Note from the MD: ASX notches first day in the green this week as case numbers mount

The fight against COVID has taken a few interesting turns this week, and what these abrupt corners might mean for markets is once again grabbing headlines.

The fight against COVID has taken a few interesting turns this week, and what these abrupt corners might mean for markets is once again grabbing headlines.

In Australia, a slew of lockdowns on the east coast are threatening to derail the oft-touted ‘V-shaped recovery’ many predicted would play out in the land down under.

And while growth may take a hit, suspicions are mounting that inflation will continue to tick upwards, amid a tightening labour market. Read more.

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Scott Morrison also noted yesterday that 70,000 claims for government financial assistance are currently being made daily, adding the current lockdowns will have a”significant” impact on GDP.

Interestingly, Morrison also said our vaccine rollout looks to be back on track after stumbling out of the starting blocks.

Australia’s banks, meanwhile, are expected to throw their shareholders a bone, using the excess capital they’ve accrued through the COVID period to up dividends, increase payout ratios, or run share buybacks.

ANZ have already announced a $1.5 billion share buyback, with the other banks tipped to follow from next month. 

Those expectations helped push the financial sector – and the market more broadly – up on Wednesday.

The ASX 200 (ASX: XJO) has continued its consolidation sideways after testing support at the 50 day moving average earlier in the week.  

The 50 day MA has proven to be strong support for the index since the COVID-19 drop in March last year. We see the market continuing to consolidate at these levels until a breakout move occurs. 

As of close of business yesterday (21 July), almost every sector saw gains, with the only two exceptions being Industrials and Information Technology, which closed 0.7% and 0.5% down.

Miners were big winners. The ASX 300 Metals and Mining index (ASX: AXMM) climbed 0.96% helped along by a 10% jump from Australian Strategic Materials (ASX: ASM) following news a South Korean investor provided the company with a $250 million capital injection.

Pilbara Minerals (ASX: PLS) also gained 5.49%, while BHP (ASX: BHP) lifted 1.32% and Rio Tinto was up 1.16%.

The Small Ordinaries index (ASX: XSO) saw a modest 0.65% gain, while the Emerging Companies index crawled along almost horizontally, closing the day 0.02% lower.

To return to this week’s newsletter, click here.

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