S&P/ASX 200 morning report – RBL, CBA & CGF shares in focus

The S&P/ASX 200 (ASX: XJO) is expected to edge lower when the market opens on Friday according to the latest SPI Futures. Here’s what’s making headlines.

ASX rallies, RBA planning more QE

The ASX 200 rallied 0.5% on a mixed day. The key result yesterday was a slightly better than expected unemployment result, the rate increasing to 6.9% despite Victoria shedding another 1.1% of jobs. Queensland stands out with the highest level of unemployment at 7.7% despite being well sheltered from the virus, suggesting border closures are having a large economic impact.

Second was the RBA Governor’s speech in which he effectively locked in another rate cut in November and confirmed that Quantitative Easing policies would be in full effect, pushing from three-year to ten-year bonds as they seek to stimulate lending from the banks.

The financial sector was a key beneficiary adding 0.6%, with the Commonwealth Bank of Australia (ASX: CBA) share price rallying 0.9%. CBA stands out as the bank most able to offset shrinking net interest margins via its strong franchise.

Similarly, the energy sector led the market, up 2.5%, as Chinese and Asian demand for oil points to a stronger 2021 recovery. Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH) both finished 4.0% higher for the day.

Pro Medicus signs another deal, Redbubble booming

The CEO of the newly recapitalised Virgin Australia Holdings Ltd (ASX: VAH) unexpectedly stepped down on Thursday, not a great look given the apparent support from private equity during the bidding process.

Radiology software provider Pro Medicus Limited (ASX: PME) jumped 7.7% on news of a $10 million contract with a German hospital, supporting the cross border opportunity for the company.

Challenger Ltd (ASX: CGF) shares continued to rally, adding 2.6% yesterday and 2.1% the day prior after reporting a 46% jump in annuity sales, driven primarily by Japan. The Japanese have been dealing with near-zero interest rates for decades, so the spiking demand for guaranteed income annuities may be a look into Australia’s future.

Elsewhere, Redbubble Ltd (ASX: RBL) reported another 116% growth in marketplace revenue, supporting a 149% jump in gross profit to $64.5 million. The company has been one of the best performing ASX shares in 2020, adding 11.5% yesterday and up 500% for the year as consumers flock to the well-priced, artist-focused products.

RBL share price chart

Source: Rask Media RBL 1-year share price chart

Morgan Stanley delivers, surging COVID-19 cases in Europe

The US markets managed to pare early losses, the S&P 500 and Nasdaq falling 0.2% and 0.7%, respectively. Tech continues to underperform, with smaller companies leading the way as all eyes turn to the recovery.

The banking sector continues to benefit from heightened volatility in markets with the Australian-led Morgan Stanley Inc. (NYSE: MS) reporting 20% growth in sales and 25% in profits to US$2.7 billion for the September quarter. The investment bank has a smaller lending book than its competitors and the recent acquisition of Eaton Vance was highlighted as an alternative to dividends at a time when they are still restricted by the regulator.

The French capital instituted curfews as European case averages exceed the US, sending the Euro Stoxx down 2.5%. Despite concerns around the length of the Victorian lockdown, Australia’s position as a global leader has been solidified.

Back to the US and jobless claims unexpectedly spiked by 53,000 to 898,000 as employers continue to lay off workers even as businesses are allowed to reopen. This trend has been brought forward in the US but we will likely see it in both October and April in Australia.

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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, Drew does not have a financial or commercial interest in any of the companies mentioned.

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