Fifth Week of July
In a volatile week, the market finished back to where it started after an end of week sell-off erased all positivity from early in the week. The early news of JobKeeper & Seeker being extended, albeit scaled back, was enough give markets the confidence to rally back up to its monthly-highs mid-week but sentiment was damped as global trade tensions weighed on our market. The fear is that US and China will resume their harmful dispute, this, coupled with investors already concerned as to how the economy will recover post-covid was enough for a risk-off shift.
On a company specific level, the expected negative earnings season has gradually kicked-off, and it was still worse than expected. IAG dropped on its report, whilst Vicinity Centres also warned the market its figures would struggle due to the shutdown.
Top/Bottom Performers (in ASX200)
- Resolute Mining +17.7% (RSG.AX)
- AP Eagers +16.8% (APE.AX)
- Orocobre +13.2% (ORE.AX)
- Alumina -7.2% (AWC.AX)
- Cooper Energy -7.1% (COE.AX)
- Western Areas -6.6% (WSA.AX)
Psychological fatigue with social distancing is emerging as a major challenge for curbing a pandemic now into its eighth month. That’s especially so among young adults who are less fearful of the coronavirus, and suffer greater economic and social costs when they stay home.
From Japan to Spain and the U.S., infections among millennials and Generation Z are driving new waves of cases which don’t seem to be abating despite re-imposed restrictions. The worrying trend reflects that social distancing curbs are proving untenable over a long period, despite their initial efficacy in flattening the virus curve across the world earlier this year.
For the week, the Dow declined 0.7% and the S&P 500 lost 0.2%, both suffering its first negative week in four. The Nasdaq tanked 1.3%, its first back-to-back weekly losses since May.
The Nasdaq was led lower by a 16% plunge in Intel shares and a 5.6% decline in Tesla.Interestingly, both companies provided better-than-expected results in the latest quarter but gave guidance for the current period that trailed analyst estimates. This week will see, Facebook reports results on Wednesday, followed by Apple, Amazon and Alphabet on Thursday.
In addition to some of the largest Tech stocks reporting this week, an event that undoubtedly test the Nasdaq’s high valuation. Global Energy Companies such as Shell and BP will report their earnings with their dividends being the main focus of these reports. Oil averaged just $29 a barrel the past quarter, compare to the first quarter’s average of $51.
Play of the Week – Local Covid Cases
There’s plenty happening in global markets this week for the Aussie market to take direction from this week but the spread of coronavirus cases will be pivotal this week and markets will react as such. As it stands, cases are back up to the peak number they were previous but it is dispersed very differently; with the majority of cases being in Victoria but slowly spreading into NSW. Both states will be closely eyed as to whether they can contain the numbers while low, or will the nature of the virus take over and exponentially spread.
Most recently, NSW reported 14 new cases on Sunday as a student at a south-west tested positive and another three restaurants also reported a related positive case. This is concerning because the last restaurant, the Thai Rock, is now linked to 67 new cases from a single worker.
Oil finished the week at $41.30 a barrel – a gain of 1.7% for the week, its third weekly rise in four.
Gold finished just under $1900, after six straight days of gains, the commodity added 4.8% for the week – its seventh straight weekly gain.
Iron Ore is still trading at the high levels of $107.
The US earnings season continues next week, with companies such as Alphabet, Apple, Amazon, Facebook, Pfizer and Gilead Sciences reporting their quarterly results. Meanwhile, the Fed’s monetary policy meeting will be keenly watched as well as GDP data for the US.