.9% (AWC.AX)
  • Credit Corp Group +10.8% (CCP.AX)
  • Cooper Energy +10.5% (COE.AX)

Top Losers:

  • Avita Therapeutics -19.0% (AVH.AX)
  • Mesoblast -9.5% (MSB.AX)
  • Polynovo -7.0% (PNV.AX)

 

Auris (ASX: AUR) has provided an update on exploration activities during the June quarter 2020, with the highlight being significant gold results from Morck Well JV, from the air core drilling completed by Sandfire during the quarter. High-grade gold mineralisation has been intersected in very wide spaced, first pass, regional air core drilling in the project which, in addition to results from the previous quarter, indicates gold prospectivity and boosts the potential of the site. Further drilling of the site and essays are still due to be completed.

Globally

Wall Street closed mixed to wrap a volatile week, as investors assessed better than expected macro data against weak earnings and rising coronavirus cases in multiple US states. On Friday, more than 77 thousand new contagions were reported in the US and the 7-day rolling number continues to hit new records.

On the corporate side, Netflix shares tanked after the company reported disappointing earnings and warned of weak subscriber growth for Q3, saying, “growth is slowing as consumers get through the initial shock of COVID and social restrictions”.During the week, the Dow Jones jumped 2.3% and the S&P500 rose 1.3%, whereas the Nasdaq lost 1.1%.

Play of the WeekNASDAQ vs DOW (New vs Old)

Since the outbreak, it has been evident that Technology companies which are typically newer and viewed as more dynamic business models have been outperforming the ‘blue-chip’ companies that are well-established and have large infrastructures in place. For the year, the tech-heavy Nasdaq is up 15% and is even 7% higher than the pre-coronavirus peak. Compare this, to the Dow Jones which still remains down ~7% for the calendar year and 9% down from the peaks. 

This week with earnings season getting into full swing, Tech companies such as Microsoft, Intel, American Express, Tesla and Twitter are due to report to the market. The big question will be answered; have these Tech companies really been outperforming their peers as much as the share prices are currently reflecting. There is a lot of speculation going on right now as to which will be the next outperformer, the continuation of Tech or a cycle back into the undervalued names. A lot of which will be given much more confirmation on the other side of the reports. 

Commodities

Oil finished the week at $40.6 a barrel after OPEC+ agreed to trim record output cuts of 9.7 million bpd imposed earlier this year by 2 million bpd starting in August.

Gold gained 0.6%, for the week in its sixth straight weekly gain to $1,810US – the metal was also boosted by a weaker dollar. 

Iron Ore was boosted this week to $107USD.

Looking Ahead…

Investors are wary of what the government will outline for its Covid support plan after September. Thursday the federal government is to announce its plan for the JobKeeper subsidy beyond September.

The index has not had back-to-back sessions of gains in a fortnight, a theme that may continue as continue to aim to find a next direction. On the company specific front, a number of mining companies will release their quarterly production reports. Including; South32, BHP, Oil Search, Oz Minerals, Evolution, Galaxy, Newcrest, and Santos. Megaport, Sydney Airport, and ResMed are also expected to release updates to the market.