ASX update; RBA minutes offer little

Lacklustre Tuesday, positive China data triggers a global rally, RBA minutes offer little

The banking sector was among the weakest on Tuesday, falling 1.4%, with the ASX 200 (ASX:XJO) finishing the day flat.

The Australian house price index fell 1.8% on the previous quarter, sending the Commonwealth Bank of Australia Ltd (ASX:CBA) down 1.7% as investors grow more concerned about Victoria’s slow roadmap and the impending cuts to JobKeeper and JobSeeker payments.

The RBA minutes offered little in the way of support, seemingly waiting for the Federal Government’s October budget before announcing any more ‘unconventional’ policies. The central bank noted the AUDs recent rally to a near two year high, confirming it wasn’t of concern (yet) and continues to trade in line with commodity prices.

BHP Group Ltd (ASX:BHP) benefited from better than expected Chinese industrial production, which was 5.6% higher than 2019 levels, on the back of manufacturing, energy and a mining recovery.

Retail sales also surprised, a broad based contribution sending them 0.5% higher, the first improvement since December.

Scentre Group (ASX:SCG) considering a hybrid, Qantas (ASX:QAN) under review, Telstra (ASX:TLS) meets investors

Telstra Corporation Ltd (ASX:TLS) fell another 2.1% after holding its AGM, reiterating guidance for a fall in earnings to $6.5 to $7.0 billion assuming all goes to plan for the remainder of the financial year.

Negative sentiment remains an issue for management despite the company generating $1.8 billion profit and offering a consistent dividend.

Reports are suggesting Scentre Group (ASX:SCG) will look to the wholesale hybrid market to cover its estimated $1.8 billion capital shortfall, preferring this over a heavily diluted capital raising.

Qantas Airways Ltd (ASX:QAN) management announced the intention to reduce their $40 million in office costs, along with potentially moving their HQ from the expensive Mascot Sydney Airport (ASX:SYD) to new Greater Western Sydney digs.

It seems Governments are yet to fully appreciate the elasticity of businesses like QAN, in that they require substantial investment to get back up and running but have a substantial runway (pun intended) before revenue looks anything like what it was pre-COVID-19.

Global rally continues, investors positioning for vaccine, Germany boosts confidence

Buoyed by robust Chinese economic data and signs that German business confidence was returning to previous levels boosted most global markets overnight.

The S&P 500 finished 0.5% higher, the Nasdaq regained its ascendancy, 1.2%, and the Eurostoxx closed at a three week high, 0.7% higher.

It was a rotation into more cyclical or ‘value’ companies driving the market, with communications, discretionary and real estate businesses driving the rally.

The likes of Louis Vuitton Moet Hennessey (EPA:MC) and Hermes (EPA:RMS) are key beneficiaries of a faster than expected recovery in China and signs that economies are slowing moving back to normal with the substantial policy support. There has been little sign of a similar trend in Australia yet.

Apple Inc. (NASDAQ:AAPL) launched a long-awaited new Apple Watch overnight, virtually of course, whilst chip giant Nvidia (NASDAQ:NVDA) is facing some push back over its acquisition of key competitor ARM Holdings.

The Federal Reserve meets today and Australian unemployment is due tomorrow.