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Note from the MD: The (lack of) needle and the damage done: Melbourne outbreak hits confidence

June 9, 2021

Note from the MD: The (lack of) needle and the damage done: Melbourne outbreak hits confidence

After two long weeks, the restrictions placed on Melburnians are set to ease from tomorrow following a massive community effort and the tireless work of contact tracers.

After two long weeks, the restrictions placed on Melburnians are set to ease from tomorrow following a massive community effort and the tireless work of contact tracers.

It’s good news, but maybe too little too late? The latest figures from NAB’s consumer confidence index show a noticeable drop in sentiment – with Victoria’s 7.5% decline one of the major drags on the index – though analysts suspect we may see a sharp rebound next week.

Looking to markets, the benchmark ASX 200 index (ASX: XJO) briefly rallied in the morning but struggled to hold onto that momentum, with all but three sectors – utilities, materials, and industrials – closing in the red.

Ultimately, the XJO finished the day down 22.4 points (about 0.3%), with consumer staples proving to be a major weight.

With the XJO testing the 7300 level every day this week we will be watching for a short term pull back in the market. 

The XJO is currently trading 180 points above its post-COVID support line which the market has reverted towards after failing to break through to new all-time closing highs. We expect any pullback to be short term with buying pressure following in the coming days.

Today’s big winners were a pair of mining stocks – joint venture partners Coda Minerals (ASX:COD) and Torrens Mining (ASX:TRN) – who announced they’d found an “intense IOCG alteration” at their South Australian project.

These IOCG (iron-oxide-copper-gold) deposits have the potential to be massive, like BHP’s Olympic Dam project (also an IOCG deposit).

After striking literal gold the two companies saw their prices jump significantly; Coda Minerals gained 235%, while Torrens Mining put on a not-insignificant 100%.

Miners played a role in the ASX Small Ordinaries’ (ASX: XSO)  0.11% gains today, too.

Whitehaven Coal and New Hope Corporation slipped into the top ten performers in the index, up 5.18% and 3.97% respectively.

But it was Brickworks (ASX: BKW) that really lit a fire under the XSO, climbing 11.3% today after upgrading its earnings expectations to a new record of $240 – $260 million for its Property Trust joint venture.

The company said strength in the property market has underpinned this improved outlook.

And speaking of improved outlooks, Flight Centre (ASX: FLT) and Webjet (ASX: WEB) both saw small improvements today as news of easing Victorian restrictions broke. Maybe they’re counting on the entire state taking a well earned holiday.

I know I’m considering one.

One investor who is always on the hunt for new opportunities is Nick Guidera, a portfolio manager at Eley Griffiths Group – a specialist investment management company focusing on Australian listed small and emerging companies.

Nick will be joining us next Friday 18th June at 12pm (AEDT) for “The Insider: Meet the Fund Manager” webcast, where he’ll share 3 of his favourite stocks, his investment strategy and market outlook for 2021. To join us for this session, click here.

 


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