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ASX200 follows global markets higher

Equities

ASX200 follows global markets higher, economic data flows, inflation of little concern, Metcash (ASX:MTS) continues to deliver

The ASX200 (ASX:XJO) finished another 0.8% higher on Tuesday, with every sector but energy and materials delivering positive results for the day.

CSL (ASX:CSL) continues to catch up on the market after a slow start to 2021, adding 2.3%. The company has been impacted by both a weaker USD and the threat of higher bond rates reducing the value of its compound earnings.

  • The sector finished 2.4% higher as markets moved out of commodities in signs that the iron ore price is now being impacted by Chinese pollution controls.

    The news of the day was the exit of the CEO of Pendal (ASX:PDL), previously part of BT, with Emilio Gonzalez stepping down after 11 years at the helm of the value-oriented manager; shares rallied 2.7% on news that Nicholas Good would be replacing him.

    The RBA has remained active this week, with the release of their latest board minutes confirming little concern about inflation even as the economic recovery heats up, noting “this was considered unlikely for as long as substantial spare capacity remained in labour markets and wages growth remained subdued”.

    With JobKeeper set to end next week, they may well be right. The property sector was a beneficiary of the comments, with Charter Hall (ASX:CHC) up 5.5% and Vicinity Centres (ASX:VCX) 1.5%.

    Metcash sales up 14%, USD$100 oil price possible, Aussie’s leveraging up

    According to the Australian Financial Review, data for the December quarter released by the banking regulator APRA has shown that the number of property buyers with significant debts has doubled in less than two years.

    The release suggests that the number of borrowers with a debt-to-income ratio of more than six times has risen from 11,397 in 2019 to 21,551 in December, no doubt triggered by record-low interest rates.

    Timing is everything in business, and it couldn’t have been better for Metcash (ASX:MTS) and their IGA network, with supermarket sales increasing 14.4% in the first four months of the group’s financial year.

    According to the update, food sales were 4.1% higher or 14.1% when their 7-11 convenience store contract was excluded.

    The group is seeing huge growth in their hardware division, with sales up 31.6% over the same period and liquor remaining resilient, up 19.6%.

    As flagged by Coles (ASX:COL) management earlier this year, comparable sales figures will begin to weaken in the second half of 2021 as lockdown buying peaked. Shares fell 4.0% despite the decision to increase the dividend payout ratio from 60% to 70%.

    US markets weaken, ASX to follow, Volkswagen’s record session, Alibaba pressured 

    The S&P500 has broken a run of seven successive days of gains, falling 0.2% as the energy and industrial sectors fell.

    The Dow Jones also fell from a record high, down 0.4%, with the Nasdaq the only positive adding 0.1%.

    The Chinese regulator continued to ramp up the pressure, this time looking to force Alibaba (NYSE:BABA) to sell off or separate its media assets, which include the South China Morning Herald.

    The sprawling empires of these tech giants are increasingly in focus, whereas the US alternative, like Amazon (NYSE:AMZN), whose Chairman owns the Washington Post remains untouched.

    Carmaker Volkswagen (GR:VOW) has delivered a remarkable rally jumping 6.7% in European trade after announcing plans to take on Tesla (NYSE:TSLA).

    The group intends to standardise technology across its brands and will build six battery factories in Europe alone.

    US economic data releases were weaker, with both industrial production and retail sales falling 2.2% and 3% respectively in February after harsh weather spread across the country.

    But with stimulus cheques being received this week, and all but guaranteed central bank support, the economic recovery remains on track.


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