S&P/ASX 200 morning report – Service Stream & Telsa shares on watch

The S&P/ASX 200 (ASX: XJO) is expected to follow a negative lead from US markets and open lower on Thursday. Here’s your daily ASX morning report.

ASX records strongest day in three months

The ASX 200 recovered strongly on Wednesday, bouncing 2.4% higher with just 17 shares finishing lower. The industrial sector led the market higher, rising 4% behind a strong recovery in Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD), as cases continued to fall in Victoria and border restrictions are loosened.

Service Stream Limited (ASX: SSM) was the standout, the NBN installer finishing 14.0% higher after NBN Co announced it would be offering a fibre-to-the-home service for up to two million Australian households as part of a $3.5 billion upgrade.

The depth of the Victorian lockdowns was reflected in August retail sales, which fell 4.2% month-on-month, but more than 12% in Victoria. This was still 4.9% higher than 2019, showing the sharp recovery once conditions return to normal. Adventure retailer Kathmandu Holdings Ltd (ASX: KMD) fell 8.5% on the news, announcing an 85% fall in profit for the financial year to just $8.9 million.

Keating backs MMT, Telsa Battery Day disappoints

Paul Keating delivered an extraordinary and much-needed rebuke to the perceived lack of action from the RBA, calling out the Board’s ‘indolence’ on the issue. He continued suggesting the central bank should be explicitly supporting the government, so the country does not experience a massive fall in unemployment.

Instead of directly funding Government stimulus, the RBA is buying bonds from the banking sector to keep rates artificially low. It’s clear fiscal stimulus is needed and the cost of a job saved today is far higher than an extended period of unemployment. It’s difficult not to agree with the sentiment, given the pain experienced in Australia, and await what is expected to be an expansive Federal Budget in October.

Featured video: Modern monetary theory (MMT) explained

Elsewhere, Westpac Banking Corp (ASX: WBC) economist Bill Evans forecast the RBA will cut interest rates to just 0.1% in October, while the AUD has fallen to $0.71 during the week.

Tesla Inc (NASDAQ: TSLA) remains under selling pressure, falling 10.4% overnight after announcing its $25,000 car would not be available for at least another three years and flagging issues with the stubbornly high cost of batteries.

Lack of stimulus catching up with markets, Nike delivers

The sell-off continues in the US, with the Nasdaq down over 3% on the back of weakness in Tesla, and the S&P 500 similarly falling 2.4%.

It has become clear that a second round of stimulus measures is unlikely to be forthcoming, the Republicans and Democrats at an impasse to the detriment of the US population. This despite the Federal Reserve continuing to stress the importance of more economic support.

With COVID-19 cases spiking globally again, Johnson and Johnson’s (NYSE: JNJ) announcement of a drug trial with 60,000 people didn’t capture the excitement of markets. Nike Inc. (NYSE: NKE) showed its resilience, surging 13%, after announcing an 11% increase in profit in the quarter to US$1.5 billion, pushed higher by online sales and its Chinese expansion.

European markets bucked the trend, finishing 0.5% higher, as both Adidas (DE: ADSGn) and Puma (DE: PUMA) rallied by over 4% on Nike’s strong performance.

This article 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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Free: Our Ultimate BNPL Sector Report

Afterpay, Zip Co, Sezzle… is BNPL the opportunity of a lifetime? Or is the sector a ticking time bomb? Our analyst’s 7,500-word report, Our Ultimate BNPL Sector Report, takes a deep dive into the BNPL sector and shines a spotlight on each of the major players in this booming market. You can get the full report right now (for FREE) by clicking the button below.

Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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