The Monday Report – 19 October 2020

This story features G.U.D. HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: GUD

By Greg Peel

Solid Week

It was a Friday kind of Friday on Friday as the ASX200 opened lower and continued to drift away to the close. It had been a strong week, providing an opportunity to lock in ahead of the weekend, and the index still managed to clock a 1.2% weekly gain.

There remains much to be concerned about globally. Here we’re still fretting over single-digit case-counts while countries across Europe are posting new record counts, including in the UK, where a no-deal Brexit is appearing ever more likely as well.

The daily case-count in the US is now more than double what it was at its lowest ebb, yet still this doesn’t seem to much worry Wall Street, which continues to put faith in a vaccine. Nor is stimulus a problem as (a) whoever wins the election will provide it and (b) if there is a vaccine by inauguration, it may not be needed.

One thing we know for sure is that international borders will be closed for a very long time. And look what happens when you let in bloody Kiwis.

All sectors closed lower bar two on Friday and those closing lowest were those having enjoyed a strong week.

Consumer discretionary rose 0.2%, aided by a solid trading update from GUD Holdings ((GUD)), which was worth 6.3% and silver on the winners’ board, with the bronze going to Super Retail ((SUL)) with 4.7% and just out of the medals, Corporate Travel Management ((CTD)), up 3.3% for some reason.

IT rose 0.3%, which is neither here nor there.

Gold medallist on the day was UR Westfield ((URW)), bucking the trend of weakness in the property sector (-2.1%) in rising 12.1% after an investor group declared it would oppose a proposal to sell EUR3.5bn worth of stock, which would include a sale by the former CEO.

Beyond property, energy (-1.1%), materials (-0.7%) and healthcare (-0.7%) were the worst performers having otherwise risen over the week, while the banks sat it out.

The worst performing stock was REIT GPT Group ((GPT)) down -4.7%. Also making that top five were Whitehaven Coal ((WHC)), back in selling mode down -3.8%, and Atlas Arteria ((ALX)), down -3.6% as France locks down once more.

The good news over the weekend is Melbournians can now travel 25km for a haircut and few more can attend regional pubs. Bad luck for other retailers, but it’s all slowly heading in the right direction.

I believe the futures were up 22 on Saturday morning.

Buying Spree

US retail sales rose 1.9% in September when economists had forecast only 0.7%. The breakdown nonetheless shows a clear bifurcation between strength in the work-from-home theme and weakness in hospitality/clothing etc. The suggestion is one of pent up demand being released, as shown by solid auto sales (also the stay-off-public-transport theme), among other things.

One presumes such numbers cannot continue if pent up demand has been pulled forward and sated, and WFH requirements are fulfilled, along with no further stimulus. Yet fortnightly consumer sentiment edged up to 81.2 from 80.4, noting 100 is neutral.

US industrial production fell -0.6% when economists had forecast a gain of 0.5% (they’re clearly not very good at this) to mark the first decline after five months of gains out of the depths. An ominous sign of a recovery losing steam on a growing case-count and lack of stimulus.

But Wall Street likes to accentuate the positive and aside from retail sales data, Friday brought news Pfizer expects to apply to the FDA for the emergency use approval for its vaccine candidate by late November.

The Dow was thus up 350 points early in the session, with additional help from Boeing. Boeing was the most influential stock in the price index even before Apple split and it jumped after the EU regulator gave the 737 Max a thumbs up. Apple, on the other hand, led further tech sector weakness.

It all began to fade away in the last hour in a Friday fashion to ensure the S&P500 closed flat and the Nasdaq lost -0.4%.

On the stimulus front, the Democrats and the White House are still at it, believe it or not, and the latter has agreed to include an allocation for a national virus-testing strategy, as it becomes increasingly more desperate. Trump has pushed the Senate to lift its bid but the Republicans are not budging, so it’s all moot.

The Senate’s too busy rushing through the Supreme Court nominee anyway.

15 days to D-Day.

Commodities

Not much to see here really.

The Aussie is down a tad more at US$0.7088 even as the greenback fell.

The SPI Overnight I believe closed up 22 points or 0.4%.

The Week Ahead

China will report September quarter GDP today, along with monthly industrial production, retail sales, and fixed asset investment.

The US will see numbers for housing market sentiment, housing starts and existing home sales over the week. The Fed Beige Book is out on Wednesday and Friday brings flash estimates for October manufacturing PMIs from across the globe.

The minutes of the October RBA meeting are out today ahead of Cup Day’s expected rate cut. NAB’s business confidence index for the September quarter is out on Thursday.

It will become very busy from this week on the local stock market. The weekly list of AGMs has a growth spurt to accompany a jump in the number of resource sector quarterly reports and quarterly reports from companies across the spectrum.

Ampol ((ALD)), South32 ((S32)) and Cooper Energy ((COE)) provide quarterlies today.

The Australian share market over the past thirty days…

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