ASX shares and the S&P/ASX 200 (INDEXASX: XJO) are expected to open flat Tuesday morning according to futures in Sydney. Here’s what you need to know.
Market Recap
The ASX 200 closed above 6,000 points for the third straight day on Monday, despite falling 0.7% for the session. Tech stocks were the only positive sector and the major miners being the biggest detractors, including BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO), which fell 1.7% and 1%, respectively, amid signs of a rebound in Brazilian exports reported by Vale S.A.
Chinese shares added to last week’s 7% gain, with the Shanghai Composite up 5.7% on Monday as an influential newspaper suggested the Communist Party valued a strong bull market for equities. Is the People’s Bank of China following the Bank of Japan’s lead?
The unstoppable march of the technology sector continued in the US with the Nasdaq adding 2.3%, the S&P500 1.4% and both Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) hitting new all-time highs.
Digital payments processing business Square (NASDAQ: SQ) rallied 10% on the back of expectations it can grow to dominate the direct deposit market. Anyone who has used the hardware would know user friendly it is.
It seems all markets are focusing on any good news, like German manufacturing orders recovering 10.4% in May, yet still 29.3% down on February’s level. In my view this should be of concern to all investors and now is the time to ensure your portfolio is well diversified.
Virgin part two
Creditors of Virgin Australia Holdings Ltd (ASX: VAH) are said to be considering their options with the Takeover Panel in an effort to recover more than the 10-20 cents in the dollar under Bain Capital’s winning bid. Once again, this illustrates that debt holders are the real owners of any business.
Regenerative medicine group Mesoblast Ltd (ASX: MSB) jumped another 11.3% after receiving approval to expand its Remestemcel tests to children. Meanwhile, Event Hospitality & Entertainment Ltd (ASX: EVT), which owns a network of cinemas and both the Rydges and QT hotel chains, announced its dividend would be cut but that they had successfully accessed a further $205 million in debt. If you ask me the company is facing an existential crisis, with more debt not necessarily the best course of action.
Interesting fact: the total capital, not only debt, raised in June 2020 was $26 billion with Qantas Airways Ltd (ASX: QAN) leading the way following its huge capital raising. After a quiet crisis, Berkshire Hathaway Inc. (NYSE:BRK.A) announced the acquisition of Dominion Energy Inc. (NYSE:D) for $9.7 billion, formally making a move into the storage and transmission of natural gas.
Good, bad and ugly
Eurozone retail sales surged 17.8% in April, but are still below February’s numbers. The positive news was enough to send the Eurostoxx 50 1.7% higher, with only one constituent falling. The leaders were once again the major banks, including ING Groep NV (AMS: INGA), and the manufacturer of Mercedes cars, Daimler AG (ETR: DAI), in hopes of improving exports to Asia.
Australian Super announced that their aggressive Balanced option had finished the year in positive territory, delivering a financial year return of 0.52%. Given the quick turnaround from 30 June, I’d suggest that the fund’s massive unlisted property, infrastructure and utility assets have not been fully repriced yet.
On the positive side, ANZ reported that job advertisements were up a further 42% in June, albeit some 41% lower than February. Nonetheless, this should be positive for the likes of jobs platform Seek Ltd (ASX: SEK) and leasing business McMillan Shakespeare Ltd (ASX: MMS). I recently wrote an article: “Seek Ltd – Buy, Hold or Sell?”
Finally, the New York stock exchange welcomed its latest unicorn with rental property insurer Lemonade Inc. (NYSE: LMND) up 140% on debut.
Drew is one of the founders of Wattle Partners. He is an experienced financial and investment adviser with expertise in self-managed superannuation funds, superannuation strategies, investment analysis and portfolio construction. Drew is a Partner at Wattle Partners.
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