Tuesday 27th October 2020
RBA: Recession is over, ASX 200 slumps 1.7%
RBA: Recession is over, ASX200 slumps 1.7%, stronger open ahead
The ASX 200 (ASX:XJO) finished off the day’s lows falling 1.7% on Tuesday after a weak global lead.
The good news in Victoria is being offset by a raft of new lockdown measures across Europe and signs the pandemic is unlikely to slow soon.
On a positive note, the RBA indicated in a speech that they believe the Australian recession is over!
Once again, we look to be saved by a combination of mining exports, with the iron ore price still booming thanks to China, and huge Government stimulus.
According to UBS this stimulus making it hard to understand the true strength of the banks as they are operating in a ‘false economy’.
ANZ Banking Group (ASX:ANZ) was the latest to announce a write-down, $528 million taking the total for 2020 to over $1.5 billion, this time centred on more customer remediation and the ‘accelerated write-down of software’.
Shares fell 0.9% on the news taking the sector down 1.3%. The latter becoming increasingly common as the banking sector is challenged by more tech-driven competitors.
Boral (ASX:BLD) announces asset sale, Evans & Dixon (ASX:ED1) under offer, oil retreating again
Boral Ltd (ASX:BLD) offered the news of the day, announcing the sale of their Asia-focused USG Boral business to Joint Venture partner Knauf for just over $1.0 billion.
The company specialises in plasterboard and other building products across the region and has been facing a slowdown in volumes of 6% as the pandemic hit.
The price represents a profit of $540 million to BLD shareholders and a multiple of 15 times 2020 earnings, so a solid result in a difficult market.
Management confirmed their intention to retain the majority of the US businesses, but particularly Fly Ash, but to focus more closely on extracting all growth and value possible, including through smaller asset sales.
The sale increases the likelihood of a reinstatement of the dividend.
BLD shares were among just eight of the 2o0 companies finishing higher, up 0.8%.
Long suffering shareholders, and clients, of Evans & Dixon (ASX:ED1) may have a knight in shining armor with aggressive acquirer 360 Capital Group (ASX:TGP) offering what amounts to a $0.61 cent per share offer, which was immediately knocked back.
It’s been a difficult few years, the share price down 79% since it’s IPO in 2018 and the announcement of an ASIC investigation into the appropriateness of their financial advice remains in the background. Shares finished 7.8% higher.
Tech bounces again, US markets higher, WFH set to continue
US markets were mixed overnight as more corporate activity and the likelihood of another round of lockdowns in the US bites on confidence.
The key beneficiary is obviously the technology sector, with the Nasdaq outperforming adding 0.8% whilst the broader S&P 500 closed down around 0.3% primarily on the back of weaker oil prices.
The news of the day was the agreement for US chipmaker Advanced Micro Devices (NASDAQ:AMD) to buy competitor Xilinx (NASDAQ:XLNX) send the latter over 8% higher.
The rest of the week will see the likes of Alphabet, Microsoft and Facebook report, which may contribute to a final pre US election rally if the WFH theme is continuing to pay off for these groups.
Watch this space.
Drew is editor of The Inside Network's publications and a principal adviser at Wattle Partners.
