ASX futures pointing higher; market waits on China GDP figures


  • Iron ore prices up 0.1% overnight after falling 5.4% last week 
  • Aussie dollar at US70.74 cents and gold hovers at $US1,900 per ounce
  • Coronavirus restrictions ease in Victoria, but retail and hospitality prevented from a full opening

Latest updates

Melbourne-based retailers question speed of easing

By Dominic Powell

Victorian retailers have expressed a mixture of relief and disappointment over the state government’s easing of restrictions, with many questioning why stores are not able to reopen sooner.

On Sunday, Premier Daniel Andrews announced that retailers could open their doors with COVID-19 precautions in place from November 2, though this date might be brought forward if case numbers remained low.

Mike Schneider, the chief executive of $15 billion hardware retailer Bunnings, said while he welcomed the clarity provided by the government, he was disappointed larger format stores were unable to open.

Retailers in Melbourne are looking forward to opening up, even though it will be "COVID normal" and not back to pre-pandemic ways.
Retailers in Melbourne are looking forward to opening up, even though it will be “COVID normal” and not back to pre-pandemic ways. Credit:Paul Jeffers

“We’re disappointed that the different risk profiles in the retail sector have not been recognised, particularly standalone large format retail with outdoor adjacencies and stringent COVID-safe measures,” he said.

“Reopening retail is vitally important to rebuilding the Victorian economy and to restoring a sense of normality to people’s lives.”

Office supply company Officeworks, which is also owned by Bunning’s parent company Wesfarmers, was similarly displeased. Managing director Sarah Hunter said the announcement was disappointing given the low case numbers in metropolitan Melbourne.

Large retailers such as Bunnings and Officeworks have been lobbying the state government to be able to reopen for weeks, pointing to supermarkets as an example of the low virus risk in bigger retail spaces.

Small retailers were also lukewarm on the Premier’s announcements. Caleb Brown, who heads up major retailing group Brand Collective, told The Age while he was broadly pleased about the plans, he questioned why the sector had to remain shut for a further two weeks.

The week ahead

By Kyle Rodda

US politics

Speculation about US politics, as well as negotiations within US Congress regarding a US fiscal stimulus bill, will be the major drivers in the global financial markets. Polling continues to suggest a Joe Biden victory in the US general election, with the balance of probabilities seemingly indicating a so-called ‘blue wave’, which would see Democrats seize control of both houses of congress, with the markets also positioning for a subsequently bigger spending government after the election. The markets also appears to be less concerned about the possibility of a contested election result. Although it remains inverted, the US VIX Futures curve has flattened considerably in recent weeks.

Australian markets
SPI Futures are suggesting that the ASX200 ought to kick-off the week with a 0.63 per cent rally, following a neutral lead from Wall Street on Friday. It backs up what was a positive week for Australian equities, with the ASX200 briefly challenging post-virus-crisis highs during the week and closing trade 1.22 per cent higher. The highlight for the local trading week this may prove to be the RBA’s minutes from its last meeting. The minutes will be read for how close the RBA came to cutting rates last month, as market participants price-in a likely easing of monetary in November, along with the increased likelihood of a more conventional quantitative easing program from the central bank in the near future.

Virus and lockdowns
Second and third waves of the coronavirus in several major economies is weighing on market sentiment. A spike in infections in the UK and parts of Europe cast doubt over the global economies recovery last week, the UK and France two notable countries to reimpose fresh lockdown measures. The need for a vaccine has become more pronounced for the markets, as it becomes clearer that the global economy faces a slow journey to normalcy
without one. Hopes were bolstered at the end of last week that a vaccine may come sooner than expected, after US pharmaceutical company Pfizer flagged it could release its vaccine by as soon as November.

US earnings season
The reporting period for US corporates has so far been a positive one. According to financial data company FactSet, of the 49 companies that have reported profits, 83 per cent have exceeded expectations, with the market now tipping a contraction in earnings this quarter of -18.5 per cent. Better than expected results from financial sector firms were largely responsible for the outperformance, with some of America’s biggest banks surprising
investors by reporting lower provisions, and continued strong revenues in trading divisions. Attention will turn to US tech in the week ahead, with Netflix and Tesla reporting their Q3 results.

Economic data
A raft of economic data will deliver a health check on the global economy’s recovery this week. China will publish its GDP data for the quarter, with economists tipping the figure will reaffirm the view that the Chinese economic rebound is on strong footing. GDP is projected to have expanded by 5.5 per cent on a quarter-over-year basis, up from 3.2 per cent last quarter. Global PMI surveys will also be closely watched to get a live pulse on global
business activity. Estimates are suggesting a plateauing of both manufacturing and services activity across the world economy, with special concern directed to the services surveys this week, as fresh lockdowns roll-out across several major economies.

Good Morning

Good Morning and welcome to Markets Live for Monday, 19 October.

Your editor is Lucy Battersby while Alex takes a well deserve break.

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