ASX climbs despite tough week as trade war, economic data cause woe

Prepare for another big week of economic news, as the nation waits for a cash rate decision tomorrow from the RBA. The market rose last week, despite turbulence caused by poor economic data and the continued fallout from the US-China trade war. But who were the week’s winners and losers on the ASX?

What’s happening this week in Australian economic news? 

International markets are expected to be turbulent again this week, after another escalation of the US-China trade war over the weekend.

In Australia, a raft of economic data is also expected to weigh on the markets this week, from house-price figures today from CoreLogic to official Australian Bureau of Statistics trade figures on Wednesday, and international trade figures on Thursday.

The Reserve Bank Board will meet tomorrow for its monthly summit on monetary policy. Some analysts have deemed rate cuts to the current record-low cash rate of 1% to be likely this year, but there are mixed views on whether a change to the official cash rate will impact the economy significantly.

On Wednesday, all eyes will be on the outcome of the official GDP figures. Some analysts believe growth could have slowed to 1.2%, down from the annualised 1.8% rate recorded earlier this year.

Housing Construction Boom At An End

Data reveals construction and business investment is down

This new economic data will come after another week of subdued results about the Australian economy. Official figures from the ABS revealed construction work fell 3.8%. Home building fell by 5.7% in the quarter, the biggest decline in 19 years. Major infrastructure work also fell 1.1% over the three months to June 30.

But on a more positive note for future investment, businesses reported they are planning to spend almost 15% more than expected in 2019-2020. Spending on buildings and structures was down more than 6% in the quarter compared to the same period last year, but equipment, plant and machinery spending was up more than 5%. 

US-China trade war continues, dragging markets down

This week has started as so many recent ones have, with turbulence following another ruction in the US-China trade war.

Despite optimism last Monday, after US President Donald Trump mused “I think we’re going to make a deal”, yesterday his administration raised the bar with an additional $110 billion in tariffs on Chinese imports. China labelled the move “US economic warmongering”.

The markets had already been gloomy about the long-term outlook, and overnight to Wednesday the 30-year US Treasury bond yield had fallen to 1.9%, the lowest on record.

ASX 200_type of investment options
Source: Pavel Ignatov (Shutterstock)

ASX weekly update: Local market ends the week up despite turbulence

Following the previous week’s 1.99% rise in the ASX All-Ordinaries Index – the first positive week of the month – international political and economic jitters led to $28 billion being wiped off the market on Monday (26 August). 

But with gains each day after that, the All-Ords had recovered to increase 1.27% to close on Friday at 6,698 points.

 

S&P and All Ords Movements 23-30 August, 2019
  Closing Points % Change
S&P/ASX 200 (XJO) 6,604 1.24%
All Ordinaries (XAO) 6,698 1.27%
Prepared by Canstar. Points taken as of Monday open to Friday close.

 

Sector Movements 23-30 August, 2019
  Closing Points % Change
Consumer Discretionary (XDJ) 2,532 0.19%
Consumer Staples (XSJ) 12,450 2.41%
Energy (XEJ) 10,421 -0.61%
Financials (XFJ) 6,231 1.16%
Health Care (XHJ) 36,822 1.28%
Industrials (XNJ) 6,792 0.79%
Information Technology (XIJ) 1,396 5.81%
Materials (XMJ) 13,064 2.65%
Telecommunication Service (XTJ) 1,304 -0.46%
Utilities (XUJ) 8,006 0.58%
Prepared by Canstar. Points taken as of Monday open to Friday close.

 

Despite the rally over the past fortnight, though, in August the market went backwards overall by 3.1%. 

Blue-chip bank Commonwealth Bank, miner BHP Group and retailer Woolworths each increased their market capitalisation more than $2 billion over the week. But property company Goodman Group, construction company Boral, fuel supplier Caltex Australia, engineering firm WorleyParsons and energy company Viva Energy Group all lost ground. 

Satellite company Speedcast lost more than half its value this week (54.8%) after announcing a statutory NPAT loss of US$175.5 million. One of its major shareholders  – the Norwegian Central Bank, Norges Bank – sold down its stake. Chief executive officer Pierre-Jean Beylier said it was “a very challenging six months for Speedcast”. 

Last week marked the final week of reporting season, with a number of major Australian players disclosing their financial results to the market. 

Which major players reported FY19 performance to the ASX last week?

