Scaling up or winding down
The ASX 200 (ASX:XJO) followed a strong global lead pushing 1.7% higher, with all sectors benefiting. The most stunning performance has come from Afterpay Ltd (ASX:APT) which after hitting another all-time high has become the 19th most valuable company at $18 billion; this despite losing $32 million last year.
Similarly overseas, Amazon Inc. (NASDAQ:AMZN) has achieved the rare feat of delivering nine straight weekly gains, the latest sending the NASDAQ index up 0.5%.
Elsewhere, Tesla Inc. (NASDAQ:TSLA) may be on the verge of a long awaited inclusion into the S&P 500 (+0.5%) after delivering over 90,000 cars in the second quarter, beating expectations despite the COVID-19 shutdowns.
This comes as the US economy showed signs of turning the corner, adding 4.8 million jobs in June, sending unemployment down to 11.1%, far better than estimated. Turning to Europe, the markets benefited from the US jobs recovery, despite the potential for another round of lock-downs, with the Eurostoxx 50 up 2.8% and every company in positive territory, lead by the banks including Societe Generale (EPA:GLE) +5.5% and ING Groep (AMS:INGA) +4.3%.
After announcing stronger than expected results just a few short weeks ago, online furniture retailer Temple & Webster Ltd (ASX:TPW) jumped on the opportunity to raise another $40 million; the share price was up 17.9% after the trading halt.
I prefer TPW over something like Metcash Ltd (ASX:MTS) which interestingly announced that only 180 of its 1,400 premises had an online e-commerce offering. On the negative side, evidence of how difficult the aftermath of COVID-19 may be continues to filter through, with reports that 1 in 10 off-the-plan apartment sales are collapsing as stretched banks pull funding and dwelling approvals down another 16%.
Reports suggested that $236 billion in loans have been deferred, equal to around 8% of all loans, and with a 25-35% fall in commercial and residential property predicted the prospects of negative equity are incredibly high; ANZ Banking Group Ltd (ASX:ANZ) was among the leaders on Thursday, adding 2.0%.
Ramsay Healthcare Ltd (ASX:RHC), the private hospital operator announced that the business was back to nearly 100% capacity in Australia after opening all elective surgery hospitals, which the 2nd of July saw the end of 170 years of insurance for AMP Ltd (ASX:AMP); a great decision that sets the company up for the future.
Geopolitical risk is on the rise once again, with the EU and UK still struggling to agree on an appropriate Brexit deal and China successfully passing then quickly enforcing its new security law. Government’s around the world have opened their borders to HK residents and the US has responded by removing trade benefits as well as banning the likes of Huawei and ZTE (SHE:000063) from its telecommunications network.
This growing rhetoric stands as the biggest risk to Australia given our reliance on commodity and education exports to the Chinese. It’s distribution season, so don’t confuse falling ETF, A-REIT and managed fund unit prices for unexpected capital losses.
The structures are uniquely different though, with funds required to distribute all profits, or not pay a distribution if a loss is made which will be the case for many, and listed income companies able to declare dividends regardless of performance.
The daily report is written by Drew Meredith, Financial Adviser and Director of Wattle Partners.