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US markets pointing to flat open

Daily Market Update (42)

More of the same, 2020 ASX losses evaporate, Harvey Norman (ASX:HVN) falls on strong profit, US markets pointing to flat open

The ASX200 (ASX:XJO) weakened throughout the day finishing 0.6% higher, but has now overcome all losses sustained in 2020 and is on track for the best November in several decades. 

The sustained recovery on the back of positive vaccine news reiterated the importance of remaining investors and not capitulating when faced with uncertainty, those who sold in March have missed out on significant returns. 

Once again it was the financials and energy sectors benefitting most with Origin Energy (ASX:ORG) adding another 4.3%. 

Harvey Norman Ltd (ASX:HVN) fell 2.6% after announcing a 160% increase in net profit on the back of a 28.2% increase in sales for the first four months of the year. 

The sell-off suggests investors are growing wary of the sustainability of the recent spike in spending, a sentiment I would agree with. 

Markets are still digesting the massive stimulus programs announced in Victoria and New South Wales in recent weeks with debt-funded infrastructure and housing support the story of the day, but seemingly little in the way of stimulus for those CBD based companies most impacted. 

Fisher & Paykel (ASX:FPH) wins big from COVID-19, Fletcher Building (ASX:FBU) overcomes weaker construction

Fisher & Paykal Healthcare (ASX:FPH) has been one of the biggest winners from the pandemic with their specialist respiratory support and ventilators seeing huge demand from hospitals around the world. 

So much so that management have warned investors not to expect the trend to continue. 

The company reporting an 86% increase in profit to $214.8 million for the six months to September, on the back of a 59% increase in revenue, both were well above expectations. 

The result was driven by a near quadrupling in hardware sales to hospitals and resulted in a 33% increase in the final dividend one of the few companies able to sustain this. 

Shares fell 2.2% on the news but the company remains a high quality option for those seeking healthcare exposure. 

Australian construction fell 2.6% in the September quarter, but this wasn’t enough to slow Fletcher Building (ASX:FBU) down, management guiding to EBITDA of NZ$305 to NZ$320 million following a 1% increase in revenue in the first four months. 

The company announced its intention recommence dividend payments in early 2021 but in our view there are alternatives with more targeted exposures to the infrastructure boom.

US economic data pushes market lower, digital payments, WFH plays rally

US markets will offer a weak lead to the ASX this morning, with a deluge of data resulting in mixed results. 

The Dow Jones and S&P500 pulled back from recent highs, down 0.6% and 0.1%, with the Work From Home rotation back in swing as the likes of PayPal (NASDAQ:PYPL) and Zoom (NASDAQ:ZM) added around 4.0% each. 

The key driver was weaker than expected economic data which suggests the US recovery may be slowing despite the lack of any real economic shutdowns. 

Claims for unemployment benefits increased for the first time since July, personal incomes similar to our own wage growth fell 0.7% and with the impending cancellation of pandemic stimulus cheques the economy is on tenterhooks. 

This comes at the same time that the US trade deficit remains elevated sending more capital overseas. Thanksgiving Day is Thursday in the US with markets closed as a result.

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