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RBA planning more QE, ASX rallies

RBA planning more QE, ASX rallies, Virgin CEO out, US markets pare falls
 
The ASX 200 (ASX:XJO) rallied 0.5% on a mixed day. 
 
The key result today was a slightly better than expected unemployment result, the rate increasing to 6.9% despite Victoria shedding another 1.1% of jobs. 
 
Queensland stands out with the highest level of unemployment at 7.7% despite being well sheltered from the virus suggesting border closures are having a large economic impact.  
 
Second was the RBA Governor’s speech in which he effectively locked in another rate cut in November and confirmed that Quantitative Easing policies would be in full effect, pushing from three year to ten-year bonds as they seek to stimulate lending from the banks. 
 
The financial sector was a key beneficiary adding 0.6%, with the Commonwealth Bank of Australia (ASX:CBA) rallying 0.9%. 
 
CBA stands out as the bank most able to offset shrinking net interest margins via its strong franchise. Similarly, the energy sector led the market, up 2.5%, as Chinese and Asian demand for oil points to a stronger 2021 recovery. 
 
Santos (ASX:STO) and Oil Search Ltd (ASX:OSH) both finished 4.0% higher for the day.
 
Virgin CEO leaves, Pro Medicus (ASX:PME) signs another deal, AGMs
 
The CEO of the newly recapitalised Virgin Australia Holdings Ltd (ASX:VAH) unexpectedly stepped down today, not a great look given the apparent support from private equity during the bidding process. 
 
Radiology software provider Pro Medicus (ASX:PME) jumped 7.7% on news of a $10 million contract with a German hospital, supporting the cross border opportunity for the company. 
 
Challenger Financial Group (ASX:CGF) continued to rally, adding 2.6% today and 2.1% yesterday after reporting a 46% jump in annuity sales driven primarily by Japan. 
 
The Japanese have been dealing with near zero interest rates for decades, so the spiking demand for guaranteed income annuities, maybe a look into Australia’s future. 
 
Redbubble Ltd (ASX:RBL) reported another 116% growth in marketplace revenue, supporting a 149% jump in gross profit to $64.5 million. 
 
The company has been one of the best performing stocks in 2020, adding 11.5% today and up 500% for the year as consumers flock to their well-priced, artist focused products.
 
Jobless claims blowout, Morgan Stanley delivers, surging COVID-19 cases in Europe, but a mixed day for the US
 
The US markets managed to pare early losses, the S&P 500 and Nasdaq falling 0.2% and 0.7% respectively. 
 
Tech continues to underperform, with Smaller Companies leading the way as all eyes turn to the recovery. 
 
The banking sector continues to benefit from heightened volatility in markets with the Australian-led Morgan Stanley Inc. (NYSE:MS) reporting 20% growth in sales and 25% in profits to $2.7 billion for the September quarter. 
 
The investment bank has a smaller lending book than its competitors and the recent acquisition of Eaton Vance was highlighted as an alternative to dividends at a time when they are still restricted by the regulator. 
 
The French capital instituted curfews as European case averages exceed the US sending the Eurostoxx down -2.5%. 
 
Despite concerns around the length of the Victorian lockdown, Australia’s position as a global leader has been solidified. 
 
Back to the US and jobless claims unexpectedly spiked by 53,000 to 898,000 as employers continue to lay off workers even as businesses are allowed to reopen. 
 
This trend has been brought forward in the US but we will likely see it in both October and April in Australia. 

Drew Meredith

  • Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.




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