Lacklustre ASX declines 0.3% as RBA holds steady

ASX falls but 2% higher in May, Macquarie, Magellan looking to the future

The ASX200 (ASX: XJO) fell 0.3% on Tuesday, the first day of winter, with consumer confidence taking a hit as the Victorian lockdown rolls on.

Every sector was weaker except energy and materials, which added 1.3% and 0.3% respectively. Healthcare and financials were the hardest hit, falling 0.7% each as the major banks retreated from recent highs.

The Reserve Bank of Australia held rates at 0.1% as expected, however, highlighted the growing risks in the property market as investor demand outstripped owner-occupier loans driving a 2.2% price rise across Australia in May.

Whilst the cash rate is on hold, fixed home loan rates have already been increasing in recent months as the banks seek to refinance their super cheap RBA-backed debt with new bond issues, sending their cost of capital higher.

The board reiterated that they will not be making a call on its Quantitative Easing program until July as previously flagged.

Vitamin seller Blackmores Limited (ASX: BKL) and rare earths miner Lynas Rare Earths Ltd (ASX: LYC) were the biggest decliners, falling 5.0% respectively as the Chinese export market slows.

GDP forecasts upgraded, Future Pay launch, Forrest’s green push continues

The major banks have upgraded their GDP expectations ahead of the official release tomorrow, with the result expected to confirm Australia’s position as one of the strongest economies in the world; at least at a headline level.

ANZ and CBA are most bullish expecting 2.1% and 2.0% quarterly growth, with NAB and Westpac more conservative, forecasting 1.7% and 1.6%. If recent results are anything to go by, it may be a long way off.

Magellan Financial Group’s (ASX: MFG) retirement income solution ‘FuturePay‘ went live today.

Whilst not an annuity, the fund seeks to dampen the volatility of global sharemarkets for retired investors, hiving capital into a ‘support’ trust when returns exceed expectations.

This capital is then used to ensure a regular income can be paid regardless of market conditions. MFG shares finished mostly flat.

APRA data has highlighted the stark technology edge built by Macquarie Group Ltd (ASX: MQG) in home lending, which I can attest to having refinanced in 2020.

Macquarie’s loan book grew by 25% in April and 33% over the last 12 months. This equates to its issuance of loans growing at seven times the speed of the rest of the market, with CBA the closest competitor growing at 1.2 times the system at 4.5%.

The bank is much smaller in size but has clearly seen an opportunity in a still people-heavy sector. MQG shares were down 1%.

Markets stumble, Zoom sales growth continues as share slides, HP delivers another strong result

It was a reasonably flat session in the US, with gains lost into the close, the Dow Jones finished 0.1% higher, but both the S&P500 and Nasdaq composite were down 0.1%.

In economic news, manufacturing data topped estimates with the US PMI hitting 61.2, however concerns continue to grow about a job shortage and a jump in the waiting times for key product inputs.

OPEC+ agreed to increase production from July, which would typically see the oil price fall, yet their expectation of a significant increase in demand meant it was well supported.

Shares in Zoom Video Communications Inc (NASDAQ: ZM) fell despite seeing a 191% increase in revenue to US$956 million for the quarter. The company has remained strong despite the WFH trend easing.

Hewlett Packard Enterprise (NYSE: HPE) also beat expectations, posting an 11% increase in revenue after a 1% drop in the June quarter.

The innovative part of its business has been the key driver with the ‘Edge Computing’ division accelerating 20% and storage a more mature growth level of 5%.

The Inside Adviser