ASX Pulls Back From 6000 Mark: Quick Facts You Should Not Miss!

Summary

• RBA states that economic activity in Australia contracted significantly in late March and April, but more recent data suggests that it began to recover over the course of May.
• After a rise in unemployment rate adversely impacted ASX on Thursday, positive sentiments owing to lift in estimated retail turnover dominated Friday’s performance. Next week will be an exciting one with more updates lined up.
• Globally, uncertainty prevails in the wake of the GVC as world's biggest economies, US and China struggle with fresh outbreak.

As the third week of June ends, the Australian market ended Friday, 19 June 2020, mostly flat with ASX 200 closing 6 points or 0.1 per cent higher at 5,942 47. The index was up 1.1 per cent at its best levels of the day, just over 6,000 points. Overall, financials and consumer staples weighed on the broader market while there were losses for materials. Discretionary retailers, telcos and tech stocks posted biggest advances.

A day before, on 18 June 2020, ASX 200 demonstrated a 55 point or 0.92 per cent fall to 5,936.5, pausing its two-day run of gains wherein mining, retailing and communication stocks plummeted while utilities sector gained.

Sinusoidal trends are a common sight in share markets, and a lot of macro and micro events influence its performance. Let us understand few factors that affected ASX this week-

Consumer confidence

Consumer confidence rating rose by 0.5 per cent to 97.5 points, as per the weekly ANZ-Roy Morgan marking the 10th lift in 11 weeks. Sentiment rose by 49.3 per cent since hitting 65.3 points on March 29, the record low since 1973. Future finances were up by 1.4 per cent to 21.7 points (15-week highs).

Retail & Online spending

Gradually but certainly, Australia is coming out of lockdown- a crucial factor for consumer-focussed companies. ‘Preliminary’ retail trade was up by a record 16.3 per cent in May (highest in 38 years of records) after plunging a record 17.7 per cent in April and increasing 8.5 per cent increase in March.

Online spending rose 7.9 per cent in the week to June 12, and in-store spending was up 5.9 per cent, as per Commonwealth Bank.

Household Spending

There have been initial indications of steadiness and improvement in few parts of the Australian economy, catalysed by alterations in government policy. Moreover, the Australian Bureau of Statistics (ABS) reported that home prices surged by 1.6 per cent in March quarter, 7.4 per cent elevated over the year marking the strongest annual growth rate in more than 2 years. During the period, total value of residential dwellings was at $7,237.1 billion (a record high).

Farm Exports

Good news for Australian farmers was welcomed this week as ABARES lifted its forecast for farm exports to $ 47 billion during 2019/20. In the period, meat and live animal exports are likely to touch record highs of $ 17.5 billion, up by over 13 per cent from one year ago.

Population

Annual population growth rate dropped to 1.39 per cent from 1.43 per cent, over the year to December 19. This marks the slowest pace in over 13 years. Moreover, recovery in iron ore mining bustle seems to be attracting both Aussies, and overseas immigrants to Western Australia as the region displayed the sharpest population growth rate (annual) in over 5 years.

Tourism

In 2019, country residents embarked on a record 11.3 million trips overseas, up by 247,500 from 2018, according to the ABS, Austrade and TRA data. During the year, they spent $ 66.6 billion in other countries. However, the Government affirms that the country’s borders will most probably stay sealed until (at least) 2021, owing to COVID-19.

Jobs & Wage Updates

It seems like Australia is recovering from the pandemic hues, though it might take time to fully out of it.

As per the ABS, employee jobs shrank by 7.5 per cent between the week ending 14 March 2020 and 30 May 2020. Employment fell by 227,700 in May after falling by a record 607,400 in April and unemployment rate rose from 6.2 per cent to 7.1 per cent in May, the highest jobless rate in almost 19 years. However, job gains are expected from June as businesses re-open and workers re-join their employers.

Payroll index lifted to an 8-week high of 92.5. Moreover, the Fair Work Commission granted an upsurge of 1.75 per cent in the minimum wage. Now, the minimum wage will be $ 753.80 per week/ $ 19.84 per hour.

Bottomline

Australia has made upright progress in curbing the spread of the novel coronavirus. Currently, states and territories are focussed on vigilant re-opening of the economy. However, one should note that while health risks are easing, economic risks have not yet subsided.

It will be interesting to watch the stock performance next week with a lot of updates in pipeline, including a speech by Governor Lowe, Business impacts of COVID-19 for June, Detailed employment for May, to name a few.

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Let us gear up for a fresh exciting week ahead!

(Note: All currency in AUD, unless otherwise specified)