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Australian shares hit a four-week low before reversing higher at the start of a huge week for financial markets as Americans go to the polls and the Reserve Bank weighs fresh stimulus measures.
The S&P/ASX 200 fell as low as 5904 following the local market’s worst week since March, then rebounded. By mid-session the index had gained 26 points or 0.4 per cent at 5953.
What’s driving the market
Caution initially prevailed ahead of a week crammed with risk events. The market lost as much as 24 points before a reversal in US index futures encouraged buyers to step in. S&P 500 futures were recently up two points or less than 0.1 per cent after dropping more than 0.3 per cent.
“We have a busy week for markets with the US presidential election on Tuesday the big ticket,” NAB Currency Strategist Rodrigo Catril said. “Covid-19 infections and [the] prospect of new lockdowns is another theme that will keep investors preoccupied… For Australia, the RBA is expected to lower rates on Tuesday, cutting the cash rate, three-year yield and the term funding facility rate to 0.1%. The Bank should also announce a QE [quantitative easing] programme.”
The market entered the week burdened by soft overseas leads. The S&P 500 fell 1.21 per cent on Friday to extend its biggest weekly loss since March to 5.6 per cent.
Investors kept a wary eye on negative developments in the struggle against Covid. England announced overnight it was returning to lockdown for a month. The US recorded its highest single-day total of new cases since the start of the pandemic.
Trade difficulties with China were underlined by reports of delays at Chinese airports in processing Australian lobster exports. The news heightened concerns about deteriorating relations with our biggest trading partner. The latest dispute followed skirmishes over beef, barley, wheat, cotton and coal earlier this year.
Going up
Gains in utilities, property groups and other traditional defensive stocks led the advance. Energy infrastructure provider APA Group climbed 2.6 per cent, property group Dexus 2.3 per cent, Scentre Group 2.1 per cent, AGL Energy 1.9 per cent and Goodman Group 1.6 per cent. GPT Group rose 2.4 per cent after announcing plans to sell its 25 per cent interest in Sydney prestige office block 1 Farrer Place.
Other defensive movers included Telstra +1.5 per cent, goldminer Newcrest +1.4 per cent, supermarket Coles +1.3 per cent and Woolworths +0.9 per cent.
A bifurcated financial sector saw a sharp divide in fortunes after Westpac reported full-year earnings (more below). Wealth manager AMP surged 8 per cent after clarifying details of a takeover offer from US investment manager Ares. AMP shares traded at $1.65, well short of the implied offer value of $1.85 per share. ANZ rallied 2.4 per cent, NAB 1.2 per cent and Macquarie Group 0.7 per cent.
Telecom Amaysim soared 11.2 per cent after announcing the proposed sale of its mobile business to its wholesale partner Optus for $250 million. If shareholders approve the sale, the company will be delisted and wound up while the Amaysim brand continues under Optus ownership.
Going down
A “disappointing” full-year result sent shares in Westpac down 1.4 per cent to a near-four-week low. Statutory net profit fell 66 per cent to $2.29 billion as cash earnings declined 62 per cent..
“2020 has been a particularly challenging year and our financial result is disappointing,” Westpac Group CEO Peter King said.. “Our earnings have been significantly impacted by higher impairment charges, increased notable items and the sharp decline in economic activity.”
Commonwealth Bank dipped 0.1 per cent. Insurers IAG and Suncorp shed 1.2 and 1 per cent, respectively.
Fortescue Metals was the worst of the iron ore majors, falling 0.5 per cent. BHP gained 0.5 per cent and Rio Tinto 0.3 per cent. Other market drags included Transurban -0.1 per cent and CSL -0.3 per cent.
Other markets
Rallies on Asian markets helped lift US index futures. China’s Shanghai Composite climbed 0.2 per cent, Hong Kong’s Hang Seng 0.9 per cent and Japan’s Nikkei 1.4 per cent.
Oil continued to crumble in the face of weakening demand as Europe slides back into lockdown. Brent crude skidded $1.21 or 3.2 per cent to $US36.73 a barrel. Gold dipped $1.90 or 0.1 per cent to $US1,878.10 an ounce.
The dollar flirted with the 70 US cents level before accelerating 0.16 per cent to 70.18 US cents.
What’s hot today and what’s not:
Hot today: A whiff of US government backing for a zinc-lead project in Greenland helped lift Ironbark Zinc (ASX:IBG) to a near two-year high. Ironbark announced it had signed a Letter of Interest with the US federal government’s official credit export agency, EXIM. The non-binding letter concerns loan financing of up to $216 million for the US content of the Citronen project. IBG Managing Director Michael Jardine described the letter as a “significant, and potentially transformational, milestone”. IBG’s share price more than doubled to 3.2 cents before shaving its rise to 61.5 per cent at 2.1 cents.
Not today: Specialty retailer Dusk Group (ASX:DSK) picked a tough week to list on the ASX. The scented candle seller’s shares opened well shy of their $2 prospectus price, but by lunchtime had recovered a fraction to $1.73, a decline of 13.5 per cent. The initial public offering raised $70 million. The company sells oils, candles and diffusers through a store network and website.
