22 November 2021 | Weekly Snapshot

Did you know?

Alibaba’s ‘Single’s Day’ this year conducted a total sales volume of US$84.5 billion – an 8.6% increase on 2020.

Market Movements

Australian Share Market (ASX200) – down 0.62% and the second weekly decline in a row. Despite the index decline, 7 out of 10 sectors were higher led by Info Tech (+3.05%), Health Care (+2.94%) and Telecommunication Services (+1.85%). The very large Financials (-3.57%) and Materials (-1.65%) sectors weighed on the overall market. The Energy sector was also lower (-1.53%) and down 6 weeks in a row. In Financials it was the Banks leading the declines (-5.82%) and the worst performer of the week. The September quarter wage price index was released and increased by 0.6%, not bad considering most of NSW and Victoria were under harsh lockdowns for much of the period. At 2.2% growth over the year, wages are currently increasing below the  inflation rate although the Reserve Bank expects this to hit around 3% next year as the economy returns to full strength. Inflation and interest rates remained key themes during the week with several lenders increasing their fixed rate mortgages with some now having hiked their fixed rates 3 or 4 four times over the past month.

US Share Market (S&P 500) – up 0.32% and some divergence amongst the major indices with the Dow  down 1.38% and the Nasdaq up 1.24%. Growth stocks outperformed value stocks by a wide margin. The Consumer Discretionary sector led the gains (+3.81%) on positive earnings revisions and a big beat in the monthly retail sales figures (+1.7% for the month), the largest increase since March. Info Tech (+2.37%) and Utilities (+0.92%) were also higher. The Energy (-5.22%), Financials (-2.82%) and Materials (-2.00%) sectors lead the declines. Developments were mixed with strong consumer demand  heading into the peak holiday spending period buoying sentiment, but after a few months of declines, rapidly rising covid cases in the US and Europe got attention later in the week and weighed on reopening trades. Supply chain issues showed some early signs of easing and the House passed the additional $1.75 trillion social spending package although wont make its way to the Senate until next month and could still be contentious. Inflows into US equities funds remained very strong according to Bank Of America’s Flow Show report with another $13.2 billion inflow for the week, taking the 2021 year to date total equity fund inflows to just over $1 trillion.

Portfolio Movements

CBA (CBA) rounded out the bank reporting announcing a $2.2 billion profit for the first quarter, up 20% year on year but was sold off on the result as their Net Interest Margin was lower than expected. This was a key theme through out the Bank reporting season affecting all the majors with the low interest rate environment partly to blame but also intense competition in the mortgage market from an increasing number of smaller players. CBA’s loan loss provisions were largely unchanged and operating income increased 3% year on year. The tier 1 capital ratio increased to 12.5% and some analysts think CBA could have further capital to return to shareholders. Strong capital ratios across all the major Banks was the other key theme of the bank reporting season.

Telstra (TLS) rallied to a 4 year high during the week following an investor day presentation where management reiterated their growth targets for the coming years. One of those is to grow annual underlying earnings in the “high teens” between FY2021 and FY2025 with additional cost reductions and mobile services revenue growth underpinned by their superior 5G network and 5G rollout. TLS earnings per share most recently peaked in 2014 but earnings really started to dive from 2016 as the full effects of the customer migration onto the NBN, and NBN rollout really started to negatively impact on Telstra’s business. With that drag on earnings now largely complete, TLS looks set to increase earnings for the first time in many years.

Linde (LIN) made a new all-time high during the week. The world’s largest industrial gas company Linde, raised its 2021 earnings forecasts for the third time this year and set goals for cutting carbon emissions.
Earnings per share have been lifted to an increase of 28-29% up from an earlier range of 23-25% and should result in Linde continuing to beat quarterly estimates for the past 2 years. A strong orders pipeline and higher operating profits in the US business helped. Linde said new goals included a 35% cut in emissions by 2035 and becoming carbon neutral by 2050. Linde has signed deals for blue hydrogen with trucking businesses which involves using gas to produce hydrogen and storing CO2 emissions underground.

The week ahead

Domestically, earning season coming to a close means the events calendar is a little bare, however Ramsay Health Care and Evolution Mining are both set to hold their Annual General Meetings this week.

Internationally, flash purchasing manager index surveys are released for Europe and the UK, while Germany  & Switzerland release Q3 GDP figures. Joe Biden has confirmed the reappointment of Jerome Powell as Fed Chair for a second term, US markets to close on Thursday (Friday AEDT) for Thanksgiving and a retail boost is expected as we head into Black Friday sales this week. Data for residential property sales and a revised Q3 GDP figure will also be announced.

Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice

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