The S&P/ASX 200 (INDEXASX: XJO) is expected to fall on Thursday according to the latest data from the Sydney Futures Exchange. Here’s what you need to know.
The party continues
The ASX200 held on to a small gain on Wednesday, adding 3.5 points despite dropping 1% at the open.
CSL Ltd (ASX: CSL) shares almost singlehandedly floated the market, with its 2.6% rally adding 10 points to the ASX 200 alone. Similarly, Wesfarmers Ltd (ASX: WES) benefitted from a round of broker upgrades following stronger than expected retail sales figures.
Once again, gold miners and healthcare rallied, benefitting from a weaker AUD with junior miner Gold Road Resources Ltd (ASX: GOR) up 6% and Northern Star Resources Ltd (ASX: NST) managing a similar recovery. After years of being underappreciated gold has finally moved into the mainstream amid the COVID-19 volatility, offering one of the few uncapped returns in the market. In my opinion, gold should form a part of all long-term portfolios in this ‘new normal’ for its hedging benefits but investors need to consider the benefits of hedged or unhedged positions.
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‘As long as it takes’
They were the words of US Federal Reserve Chairman Jerome Powell overnight as he announced US interest rates would likely remain on hold until at least 2022.
Investors seemed to focus more so on his comments around the potential for long-term damage to the economy, sending all markets down with the S&P500 -0.5%, Euro Stoxx -0.8% and the Dow Jones ending down 1%.
Technology continued to rally, Microsoft (NASDAQ: MSFT) adding 3.7%, with the more cyclical beneficiaries including Boeing (NYSE: BA) and American Express (NYSE: AXP) off 6% and 4%, respectively.
There has been growing coverage of the increasing cash holdings building up in the portfolios of professional investment managers and suggestions that this extended rally may have been driven by short-sellers now covering their position. If this is the case, expect the current daily whipsaw to continue with buyers re-entering the market on any falls.
Harvey Norman…
Whitegoods and electronics retailer Harvey Norman (ASX: HVN) delivered what appeared to be a fairly innocuous sales update to the market, announcing sales were up 17.5% on its 2019 result for the five months ended May 31. The result also reinstated the previously ‘deferred’ dividend via the payment of a 6-cent special dividend, sending the share price up 7.3% and leading all constituents.
Kogan Ltd (ASX: KGN) appears to be seeking to capitalise on its recent popularity, raising $115 million at a discount of just 7.5%. In my view, this raising is one to avoid as it smells of opportunism.
Toll road owner Transurban’s (ASX: TCL) troubled Westgate Tunnel project has moved to the Supreme Court after CIMIC (ASX: CIM) and John Holland sought to tear up the $6.7 billion build citing ‘force majeure’ due to unexpected soil contamination issues. It’s looking increasingly unlikely the project will be finished anytime soon placing pressure on the extension to Transurban’s leases on its other toll roads. With TCL having recovered most of its losses already, this is one we would be avoiding for the time being with a potential capital raising around the corner.
This report was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.
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