Source: kaband (Shutterstock)

Fortescue Metals Group (FMG): 

The iron ore miner reported a record annual net profit after tax of US$3.2 billion, an increase of 263% compared to last year. It shipped 1% less iron ore but received an average revenue per tonne 48% higher than last year.

 

ASX 200 – Top 5 Share Price Gains 23-30 August, 2019
Rank Company Closing Share Price % Change
1 Nanosonics Ltd (NAN) $6.67 35.6%
2 Afterpay Touch (APT) $30.98 26.2%
3 Ausdrill Ltd (ASL) $2.00 15.0%
4 Reliance Worldwide (RWC)  $3.83 13.3%
5 Link Administration Holdings Ltd (LNK)   $5.48 11.6%
Prepared by Canstar. Prices taken as of week to week close.

Wesfarmers (WES): 

The retail giant, operator of Bunnings, Kmart and Target, more than quadrupled its annual net profit after the sale of its supermarket Coles and other businesses. Net profit after tax from the group’s continuing operations increased 13.5% to $1.94 billion. However, Managing Director Rob Scott said the Kmart Group had performed “below expectations”, while Target required “ongoing repositioning”.

 

ASX 200 – Top 5 Share Price Losses 23-30 August, 2019
Rank Company Closing Share Price % Change
1 Speedcast International Ltd (SDA) $0.78 -54.8%
2 Inghams Group (ING) $3.17 -22.3%
3 Mayne Pharma Group Ltd (MYX)  $0.45 -15.2%
4 Boral Ltd (BLD) $4.25 -14.3%
5 Viva Energy Group (VEA) $1.97 -13.8%
Prepared by Canstar. Prices taken as of week to week close.

Virgin Australia Holdings (VAH): 

Airline Virgin announced it would cut 750 jobs from its head office operations, while reporting its seventh consecutive annual loss. Chief executive Paul Scurrah pointed to the “tough economic climate” and said the results “underscored the need for change”.

 

ASX 200 – Top 5 Market Capitalisation Gains 23-30 August, 2019
Rank Company $ Change in Market Cap Closing Share Price % Change in Share Price
1 Commonwealth Bank (CBA) $2,920,895,186 $79.05 2.1%
2 BHP Group Ltd (BHP) $2,562,890,713 $36.29 2.5%
3 Woolworths Group Ltd (WOW) $2,240,468,320 $37.77 4.9%
4 Newcrest Mining (NCM) $1,959,612,247 $37.00 7.4%
5 Afterpay Touch (APT) $1,626,973,856 $30.98 26.2%
Prepared by Canstar. Prices taken as of week to week close.

Woolworths Group (WOW): 

Supermarket Woolworths announced an increase in its earnings before interest and tax of 5% on last year, including a 3.8% boost in its Australian foods division, which the company said was partly driven by “the success of the Lion King collectables program”. Discount retailer Big W was a drag on the results, however, reporting a 24% loss. Group Chief Executive Officer Brad Banducci said the first half of last financial year had been a challenging one. Woolworths had already announced earlier this year that it would close about 30 Big W stores are set to close.

 

ASX 200 – Top 5 Market Capitalisation Losses 23-30 August, 2019
Rank Company $ Change in Market Cap Closing Share Price % Change in Share Price
1 Goodman Group (GMG)  -$1,777,604,356 $14.52 -6.3%
2 Boral Ltd (BLD) -$832,355,666 $4.25 -14.3%
3 Caltex Australia (CTX) -$741,629,633 $23.96 -11.0%
4 Worleyparsons Ltd (WOR)  -$638,376,904 $12.29 -9.1%
5 Viva Energy Group (VEA) -$612,528,578 $1.97 -13.8%
Prepared by Canstar. Prices taken as of week to week close.

Afterpay Touch Group (AFP): 

Payment system Afterpay was one of the winners of the week, up 26.2% to $30.98, after it released its results on Wednesday. It announced that its global underlying sales had increased 140% as it introduced 12,500 new international customers each day to its buy now-pay later system. But despite an 86% increase in income, it made another annual loss before tax, of $43.8 million.

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About Rosanne Barrett: 

 Photograph of Rosanne BarrettRosanne Barrett writes stories that inform, entertain and inspire. She has more than 15 years’ experience in daily news media in Australia and Hong Kong, including eight years as a staff reporter at The Australian. Ms Barrett produces journalism, content and copywriting across a range of industries.

 

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