8 November 2021 | Weekly Snapshot

Did you know?

The new BetaShares Cryptocurrency ETF had a trading value of $39.7 million in its first day on the ASX, passing the previous record of $8 million. This previous record was broken within 15 minutes of trading.

Market Movements

Australian Share Market (ASX200) – up 1.82% on broad based gains and closing at an eight week high. The Energy sector was the only decliner (-1.90%) down four weeks in a row. Health Care led the gains (+3.93%) up four weeks in a row. The Consumer stocks were the next best with Staples (+3.76%) bouncing back from last week’s falls and Discretionary (+3.14%) on reopening momentum. The Reserve Bank of Australia (RBA) met on Melbourne Cup day following the higher inflation reading the week prior, announcing they were ending their yield curve control program that was put in place at the depths of the pandemic. The RBA pushed back again on the increasing view of market participants that interest rates were going to rise next year. They are sticking to their forecast for a 2024 lift-off and clarified there will be no rate hikes in 2022 while acknowledging a 2023 rate hike is “entirely plausible” prompting a number of lenders to increase their fixed rate mortgages late in the week.

US Share Market (S&P 500) – Up 2.00% for the fifth weekly gain in a row with all three major indices making new all-time highs on the better than expected Q3 earnings which are now largely done with almost 90% of S&P500 companies having reported. While input costs have risen, the demand backdrop has remained very strong meaning companies are having no problems passing through price increases with profit margins holding at or near record levels. Covid winners were under scrutiny while reopening stocks did better. The US Federal Reserve announced the tapering, in line with expectations but there were no other hawkish surprises despite the higher inflation and emphasised the difference between tapering asset purchases and hiking interest rates. A better than expected US jobs report on Friday also helped boost sentiment after some disappointing reports over the last few months that saw some decent upward revisions.

Portfolio Movements

Nike (NKE) made a new all time high as early signs the supply chain constraints could be easing. Nike has had troubles meeting the strong demand for its products as factories in Asia were impacted by coronavirus outbreaks in the region while shipping and delivery times blew out on port congestion and shipping delays. The Vietnam government announced last week that around 200 contracted factories that produce Nike’s sporting and foot ware have resumed operations after months of covid restrictions. Almost half of Nike’s 800 million pairs of shoes sold annually are produced in Vietnam.

Westpac (WBC) fell 12.50% for the week following a disappointing full year result as divergences emerge amongst the big four in terms of earnings quality and share price performance. The big four have all largely traded in line with each other for many years but post pandemic some fault lines between the banks have been exposed with CBA and NAB dominating their respective markets of retail and business banking while ANZ is particularly strong in New Zealand. WBC on the other hand is struggling to find its place and seems in a difficult position having to compete for market share with the other three, but also the emerging disruptors in the sector who continue to chip away at the majors.

Woodside (WPL) fell 2.8% for the week and is down 11.70% from the recent October highs on Energy sector profit taking. The recently announced transaction where WPL is buying BHP’s petroleum business will change the business in several ways. WPL will now have some oil exposure to compliment the LNG business. The deal sees WPL double their assets and more than double their cashflow. WPL will issue shares in order to fund the transaction meaning the balance sheet is going to be in a very strong position. The only real downside to this is that WPL shares were already cheap so issuing more shares at the lower price is dilutionary but the overall combined business looks quite compelling.

The week ahead

Domestically, Australian jobs numbers are released on Thursday, providing some indication of the strength of economic recovery as lockdowns ease around the country.

Internationally, US and China release inflation data, while Japan reports on GDP data alongside the UK – however quarterly and monthly figures are expected to show a contradictory picture of the pandemic recovery. Visa and Royal Dutch Shell are also set to go ex-dividend this week

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

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Some numerical figures in this publication have been subject to rounding adjustments. Akambo Pty Ltd (including any of its directors, officers or employees) will not accept liability for any loss or damage as a result of any reliance on this information. The market commentary reflect Akambo Pty Ltd’s views and beliefs at the time of preparation, which are subject to change without notice.