Afternoon Report / ASX down smalls, COVID contained to the beaches for now, AGL downgrades, Gold bullish in January

The daily Market Matters Reports will finish up for Christmas tomorrow afternoon and will recommence on Monday 11th January. During this time, if we do make any changes to our portfolios, we will send out alerts, furthermore if anything dramatically changes in the market, we will update subscribers accordingly – this usually happens when I’m away! For clients at Shaw, I’ll be on the desk until Christmas Eve, back on the 7th January, however the desk will be open and available all trading days during the period.

WHAT MATTERED TODAY

The ASX finished little changed today on what was a quiet session of trade, most focus on the COVID numbers out at 11am this morning and for now, the virus seems well contained on the Northern Beaches. The market actually sold off on the numbers as can be seen on the intra-day chart below, however we then spent the rest of the day recovering. The resources again a standout for the session led by Fortescue Metals (FMH) +4.93% and Nickel Producer Western Areas (WSA) +5.60%.

Gold stocks were down early however they fought back well to close mostly higher. I had a chat with a client today who flagged his observation of Newcrest’s (NCM) strong performance each January, and he’s right, January is the most bullish month of the year for NCM with an average gain for the month over the past 10 years of +6.55%, clearly strong while other gold stocks have a similar level of seasonality. This could be down to a few reasons, however likely Gold stocks are sold to free us $$ into the strongest seasonal period of the year (December) before being bought again to rebalance portfolio’s in January – this fits in with our bullish gold thesis.

Elsewhere, there was another short report out on Wisetech (WTC) -6.62%, this is an all too common occurrence these days and the impact of these are clearly waning, AGL Energy (AGL) fell to new 10+ year lows today after cutting earnings forecasts, they now see underlying profit of between $500-580m down from $560-660m, we’d previously written about AGL being all too hard with some major headwinds which were shown through a very wide guidance range, and today they’ve confirmed our thinking – the stock ended down 5.14%.

Asian markets were all lower across the board today, while US Futures are trading marginally higher into our close.

The ASX 200 finished down -5pts / -0.08% to close at 6669. Dow Futures are trading up +70pts / +0.23%

ASX 200 Chart

ASX 200 Chart

BROKER MOVES

·         Hipages Group Rated New Buy at Goldman; PT A$2.90

·         a2 Milk Raised to Equal-Weight at Morgan Stanley; PT A$11

·         Adbri Raised to Hold at Morningstar

·         Insurance Australia Raised to Buy at Morningstar

·         QBE Insurance Raised to Buy at Morningstar

·         Ansell Cut to Sell at Morningstar

·         a2 Milk Raised to Buy at Morningstar

·         QBE Insurance Cut to Hold at Bell Potter; PT A$9.50

·         IGO Raised to Buy at Shaw and Partners; PT A$7

·         Western Areas Raised to Buy at Shaw and Partners; PT A$3

·         CBL AU Rated New Speculative Buy at Morgans Financial Limited

·         Cashrewards Rated New Buy at Ord Minnett; PT A$2.20

·         Cashrewards Rated New Buy at Moelis & Company; PT A$2.38

OUR CALLS

No changes today

Major Movers Today

Have a great night

James & the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

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