RBA pessimism infects market: Aus shares rise 1.3% over week

Market Reports

by Katrina Bullock

The ASX dropped in early trade and tracked sideways for most of the afternoon despite gains on Wall Street overnight and strong prices for gold and iron ore. The Reserve Bank of Australia warns that the Australian economy will take longer to recover that previously anticipated. 4DMedical (ASX:4DX) floated today with an impressive bang. Eligibility requirements for the JobKeeper extension are being relaxed to make it easier for businesses and staff to qualify. The changes were introduced in response to the Victorian Covid 19 restrictions but will apply across the country.

The S&P/ASX200 index

At the closing bell the S&P/ASX 200 index closed 37 points or 0.6 per cent lower to finish at 6,005.

Over the week, the market has gained 77 points or 1.3 per cent.

Futures market

Dow futures are suggesting a fall of 57 points.
S&P 500 futures are eyeing a dip of 10 points.
The Nasdaq futures are eyeing a fall of 44 points.
And the ASX200 futures are eyeing a 30 point fall on Monday morning.

Economic news

The RBA now expects the economy to take longer to recover from the pandemic than previously expected. It expects global GDP to contract by more than 4 per cent, before rising by nearly 6 per cent in 2021. The RBA warns that unemployment could rise to 10.25 per cent if the virus forces other states outside Victoria into Stage 3 and 4 lockdowns. RBA assistant governor Ellis outlined 3 scenarios which the economy could experience depending on the speed at which the virus is contained - a baseline scenario, an upside and a downside. All 3 include higher rates of unemployment, lower GDP, and assume that international borders will remain closed to most travellers until at least the middle of next year.

AiGroup has released the Performance of Services Index for July. This index rose 12.5 points in seasonally adjusted terms up to 44 points, indicating another contraction in activity in July but at a slower pace than in June.

Company news

Citi rates Nick Scali (ASX:NCK) as a buy, upgrading its 12-month price target to $9.80. The company’s share price has been see sawing since the pandemic from a low of around $3 in March to new highs of $8.80. Citi says the first half guidance appears conservative. The broker believes the disruption caused by the pandemic may provide acquisition opportunities and that the market is undervaluing the $75 million in land and buildings on the balance sheet. First half net profit growth guidance of 50 to 60 per cent assumes lower sales orders during August and September because of the Melbourne lockdown. Shares in Nick Scali (ASX:NCK) closed just over 1 per cent lower at $8.71.

Ardent Leisure Group (ASX:ALG) has received a $69.9 million financial assistance package for its Theme Parks division under the Queensland Government’s Covid 19 Industry Support Package and Queensland Tourism Icons Program 2020.

Online real estate classifieds company REA Group (ASX:REA) reported a 5 per cent drop in earnings (EBITDA) year on year to $492.1 million for the year ended 30 June 2020. The group’s flagship site realestate.com.au extended its leadership position with around 60 per cent of Australia’s adult population visiting the site each month.

Village Roadshow (ASX:VRL) has finally entered into a deal with BGH Capital which will see the private equity firm acquire the theme park and cinema operator at a price of up to $2.45 per share.

The board of administration outsourcing company, Link Administration Holdings (ASX:LNK) has appointed Vivek Bhatia to succeed John McMurtrie, as Managing Director of Link Group in early 2021.

IPOs

4DMedical (ASX:4DX) started trading today. The company’s technology converts sequences of X-ray images into four-dimensional quantitative data, allowing physicians to better diagnose and treat patients with respiratory diseases. It floated with an issue price of $0.73, opened at $1.47 and closed at $1.59. The listing was oversubscribed prompting the company to increase the size of its capital raise to $55.8 million from its target in June of $45 million.

Wall Street

Wrapped up our four trading days this week higher: The Dow Jones added 3.5 per cent, The S&P 500 added 2.3 per cent and the tech heavy Nasdaq gained 3.3 per cent.