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Market update; Trump positive COVID-19

Equities

Trump’s positive COVID-19 test sparks volatility, ASX falls 1.4%

Volatility is on the rise, the ASX 200 (ASX:XJO) falling 1.2% at the open before gradually recovering.

The index then capitulated on the news of President Trump’s positive COVID-19 test as investors quickly shifted to a risk off mood.

The ASX 200 finished the day 1.4% lower and down 2.9% for the week, the worst week since April.

  • Energy was the worst hit, Woodside Petroleum Ltd (ASX:WPL) falling 4.2%, as oil prices continued to slide and the AUD tumbled on the news.

    The selloff appears to be an overreaction, particularly given Biden’s favouritism and the fact it will have little economic impact.

    On the positive side, Qube Holdings Ltd (ASX:QUB) announced an exclusivity agreement with Logos Property Group in relation to the potential sale of its Moorebank Logistics Terminal.

    This came at the same time that Patrick’s standoff with the unions was called off; in my view, this remains an undervalued strategic asset.

    Retail sales fall, Lend Lease under pressure, Mesoblast shattered

    Biotech Mesoblast Ltd (ASX:MSB) fell 37.2% after the US FDA announced a secondary trial would be required for its COVID-19 treatment spooking investors.

    The sector remains one driven by sentiment and regulatory assessment, it is not for the risk averse.

    Retail sales fell 4.0% from July levels, not unexpected given lockdowns in Victoria; but reflecting the importance of removing restrictions sooner rather than later.

    Lend Lease Group (ASX:LLC) appears to be coming under pressure from its pension fund investors, cutting the valuation of the properties in their Australian Prime Property Retail Fund by over 23%.

    This comes after the group delayed redemption requests and suggests their asset management business may be under pressure.

    One to avoid given the uncertainty around property development and valuations of unlisted assets.

    Asset Manager Janus Henderson Group (ASX:JHG) was one of the leaders this week, adding 16.7% after an activist US investor appeared as a 9.9% shareholder.

    Perhaps AMP (ASX:AMP) is next?

    What goes up, must come down, energy recovery hopes dashed, wall of worry grows taller

    US markets were rattled on news that President Trump had been move to hospital as a precaution; the S&P 500 down 1.0% and the Nasdaq 2.2%.

    Yet this wasn’t enough to stop another positive week for markets, the S&P finished 1.5% higher and small caps recovered posting their best week in two months as trading conditions continued to normalise.

    European markets were the highlight, posting a 2.2% gain for the week, despite a spate of lockdown restrictions expanding through the region.

    My first takeaway this week is that both the M&A and IPO markets are alive and well.

    The end of 2020 is likely to see a boom in businesses coming to market for fresh capital, but as always ‘buyer beware’ and ensure you take a close look at the fine print and overly optimistic expectations.

    Secondly, a reminder that election results don’t end the world and polls should not be relied upon.

    We are all prone to finding binary outcomes from major events, but as we saw after the 2016 election, life goes on and there are ultimately winners and losers in every situation.

    Now is clearly the time for active management.

    Finally, hopes of a global energy recovery have been dashed.

    A ballooning second wave will see international travel remain on hold for longer than expected, placing even more pressure on airlines, travel companies and tourism driven economies.




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