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ASX down 0.9%, Bitcoin falls 20%


Blistering start slows, ASX down 0.9%, bond rates higher, Bitcoin falls 20%

After a blistering opening to the year in which the ASX200 (ASX:XJO) added 2.6%, attention once again turned to the economic outlook, sending the ASX200 down 0.9% on Monday.

Every sector but energy weakened, with the IT sector the hardest hit falling 2.2%, Afterpay (ASX:APT) a key detractor down 2.9% in the session.

  • The bout of weakness was clearly driven by a spike in interest rates, more specifically the 10-year Government bond rate in both the US and Australia over the last few days.

    Despite the prevailing sentiment that interest rates are unlikely to move higher for the foreseeable future, markets are suggesting this may come sooner than expected. 

    Government bond yields are the single most important input into the valuation of companies, as they represent the ‘risk free’ alternative.

    The IT sector has benefited most from lower interest rates, which support higher equity market valuations, and thus were among the weakest performers with Nearmap (ASX:NEA) also dropping 5.4%.

    Retail sales in rude health, Splitit (ASX:SPT) partners with Google, SelfWealth (ASX:SWL) numbers swell

    Retail sales for November were released this week and they showed an economy recovering quickly from the pandemic.

    The combination of Melburnians being released from lockdown and Black Friday sales saw retail figures increase 7.1% for the month and an incredible 22.4% in Victoria alone.

    Clothing, footwear and accessories, up 26.7%, were the biggest beneficiary with department stores, up 21.1%, not far behind.

    Such was the strength the Shaver Shop Group (ASX:SSG) upgrading their guidance, flagging an 85% increase on FY20 profit levels as December quarterly sales were 12.4% higher.

    The strength was driven by a continued surge in online sales, which were 102% higher in the first half and now represent over 30% of total sales; shares finished 11.3% higher.

    Share trading platform SelfWealth (ASX:SWF) is clearly benefitting from the ‘Super Hero’ theme of millennials moving into share investing. Management reported a 208% increase in active traders, 377% increase in quarterly trades and most importantly a 298% increase in revenue to $4.46 million; shares finished 1.0% lower. 

    US markets lower, Bitcoin drops 20%, Twitter and Facebook sold off

    US markets followed a similar trend overnight, the Nasdaq dropping 1.3% and the S&P500 0.6% on the threat of higher bond rates; whether this is sustainable is another question.

    The key driver was an announcement by President-Elect Joe Biden that he will be pushing forward with USD$2,000 stimulus cheques along with a significant infrastructure spending spree as his first order of business; the USD also rallied.

    Bitcoin remains the most volatile asset class in the world, falling 20% in just a few days after adding 300% in 2020; this followed a report by the UK Financial Regulator warning investors in the currency to ‘prepare to lose all your money’.

    Facebook (NASDAQ:FB) and Twitter (NASDAQ:TWTR) fell 4.0% and 6.4% respectively after banning President Trump’s account, once again raising questions around censorship and control.

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