The Australian share market opened slightly lower this morning following mostly negative leads from international markets and rising geopolitical tensions between China and the US, as China ordered the US to close its consulate in Chengdu. The move was in response to President Trump’s decision to order the closure of China’s Houston consulate after the FBI allegedly found evidence of Chinese agents linked to the consulate, hacking medical research on the Covid-19 vaccine from companies and universities. Despite the drop at the open, the market rebounded in early trade. About half of the sectors are in the green this morning, Materials leading the way.
The S&P/ASX 200 index is 15 points up or 0.3 per cent higher at 6,039. On the futures market the SPI is 6 points higher.
Local economic news
Commsec has released its quarterly State of the States report. For the first time in over a decade Tasmania is number one in terms of economic rankings, followed by Victoria, the Australian Capital Territory then New South Wales. Prior to today’s survey, Victoria had held the top spot in the economic rankings for eight quarterly surveys. Victoria’s fall in the rankings relates to its covid woes. Victorian Premier Daniel Andrews announced yesterday that Victoria had suffered its deadliest day since the pandemic began, recording 459 cases and 10 deaths in a 24 hour period. The State of the States survey is based on 8 economic indicators, and Tasmania ranked first in 4 of them - relative population growth, relative unemployment, equipment investment and retail trade.
Reserve Bank assistant governor Chris Kent addressed Kanganews this morning and says that the RBA’s intervention in debt markets has “worked well” and “contributed to a noticeable improvement in market sentiment and…financial conditions”. The RBA’s Term Funding Facility (TFF) was discussed. He expects an acceleration in take-up of the TFF as the September 30 expiry date approaches. The TFF provides 3-year funding to banks at a cost of 0.25% backed by assets on their balance sheet. Take-up of the TFF is currently around $26 billion, or around 17 per cent of the total $150 billion currently on offer.
Citi rates Coca-Cola Amatil (ASX:CCL) as a buy with a 12-month price target of $9.85. This follows Coca-Cola’s recent trading update. Citi forecasts revenue of $4.57 billion and earnings of $524 million for the 2020 financial year. The broker expects the volume numbers will surprise on the upside and may lead to consensus broker upgrades. It was not surprised by the non-cash impairment of $160 to $190 million which the company unveiled, given the pace of volume decline and likely lower medium-term returns in the company’s Indonesian business. Citi’s forecast is more bullish than Credit Suisse, Macquarie, Morgan Stanley, Ord Minnett and UBS – all of whom have currently issued a hold, neutral or equal-weight rating. Shares in Coca-Cola Amatil (ASX:CCL) are trading 1.02 per cent lower at $8.74.
Buy now, pay later provider, Sezzle (ASX:SZL) has posted a positive operating cashflow of US$4.3 million for the June quarter. This follows cash outflow of US$1.3 million in the prior quarter. The company added 326,000 new customers and 3,400 new merchants during the quarter. Sezzle’s executive chairman and CEO Charlie Youakim says the company’s “strong 2Q20 performance, improving consumer profile, and successful capital raise, position[s it] to achieve [its] annualized run rate target of US$1 billion in underlying merchant sales by the end of 2020.” Shares in Sezzle (ASX:SZL) are trading 0.3 per cent higher at $7.90 at noon.
Best and worst performers
The best-performing sector is Materials, adding 1.6 per cent, while the worst performing sector is Energy, shedding 1.2 per cent.
The best performing stock in the S&P/ASX 200 is Lynas Corporation (ASX:LYC), rising 11.5 per cent to $2.42, followed by shares in Perseus Mining (ASX:PRU) and Saracen Mineral Holdings (ASX:SAR).
The worst performing stock in the S&P/ASX 200 is oOh! Media (ASX:OML),dropping 4.1 per cent to $0.81, followed by shares in Corporate Travel Management (ASX:CTD) and Cooper Energy (ASX:COE).
Commodities and the dollar
Gold is trading at US$1,920 an ounce. Gold has risen above US$1,900 an ounce for the first time since 2011.
Iron ore price fell 0.7 per cent to US$109.39.
Iron ore futures are pointing to a fall of 1.1 per cent.
One Australian dollar is buying 71.25 US cents.