Global markets recovered overnight to start November (S&P 500 Index +1.2%) as investors prepared for the US presidential election. European, UK (even with the country re-entering a 4-week lockdown) and most of the Asia Pacific markets were in the green. Asian markets were buoyed by further signs of recovery in China’s manufacturing sector. Interestingly, technology stocks continued to lag the broader market return.
Tomorrow’s US election remains the focus. Most polls give Biden a decisive lead in the popular vote, much more than Clinton had in the run-up to the 2016 election and, crucially, Biden is mostly ahead in the key swing states. Investors are bracing for the risk that the US presidential election will be contested and the potential for civil unrest.
Westpac (WBC:ASX / WBC:NZX)
Westpac slipped -0.6% lower yesterday after posting second half profits that were largely expected by the market.
Westpac said it will pay a 31¢ final dividend, down 61.3% after its profit slumped 66% to $2.29 billion in the year ended September 30. Revenue fell 2% to $20.18 billion and cash earnings dipped 62% to $2.61 billion.
WBC released a material beat on lower bad debts, while core profit was a bit weak due to higher costs and lower lending.
As we discuss below, the property market is string on both side of the Tasman, which is reducing a tail risk of a property market collapse for the banks. We see attractive value in the banks and Westpac is our preferred BUY in the sector.
Australia & New Zealand Market Movers
The Australian market was higher on Monday (ASX 200 Index +0.4%) as equities managed solid gains to start the week ahead of the Reserve Bank of Australia's policy meeting today.
Big banks recovered some lost ground thanks to a rise in national home prices last month – with a 6% seasonally adjusted increase in home loans in September thanks to record low interest rates and government subsidies to construct new dwelling. Small lender Homestar Finance has lowered its ongoing variable home loan rate to 1.79% – the lowest on offer in Australia’s housing finance market
In stock moves, AMP rallied +9% after saying last week's takeover proposal from Ares Management has an implied value of $1.85 a share. Building material business CSR rallied 5.7 per cent to $4.66 after it said it will pay a fully franked 8.5¢ interim ordinary dividend of and a 4¢ interim special dividend. Revenue for the six months ended September 30 fell 6 per cent to $1.08 billion while net profit slid 15 per cent to $58.7 million. "We are very pleased with the performance of building products," said chief executive Julie Coates.
The New Zealand market edged lower to start the week (NZX 50 Index -0.1%) with harsher declines coming from NZ listed companies off the main NZX 50 index index. Helping limit losses on the NZX 50 was a rebound in shares of market heavyweight Fisher & Paykel Healthcare.
Economic news-flow was strong as according to Statistics NZ building permits data showed 3,605 new dwellings were consented in Sept, +7.7% vs Sept last year. Despite initial fears of a sharp downturn, residential consents have remained at recent high levels post-lockdown with demand supported by tight supply and record low mortgage rates.
3 Things Markets Will be Watching this Week
- All eyes this week will be on the US election, with results set to start coming through around lunchtime on Wednesday (Australian time).
- COVID-19 news is back at the top of headlines with social distancing measures re-introduced in Europe.
- It will be another big week of US earnings ahead with 132 S&P 500 companies due to report including Alibaba Group, Wynn Resorts, and Berkshire Hathaway. Regionally, Westpac, CSR, Pushpay, Z Energy, Trustpower, Goodman Group and News Corp all report earnings.
Team
