It’s Monday morning, we have a whole lot of trading ahead of us this week and you’re right where you should be. As usual, today we’re going to focus on a hot topic with a little analysis; then we’ll dig into the events that you should be keeping an eye on. Without further ado, grab your cork hat and Vegemite, we’re heading to the land Down Under!
COVID forces the Aussie economy into a u-turn
Okay, newsflash: the global pandemic has done to Australia what even the 2008 global financial crisis couldn’t; sharply halting a period of record growth and plunging the country into a recession that’s going to take some getting out of.
Through the ‘Golden Years’, Australia’s economy morphed into an open, services-driven economy, focusing on tourism and also tapping into its mineral wealth. Doing so meant waving goodbye to much of its manufacturing capability and it’s this fateful decision that has made the pandemic so difficult for the Australian economy.
Up until July, the country had been doing a great job of shutting out the coronavirus, but even that came at a cost. To protect its citizens, the government closed borders, effectively refused to do business with the rest of the planet, and stopped people moving around and doing the things they usually do (school and work, etc.). This had an obvious impact on tourism, education and immigration.
Even worse, those actions only delayed the inevitable, with a massive spike in infections hitting the country at the start of July, grinding everything to a halt once more, bringing the unemployment rate to a 19-year high of 7.5%.
How are the top companies faring?
A good measure of how any economy is doing (and where it might be heading) can come from looking at the performance of the country’s top companies. So, let’s do just that!
(The following are the top 5 companies headquartered in Australia, according to 2020s edition of the Fortune Global 500).
1. Wesfarmers (WES)
Stock price on 02.01: 41.44 AUD
Stock price on 14.07: 47.61 AUD
YTD high: 47.61 AUD
YTD low: 31.02 AUD
YTD % change: +14.89%
2. Woolworths Group (WOW)
Stock price on 02.01: 36.28 AUD
Stock price on 14.07: 40.27 AUD
YTD high: 43.60 AUD
YTD low: 34.16 AUD
YTD % change: +11%
3. BHP Group (BHP)
Stock price on 02.01: 54.92 USD
Stock price on 14.07: 56.99 USD
YTD high: 56.99 USD
YTD low: 30.95 USD
YTD % change: +3.77%
4. Commonwealth Bank (CBA)
Stock price on 02.01: 79.88 AUD
Stock price on 14.07: 71.76 AUD
YTD high: 90.99 AUD
YTD low: 54.26 AUD
YTD % change: -10.17%
5. Westpac (WBC)
Stock price on 02.01: 24.19 AUD
Stock price on 14.07: 18.04 AUD
YTD high: 25.81 AUD
YTD low: 14.10 AUD
YTD % change: -25.42%
Okay, so it’s not all doom and gloom. At least the retail sector is picking up! These are interesting figures and they show that consumers are feeling more confident, regardless of re-imposed lockdowns. This is positive. So too is the fact that BHP has bounced-back from pretty low-lows. That’s a signal that Australia’s mining traditions may be able to ease the suffering.
However, even these slight wins struggle to dampen the fact that Australia is now experiencing its first recession in 29 years. The government is doing its best to push the country through the crisis, with the Reserve Bank of Australia cutting its main interest rate to a record low of 0.25%. The central bank has also launched an unlimited bond-buying programme. The government has pledged hundreds of billions of dollars to help support businesses and individuals and has signalled that more stimulus measures will be announced soon.
Let’s hope that these measures take effect ASAP and that Australia can soon snap back.
This week’s trading agenda
A relatively quiet week lies ahead. Here’s what you need to know.
● Japan will announce its preliminary GDP Growth figures for Q2 (JPY).
● No major events are scheduled.
● The UK will announce its YoY inflation rate figures (GBP), which will certainly be interesting given everything that’s happened between then and now.
● The EU will also follow suit, giving us a glimpse at its own YoY inflation rate figures (EUR).
● Stateside, the Fed’s FOMC is also due to release its meeting minutes (USD).
● The ECB will announce its Monetary Policy Meeting Accounts (EUR).
● We’ll end the week where it started as Japan reveals its Inflation Rate YoY figures for July (JPY).
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The Contentworks team