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ASX to open higher, strong US lead

Daily Market Update

ASX to open higher, strong US lead, Commonwealth Bank (ASXLCBA) hit with ASIC investigation

The ASX200 (ASX:XJO) finished 1.7% higher to start the week, rebounding quickly from Friday’s so-called ‘bloodbath’.

Once again, market volatility was met with reassuring language from central banks and positive news around the vaccine rollout.

The Reserve Bank of Australia confirmed that they would be doubling their bond-buying to $4 billion per day, sending the 10-year government bond down close to 30 basis points, hitting 1.6%.

Every sector finished higher, with real estate (+3.2%), IT (+3.0%), and healthcare (+2.7%) the biggest beneficiaries, gaining on the ‘duration’ effect.

The Commonwealth Bank of Australia (ASX:CBA) gained 3.1% after the latest loan data was released, with total loan values up 10.5% in January over the month prior and more than 44% higher at the same time in 2020.

The company also confirmed that ASIC had initiated proceedings against their Commsec share trading division on the basis that they may have overcharged brokerage and failed to have sufficient systems in place to track some types of forbidden trades.

Ship maker upgrade, Tyro returning to normal, ex-dividend pulls Fortescue lower

Ship-maker Austal (ASX:ASB) jumped 8.4% after announcing that its US division had signed another US$235 million contract to produce a ‘catamaran’ type vehicle for the US Navy.

Tyro Payments (ASX:TYR) has continued with its COVID-era weekly market updates which offer an almost live insight into the rebounding Australian economy.

Management reported that YTD transactions to 26 February hit $15.94 billion,10% higher than the same time last year, whilst the February results also improved 16% with consumers clearly venturing out of their homes once again.

In an interesting insight, the final inputs into GDP results, being corporate profits and inventories were released, the former falling 6.6% and the latter gaining 0.1%.

As mentioned yesterday, many companies have kept costs low by running down inventory, but this needs to be restocked at some stage, with a surge in demand potentially creating an inflation spike.

Fortescue Metals Ltd (ASX:FMG) fell 5.3% after going ex-dividend, once again showing the issue of investing solely for income.

Strongest day since June, Berkshire Hathaway (NYSE:BRK.A) reports

All three US benchmarks finished more than 2% higher to open the week, with the Nasdaq the highlight, up 3.0%.

The S&P500 was 2.4% stronger but it was ultimately the smaller companies sector, represented by the Russell 2000, that contributed most.

The sector is inherently more tied to the reopening of the economy and hence is likely to benefit more significantly from the recently announced stimulus.

Long-term bond rates continued to fall ahead of further statements from Federal Reserve officials that will likely confirm continued monetary support.

The Warren Buffett-led Berkshire Hathaway reported 14% growth in earnings on the same quarter in 2019, hitting US$5.02 billion. But full-year 2020 profits fell 48% primarily due to both a slowdown in their insurance and energy businesses; shares finished 3.6% higher.

The holding in Apple Inc (NYSE:AAPL), which is 5.4% of the portfolio, was the biggest highlight with the company continuing to outperform.

Management also continued to buy back shares, US$9 billion for the quarter, on the basis that they undervalue the underlying assets.

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