Positive vaccine news arrests last week’s concerns

Blog
Friday 27th August 2021

Positive vaccine news arrests last week’s concerns

Blog
Friday 27th August 2021
Written by Chris Lioutas

Markets:

  • Local and global equity markets mostly finished higher for the week buoyed by reports of the approval of the Pfizer vaccine in the USA.
  • In local stock news, Sydney Airport reported a steeper first-half loss of $97 million and a large drop-off in visitors last month due the latest restrictions. The company has indicated they are willing to continue negotiations with bidders, but only if they raise their bid price from current levels.
  • Property developer and owner Stockland posted a $1.1 billion net profit, benefiting from a very strong housing market and demand for logistics / industrial hubs. The return to profit followed a $21 million net loss a year ago.
  • Ampol (previously Caltex) has lobbed a take-over offer for New Zealand fuel distributor Z Energy at NZ$3.78 per share. Ampol returned to a first-half profit in 2021 with a reported $326 million net profit after tax.
  • Westfield shopping centre operator Scentre was swung to a half-year profit of $400 million after shoppers returned from lockdowns in the 1st half of the year. Investors appeared to like the result.
  • Health insurers NIB and Medibank reported strong results supported by demand for health insurance and a significant reduction in claims given lockdowns, and delays and postponements in treatments / surgery. Medibank fared better in terms of share price movement post their results.
  • Qantas posted a full-year net loss of $1.73 billion, yet a better balance sheet and CEO Alan Joyce’s claim that international travel could be possible by Christmas helped the shares move higher on the day of the announcement.
  • The oil price rose strongly on news of the Pfizer approval in the USA whilst the Aussie dollar also rose given risk-on investor appetite is a positive for commodity-linked currencies like ours.

Economics:

  • Australian lending data was mixed in July with new lending for housing softening but still remains at a high level. The share of fixed rate lending was lower in July, particularly for investors, but lending for renovations remained solid in the month. Business lending was soft.
  • A report from Australia’s peak residential building body has projected that the current construction boom will likely end by mid next year, citing that the near 33% uptick in building projects since 2019 was unsustainable.
  • Australian construction work done rose by 0.8% in the 2nd quarter, coming in well below expectations, with the most support coming from engineering work. Residential construction fell slightly in the quarter.
  • Australian businesses ramped up investment in the June quarter as strong consumer demand and generous tax breaks drove spending on new equipment. Investment rose 4.4% to $32.7 billion according to the ABS, coming in well above forecasts. The outlook may not be so strong. 
  • New data shows that almost 4 in 10 Australians are relying on credit to make ends meet, with more than a third dependent on credit cards, buy-now-pay-later, and payday loans to pay for essentials. Lockdowns taking their toll.
  • US data showed that sales of established homes unexpectedly increased in July, whilst another report showed business activity accelerating this month.
  • Japan’s inflation dropped for a 12th straight month in July, extending the longest falling streak in a decade after data revisions showed weakness during the pandemic was worse than previously reported.
  • China’s manufacturing data has softened in July with forward looking indicators of manufacturing also weakening. Both imports and exports have pulled back from June, whilst credit and industrial production also slowed. Retail sales were mixed.
  • China’s central bank chief has vowed to stabilise the supply of credit and boost the amount of money supporting smaller businesses and the real economy.
  • Other manufacturing and service sector data was rather poor with activity in Japan’s service sector shrinking at the fastest pace in 15 months, whilst European manufacturing activity struggled to keep up with demand due to shortages of components and transportation difficulties. UK service sector data came in lower than expected with companies blaming staff shortages.

Politics:

  • US President Biden has resisted mounting pressure to keep US troops in Afghanistan past his 31 August deadline but ordered his national security team to come up with contingency plans if he determines a delay is needed. The Taliban have refused an extension of the deadline and there’s no way Biden can get all Americans out of the country by the deadline. This morning’s Kabul airport bombings haven’t helped the situation given ISIS has claimed responsibility.
  • Australian Treasurer Josh Frydenberg announced an expansion of the federal loan scheme that will make it easier for small businesses impacted by lockdowns to access government support. The scheme will no longer require businesses to have received JobKeeper payments earlier in the year…..why they were linked, no one knows. Businesses will have access to loans for up to $5 million and allow for repayment holiday up to 2 years. 


Author 

Chris Lioutas, Director, Insight Investment Consultants

Chris holds the position of asset consultant for Maxim Advisors and is a current sitting member of Maxim's investment committee. 

With permission of the author, this article is presented by Maxim Private Clients Pty Ltd ASFL No. 511972

Maxim Private Clients Pty Ltd ABN 47 611 614 398 AFSL No. 511972

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