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Best week in nine for the ASX, even after AstraZeneca setback

Daily Market Update

ASX delivers strong gains, gold shining again, travel hit by vaccine issues

The ASX200 (ASX:XJO) finished the week flat but managed to deliver a strong 2.4% from just four days of trading.

The initial driver was the Reserve Bank reiterating their accommodative policy settings, sending the technology sector including Afterpay (ASX:APT) up 15.1% over the week after a difficult few months.

Most sectors were higher on Friday apart from the consumer staples and healthcare, with Woolworths (ASX:WOW) the biggest detractor dropping 1.3%.

CSL (ASX:CSL) also fell, more likely due to currency than their involvement in producing the Astra Zeneca (LON:AZ) vaccine in Australia, which has had well-publicised issues. The group was unlikely to gain any profit from its production.

Gold bullion is beginning to rally once again, with the likes of Greensill and Archegos bringing fear back into markets.

Silverlake Resources (ASX:SLR) was the top performer on Friday, up 6.1% and over the week adding 18.6%.

Magellan Financial Group (ASX:MFG) fell 2.0% after announcing they would be shifting to quarterly flow announcements, with the latest seeing retail investors withdraw just $15 million despite sustained underperformance.

Three records for the S&P500, Alibaba’s huge fine, Amazon overcomes union

Another positive end to the week sent the Dow Jones up 0.9%, the S&P500 0.8%, and the Nasdaq 0.5% despite unexpected signs of inflation.

Both the Dow and S&P finished at all-time highs, with the latter hitting a new level on three consecutive days. The results were similarly strong over the week, adding 2.0%, 2.7%, and 3.0% respectively.

Friday brought the first signs of a potential spike in inflation with the producer price index, which measures the cost of goods being paid by manufacturers and importers, jumping 1% in March and 4.2% over the last 12 months.

To inflation hawks, this is proof that it is beginning, however, central banks and those involved in the industry highlight that an increase in prices was inevitable given the higher oil price and supply shortages due to COVID-19 lockdowns. The big question is whether they seek to pass the cost onto consumers.

Alibaba (NYSE:BABA) received a significant fine from the Chinese Communist Government, US$2.8 billion, for its monopolistic practices.

This represents just 4% of its 2019 sales so the penalty is more about a signal than financial impact; shares fell 2.2%.

In the US, Amazon Inc. (NYSE:AMZN) has seemingly overcome the challenge of workers in one of their factories seeking to unionise, potentially setting a precedent for the rest of their operations.

Not short of a dollar, volatility disappears, records made to be broken 

As the Greensill Capital and Archegos debacles showed, few companies are short of a dollar in 2021.

Buoyant conditions combined with highly dilutive capital raisings amid the pandemic, that in hindsight likely weren’t required, have companies flush with cash.

This week we saw Cleanaway (ASX:CWY) accelerate their proposed acquisition of competitor Suez’s Australian business.

We also saw Seven Group (ASX:SGH) utilise the ‘creep’ provisions to take their holding in Boral Ltd (ASX:BLD) to around 20% of the shares on issue.

The flood of cheap money is also sending markets themselves higher, with the S&P500 now joining the Dow Jones to trade at a new all time high this week.

This time, however, it isn’t the tech stocks driving performance, but rather a broad group of investment banks, financials, materials, and manufacturers among others.

This sort of dispersion offers opportunities to active investors and makes the decision to undertake a passive approach at this point of the market a difficult one.

After spiking to 37 points in January amid the GameStop saga, the US VIX or volatility index is trading at its lowest point in a year, falling 30% last month and hitting just 17 points today; where it moves next is anyone’s guess.

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