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ASX ends Friday lower as energy stocks slump

Daily Market Update

ASX sinks to first loss in a month, retailers powering ahead, materials weaker

The ASX200 (ASX:XJO) finished the week on a negative note, falling 0.6%, delivering the first weekly loss in over a month, down 0.9%.

It seems the number of divergent outcomes for 2021 is increasing by the day, with talk of an inflation spike, countered by central banks, and then a stuttering vaccine rollout.

The property and utilities sectors, typically seen as a proxy for bond rates, were the only gainers on Friday, adding 0.8% and 1.2%, with Charter Hall (ASX:CHC) adding 1.2%.

Embattled retailer Freedom Foods (ASX:FNP), producer of products including Messy Monkeys, appears to be nearing an end to its extended trading halt with management announcing a $265 million recapitalisation plan via the issue of new debt instruments.

The corporate regulator ASIC this week flagged their continued investigation into the Greensill trade finance meltdown, flagging that both Insurance Australia Group (ASX:IAG) and QBE Insurance (ASX:QBE) may have been exposed at one point in 2020, both shares finished over 1% higher.

Over the week, it was two retailers that lead all returns, with KFC owner Collins Food (ASX:CKF) and Harvey Norman (ASX:HVN) adding 19.2% and 10.5% respectively. This came despite Australian retail sales unexpectedly fell 1.1% in January.

US markets gain, bank capital exemptions removed, China-US bickering to continue

Both the S&P500 and Nasdaq gained on Friday, finishing 0.1% lower and 0.8% higher as bond yields fell.

The Dow Jones, however, contracted close to 0.7% after the Federal Reserve announced that pandemic-era exemptions on bank capital requirements were being removed, sending the entire financials sector down on the threat of lower profits in 2021. JP Morgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) both fell by over 1%.

Over the week it was geopolitical concerns driving the market lower, however, the losses were far from significant with both the S&P500 and Nasdaq falling just 0.8%.

It looks like little has changed in China-US relations under the Biden administration, with a meeting in Alaska dominated by threats and ‘bickering’ about calling each other out on recent decisions. This follows the well-publicised war of words with Russia.

Visa (NYSE:V) shares fell the hardest on Friday, down 6.2%, after the US regulator indicated it was investigating ‘anticompetitive practices’ by the company in the debit card market it dominates.

Big picture no clearer, low rates going nowhere, avoid the consensus

You would expect strong unemployment figures to bring a sense of confidence to the economy, yet this week’s announcement was met with wariness ahead of the impending finish of JobKeeper.

The damage to small business is yet to be fully seen and this week’s retail sales may be a pointer to the issue facing Australia. Will consumers continue spending money as they are forced back into offices and able to travel more freely?

The Bank of Japan appears to have taken the first step towards unwinding Abenomics after cutting their annual target for Japanese stock purchases, but this comes only a few days after the RBA and Federal Reserve confirmed rates are going nowhere for at least three years.

The issue of course facing every country is that moving too soon will see a spike in their currency and a potential dampener on any export-driven recovery.

Finally, if it wasn’t obvious before it must be now, never trust an economic forecast or ‘consensus’ view. Unemployment figures were significantly better than even the most optimistic economist, whilst retail sales were much weaker.

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