S&P/ASX 200 morning report – what you need to know

The S&P/ASX 200 (INDEXASX: XJO) is tipped to open higher on Friday. Here’s the news and the ASX shares to watch as we close out the week.

Stock market recap

The ASX 200 followed a strong global lead pushing 1.7% higher, with all sectors benefitting. The most stunning performance has come from Afterpay Ltd (ASX: APT) which, after hitting another all-time high, has become the 19th most valuable company at $18 billion; this despite losing $32 million last year.

Similarly overseas, Amazon.com Inc. (NASDAQ: AMZN) has achieved the rare feat of delivering nine straight weekly gains, the latest sending the NASDAQ index up 0.5%.

Elsewhere, Tesla Inc. (NASDAQ: TSLA) may be on the verge of a long-awaited inclusion into the S&P 500 (+0.5%) after delivering over 90,000 cars in the second quarter, beating expectations despite the COVID-19 shutdowns. The Dow Jones Industrial Average also finished in the green, rising 0.36%.

This comes as the US economy showed signs of turning the corner, adding 4.8 million jobs in June, sending unemployment down to 11.1%, far better than estimated.

Turning to Europe, the markets benefitted from the US jobs recovery, despite the potential for another round of lockdowns, with the Eurostoxx 50 up 2.8% and every company in positive territory. This was led by the banks, including Societe Generale (EPA: GLE) which rose 5.5% and ING Groep (AMS: INGA) which finished 4.3% higher.

ASX shares making waves

After announcing stronger than expected results just a few short weeks ago, online furniture retailer Temple & Webster Ltd (ASX: TPW) jumped on the opportunity to raise another $40 million; the share price was up 17.9% after the trading halt. I prefer TPW shares over something like Metcash Ltd (ASX: MTS), which interestingly announced that only 180 of its 1,400 premises had an online e-commerce offering.

On the negative side, evidence of how difficult the aftermath of COVID-19 may be continues to filter through, with reports that 1 in 10 off-the-plan apartment sales are collapsing as stretched banks pull funding and dwelling approvals down another 16%. Reports suggested that $236 billion in loans have been deferred, equal to around 8% of all loans, and with a 25-35% fall in commercial and residential property predicted, the prospects of negative equity are incredibly high; Australia and New Zealand Banking Group (ASX: ANZ) was among the leaders on Thursday, adding 2.0%.

Private hospital operator Ramsay Health Care Limited (ASX: RHC) announced that the business was back to nearly 100% capacity in Australia after opening all elective surgery hospitals. Meanwhile, the 2nd of July saw the end of 170 years of insurance for AMP Limited (ASX: AMP); a great decision that sets the company up for the future.

Geopolitical risk up ahead

Geopolitical risk is on the rise once again, with the EU and UK still struggling to agree on an appropriate Brexit deal and China successfully passing then quickly enforcing its new security law.

Governments around the world have opened their borders to Hong Kong residents and the US has responded by removing trade benefits as well as banning the likes of Huawei and ZTE (SHE: 000063) from its telecommunications network. This growing rhetoric stands as the biggest risk to Australia given our reliance on commodity and education exports to the Chinese.

Finally, it’s distribution season, so don’t confuse falling ETF, A-REIT and managed fund unit prices for unexpected capital losses. The structures are uniquely different though, with funds required to distribute all profits, or not pay a distribution if a loss is made which will be the case for many, and listed investment companies able to declare dividends regardless of performance.

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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As we emerge from COVID-19, some tech companies are growing faster than ever. Rask’s investment analysts have identified 3 growth stocks set to benefit. Big time.

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