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Aussie stocks marched towards their sixth winning week in seven as Prime Minister Scott Morrison unveiled a roadmap to restart the economy.
The S&P/ASX 200 shrugged off soft pre-market futures to rise 40 points or 0.8 per cent. A close around these levels would deliver a weekly gain of roughly 3 per cent following strong advances on Monday and Tuesday.
The National Cabinet met this morning to nut out a three-stage plan to ease the economy out of lockdown. In the last half hour, Prime Minister Morrison announced restaurants, cafes and shops will be allowed to reopen under stage one of the plan, along with libraries, playgrounds and community centres. Regional travel will also be allowed. The next stage will include reopening cinemas, gyms and campgrounds. A third stage will see a full return to work, as well as the resumption of interstate travel and the reopening of food courts.
Consumer stocks likely to benefit from the lifting of restrictions made solid gains. Retailer Harvey Norman jumped 6.7 per cent following a broker upgrade from Goldman Sachs. Webjet gained 10.3 per cent, Flight Centre 6.1 per cent, JB Hi-Fi 2.7 per cent, Star Entertainment Group 1.5 per cent and Crown Resorts 1.1 per cent. The dollar rose 0.8 per cent to 65.44 US cents.
Health and consumer staples – two sectors that have outperformed during the pandemic – were the morning’s worst performers. The health sector eased 1 per cent as CSL gave up 1.3 per cent and Cochlear 1 per cent. Consumer staples edged up 0.2 per cent as a 0.1 per cent decline in Woolworths offset a 0.2 per cent rise in Coles.
Banks and energy stocks have had the steering wheel for much of the week and dictated the market direction this morning. A 4.2 per cent rally in Macquarie Group suggests the 8 per cent decline in full-year net profit announced this morning was better than shareholders expected. The bank halved its final dividend as management took what CEO Shemara Wikramanayake described as “a cautious stance, with a conservative approach to capital, funding and liquidity”. Three of the big four high-street banks advanced between 0.3 per cent and 0.8 per cent. NAB dropped 0.4 per cent. Bank of Queensland gained 3.2 per cent.
Energy stocks outperformed in the US amid growing evidence of a return to rationality in oil markets following last month’s extraordinary plunge into negative prices. Here, Santos gained 2.5 per cent, Cooper Energy 2.6 per cent and Woodside 1.9 per cent. Brent crude bounced 33 cents or 1.1 per cent this morning to $US29.77 a barrel, reversing overnight losses.
The Reserve Bank’s quarterly monetary policy statement made bleak reading. The RBA expects unemployment to peak at 10 per cent this quarter and remain as high as 6.5 per cent two years from now. Gross domestic product is tipped to decline 8 per cent in the June quarter and six per cent in the December quarter before rebounding next year. The bank reaffirmed its commitment to keep the cash rate at 0.25 per cent until inflation reaches its 2-3 per cent target band and the economy makes progress towards full employment.
Wall Street passed a milestone overnight as the Nasdaq became the first of the three major US indices to turn positive for the year since the pandemic began. The Nasdaq climbed 1.41 per cent, helped by gains in big tech stocks that have seen increased activity since stay-at-home orders were imposed. The broader S&P 500 rose 33 points or 1.15 per cent.
A green morning on Asian markets saw China’s Shanghai Composite rise 0.5 per cent, Hong Kong’s Hang Seng 0.8 per cent and Japan’s Nikkei 1.8 per cent. S&P 500 index futures advanced 32 points or 1.1 per cent.
Gold rose $4.60 or 0.3 per cent this morning to $US1,730.40 an ounce.
What’s hot today and what’s not:
Hot today: Buy-now-pay-later companies have defied expectations that stock prices would crash as jobless millennials struggled to pay off debts. The share price of market darling Afterpay (ASX:APT) is back where it was in February before the pandemic crash. Rival Z1P (ASX:Z1P) is more than 100 per cent off its lows after a positive update this morning. The share price climbed 17.5 per cent on news monthly revenue increased by 81 per cent year on year during April to $15.1 million as it gained 70,000 new customers. Flexigroup (ASX:FXL) jumped 15.7 per cent.
Not today: Winners from the stay-at-home economy have rushed to take advantage of improved share prices by raising capital at levels unattainable before the pandemic. Marley Spoon (ASX:MMM) raised $16.6 million at $1.05 this week, more than four times the share price before COVID-19 sparked interest in the subscription home-meal service. The raising was oversubscribed and will be used to fund plans to expand the company’s offering around the world. The share price dropped 6.5 per cent this morning to $1.15.
