Aussie stocks continued to climb the wall of worry, reaching their highest level in nearly a month despite a morning of profit warnings, capital raisings and analyst downgrades.
The ASX 200 rallied 40 points or 0.7 per cent to 5427 by mid-session, a level last seen in mid-March when the market was in freefall. The rebound that commenced a week later has seen the benchmark index reclaim more than a thousand points since its March 23rd seven-year low.
Investors with a view to the long term have been willing to look beyond the grim short-term prospects for corporate profits to the recovery ahead. Today’s newsflow was typical of the current market trend: a profit warning from Westpac; analyst downgrades for CSL, James Hardie, Janus Henderson and GWA; dividend deferrals from InvoCare and Virtus Health; and news of the worst business conditions on record as confidence collapsed. The dash for cash continued with QBE and InvoCare the latest to tap capital markets for more funds. Yet the market marched higher.
The morning’s best performers were companies that were quick to bolster their balance sheets during these difficult times. Broadcaster Southern Cross Media surged 30.8 per cent, outdoor advertiser oOh!Media 21 per cent and travel agent Flight Centre 15.5 per cent. All three companies raised funds earlier this month.
Buy-now-pay-later leader Afterpay was another strong performer, rising 18.8 per cent after confirming that its balance sheet is strong and it sees no need to raise capital. The tech sector as a whole climbed 4.3 per cent, reflecting the outperformance of the Nasdaq, which bucked the downtrend in the US overnight by rising 0.48 per cent as the S&P 500 sagged 1.01 per cent and the Dow 1.39 per cent. While Afterpay set the pace, Computershare put on 3.8 per cent, Appen 5.5 per cent and Xero 1.3 per cent.
Gold stocks were the morning’s other standout, flying 9.3 per cent to their strongest level in more than a month as the precious metal scaled fresh seven-year highs. Resolute Mining gained 14.1 per cent, Gold Road Resources 13 9 per cent, Northern Start 11.6 per cent and Newcrest 10.2 per cent. Gold rose another $19.70 or 1.1 per cent this morning to $US1,781.10 an ounce.
The financial sector swiftly overcame a warning from Westpac that its first-half profit will be affected by provisions for credit losses due to the Covid-19 pandemic. The bank also announced it was setting aside $1.43 billion dollars to deal with the fallout from the money laundering scandal and asset write-downs. The share price was last up 0.3 per cent. CBA and ANZ edged up 0.1 per cent and NAB 1.4 per cent.
NAB’s monthly survey of businesses confirmed that confidence and trading conditions cratered last month as the government announced lockdowns to contain the spread of the coronavirus. The confidence measure dived from -2 in February to -66. Conditions fell from zero to -21.
“Business confidence has fallen to its lowest ever level – and in a single month,” NAB chief economist Alan Oster said. “We expect a recession of unprecedented speed and magnitude for the Australian economy over the next three quarters.”
A bright morning on Asian markets saw China’s Shanghai
Composite add 0.7 per cent, Hong Kong’s Hang Seng 0.9 per cent and Japan’s
Nikkei 1.9 per cent. S&P 500 index futures were recently up 35 points or 1.3
Brent crude rose 53 cents or 1.7 per cent this morning to $US32.27 a barrel.
The dollar climbed 0.7 per cent to 64.26 US cents.
What’s hot today and what’s not:
Hot today: Shareholders in NetLinkz Limited (ASX:NET) breathed a sigh of relief after the cloud network solutions provider emerged from a month-long trading halt with news that the balance sheet was robust and it stood by its revenue forecast. The company said its Chinese staff were returning to work on site as lockdown restrictions eased. Cash and cash equivalents of $3 million left the firm in good shape to continue to commercialise its cloud offering. The share price jumped 43.5 per cent.
Not today: Desperate times call for desperate measures. Shareholders in Dacian Gold (ASX:DCN) had to grin and bear it as the gold miner raised funds at a savage discount to pay down its debts. The miner emerged this morning from a ten-week trading halt and promptly dived 35.3 per cent to 55 cents after raising $70 million at 30 cents – less than a quarter of the company’s last traded price of $1.40 back in February.