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RBA comments push market lower

Equities

RBA comments push market lower, energy, iron ore prices fall, A2 Milk jumps 8%

The ASX200 (ASX:XJO) gave up a strong open, trading as much as 1% higher, to finish down 0.4% for the day.

With reporting season having come to an end, investors are now watching economic and central bank data intensely for any signs of change.

  • There are flashbacks of the post-GFC period with the old bad news for the economy is good news for markets coming into focus again.

    Today, the RBA decided to hold off on any further changes to interest rates, which remained pegged at 0.1%, nor did they announce a further extension to the $200 billion quantitative easing program.

    This was clearly a disappointment to investors who were looking for additional monetary support in light of last week’s spike in bond rates.

    The AUD strengthened on the non-result, moving back above $0.77 cents but the RBAGovernor did note they were ‘prepared to do more if necessary’.

    It was a day for the defensive cyclicals, with the consumer staples and financials sectors benefitting most, up 0.9% and 0.5% respectively, behind Coles Group (ASX:COL), +1.4%, and ANZ Bank (ASX:ANZ), +1.1%. 

    GDP outlook upgraded, A2 Milk recovery, Afterpay (ASX:APT) facing more competition 

    Capital Economics upgraded their GDP expectations for the December quarter of 2020, predicting the economy improved 2.7% rather than 2.3%/ This comes after the release of the latest lending and corporate profit data.

    Afterpay Ltd (ASX:APT) is now down around 20% from recent highs, falling 1.7% today after Commonwealth Bank (ASX:CBA) competitor Klarna confirmed they had raised US$1.0 billion at a US$31 billion valuation to fund their expansion into the huge US market.

    The BNPL is one of the most competitive in the world at the moment, with access to cheap capital and transaction margins key to profitability, both of which are likely to be under pressure in the coming months.

    A2M Milk (ASX:A2M) was among the top performers, jumping 8.0% despite a lack of any news releases.

    Risk off day ahead, Zoom (NASDAQ:ZM) smashes expectations, Greensill Capital under pressure

    US markets continued the recent trend of volatility, the Nasdaq falling 1.7% and the S&P500 0.8%, with investors increasingly looking for outlook updates from company management.

    In an about-face from developed market counterparts, China’s banking regulatory indicated they were ‘very worried’ about market bubbles.

    The company that will no doubt be remembered as the word of 2020, Zoom Communications (NASDAQ:ZM) provided their quarterly update overnight, with profit growing 2,327% to US$256.1 million on 2019 levels.

    Yes, that is over 20 times higher in just 12 months. This was achieved on revenue growth of 369% to US$882.5 million, with Zoom calls sticking around and likely forcing businesses onto premium subscriptions.

    Greensill Capital, founded by Australian Lex Greensill is apparently seeking insolvency protection after Credit Suisse froze a number of investment funds it manages.

    The fast-growing company offers supply chain finance to businesses around the world, assisting to smooth their cash flow, which it then on-sell to investors seeking higher returns.


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