Record inflows into equity funds in the first half of 2021 has totalled $1.178 trillion. In the preceding 20 years the cumulative inflows were $77 billion. In Australia $439 billion has been added to the value of the ASX 200 over the past 12 months. This is the equivalent of the GDP of South Africa. The total market cap of the ASX is $2.5 trillion whereas the market cap of Apple is $AUD3.2 trillion.
Australian Share Market (ASX200) – Down 0.6% last week. A volatile period but not much net change over the week. The highlight was the Sydney Airport takeover bid continuing the merger theme in equity markets. The 30% jump in the share price countered any general market selloff during the week given the size of the company.
US Share Market (S&P 500) – Up 0.4% last week. A small net rally but a wild week for daily equity moves with the US 10 year bond yield dropping from 1.40% to a low of 1.25% before recovering to 1.36%. Amazon led the recovery in tech stocks with a 5%+ rally as rates dropped and the market has been buoyed by increased expectations of EPS growth (+65%) for quarterly earnings reports which starts this week in the US.
Woolworths (WOW) is set to double its addressable market (to $500B) and increase earnings more than three-fold from branching out into businesses such as media, payments and data analytics according to a new report. The CEO is building a retail ecosystem to third parties to accelerate growth. Its current vertical businesses including supply chain operations, media, insurance and telco are already generating about $100M in earnings and can provide an impressive return on invested capital (ROIC) of 40%. Topping Australia’s most trusted brand last week will help in this rollout.
Royal Dutch Shell (RDSA) has begun production at Europe’s biggest hydrogen electrolysis plant in Germany after two years of construction, expanding further into alternative energies. The new plant will produce green fuels for an EU funded consortium and is now setting sites on a 100 MW site in Cologne. Shell also plans to produce sustainable aviation fuel from renewable electricity and biomass as well as develop a plant for liquefied renewable natural gas, in its efforts to be a leading supplier of green hydrogen for industrial and transport customers in Germany.
Visa (V) customers spent more than $1B on its cryptocurrency linked cards in the first half of the year, helping escalate Visa’s coverage of digital currencies and their broader acceptance. Visa said it was partnering with 50 cryptocurrency platforms, making it easier for customers to convert and spend at 70 million merchants worldwide. In March Visa announced it will allow the use of USD Coin to settle transactions on its payment systems. Other major companies such as Japan’s Softbank, Wells Fargo and Goldman Sachs have also been active in ensuring they don’t miss out in this emerging area with Goldman Sachs launching a cryptocurrency trading team. In most cases Visa will have a hand in the transactional side of these developments through their ongoing developments.
The week ahead
Domestically, another busy week for economic releases with building permits, business and consumer confidence before Thursday’s employment, unemployment and participation rates are announced.
The US has core inflation and PPI figures, Beige book release (which is the Fed summarising economic conditions), jobless claims, industrial production and retail sales amongst other releases. Numerous European countries release inflation figures and China releases GDP, employment, retail sales, capacity utilisation and their balance of trade to cap off a busy economic week.
Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice
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