Next Investors logo grey

Overseas markets down with futures suggesting a reality check is imminent

Published 27-JUL-2020 09:12 A.M.

|

3 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.


Click Here to View Latest Articles

After a rollercoaster ride last week when the S&P/ASX 200 (XJO) soared as much as 2.6% in one day, the index finished down 10 points on a week-on-week basis at 6024 points, having given up 70 points or nearly 1.2% on Friday.

From a broader perspective the week saw solid gains in the tech and consumer discretionary sectors, but the communications sector was hard hit, falling 2.3%.

Other features of the week were strong gains by gold miners as the precious metal pushed through the psychological US$1900 per ounce mark to register its highest close on record.

In relative terms, our market could still be seen as outperforming, having hit a four-month high despite the backdrop of a flailing economy and a rampaging coronavirus.

How long investors can remain buoyant remains to be seen, but the ASX SPI200 index suggests we could be in for a reality check this week, down 27 points this morning to 5972 points.

Adding to the likelihood of a downturn is the upcoming reporting season, which will no doubt reflect profound impact that coronavirus has had on the company earnings.

In most cases, blue-chip companies provide some form of qualitative or quantitative guidance for the upcoming fiscal year and share prices are often driven more significantly by this commentary, which on balance is likely to be fairly negative.

Aside from domestic issues, a significant downturn in overseas markets at the end of the week suggests that futures indicators could be a little conservative regarding the extent of a potential decline on Monday.

Geopolitical tensions between the US and China were central to the decline in global markets on Friday, and given recent posturing towards China by the Australian government the issues central to the ructions between the two countries could well have a significant impact on our markets.

24 hours

The Shanghai Composite was battered on Friday, falling nearly 4% or 128 points to close at 3196 points.

Things also looked grim on the Hang Seng as it shed 557 points, closing at 24,705 points.

There was a little more resilience in Japan with the Nikkei 225 coming off 0.6% to close at 22,751 points.

It was red ink all round in the European region with the FTSE 100 falling 87 points or 1.4% to close at 6123 points.

The DAX was hard hit as it plunged more than 2% or 265 points, closing at 12,838 points.

The CAC 40 didn’t fare much better, closing at 4956 points after shedding 1.5%.

While falls in the major indices in the US weren’t as steep, the negative trend continued.

The Dow came off 0.7% to close at 26,469 points, while the S&P 500 came off 0.6%, closing at 3215 points.

The highflying NASDAQ took a breather as it fell nearly 1% to close at 10,363 points.

With all this negativity, it wasn’t surprising to see gold continue its strong run, hitting a long-term high of US$1904 per ounce before closing right on US$1900 per ounce.

After making some strong gains earlier in the week the Brent Crude Oil Continuous Contract trailed off on Thursday and Friday to finish the week at US$43.34 per barrel.

On the base metals front, copper finished the week at US$2.91 per pound after looking at one stage as though it could break through US$3.00 per pound for the first time since 2018.

There was little movement elsewhere with nickel, zinc and lead all trending slightly lower.

Iron ore came off slightly to finish just shy of US$110 per tonne.

It was a particularly strong week for the Australian dollar as it pushed up from approximately US$0.70 to close in on US$0.72 before consolidating around the US$0.71 mark on Thursday and Friday.



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.