The ASX is rising strongly and for an explanation, look at the way some old favourites have come back and ignore all that talk about the influence of tech stocks like Altassian, WiseTech or fintechs such as Afterpay and Zip and even CSL.
By close of business Friday we saw the big four banks – the Commonwealth, Westpac, NAB and ANZ – underline their importance to the local market.
While the ASX 200 rose 3.5% last week, the share prices of the big four were up by between 4.8% and 7.2%.
A peg for the increased investor interest was the interim results from the Commonwealth Bank on Wednesday. These are expected to be solid, but after an interim of $2 a share was paid a year ago (before the pandemic hit), the payout may not rise all that much, if at all.
It will be the signal the bank sends for the second half – a 98 cents a share payment was made a year ago for the June half and this year it will be much higher.
The cap placed on payouts by APRA, the key regulator, has been eased
After being hammered in the pandemic and sell off and ignored in the post-March rebound by investors with tech and retail stocks in their eyes, the usual drivers of ASX performance have come back hard since November when talk about the early successes with COVID vaccines saw the start of as rotation away from techs etc and back to more traditional value stocks such as industrials and banks.
And their rise has continued, helping push the ASX 200 up more than 10% in the past three months.
Friday saw Wall Street finish with modest gains and that saw the ASX futures platform end 5 points higher – pointing to a soft start later this morning.
The ASX200 ended at up 1.1% 6,840.5 on Friday while the All Ordinaries rose 1.07% to 7,112.9.
Friday trading saw the ASX recoup all of Thursday’s losses and lifted the market by 3.5% last week, with solid gains by the big four banks a major factor.
Shares in the ANZ rose 2.06% on Friday to end at $25.29; the Commonwealth Bank added 1.82% to $88.64, National Australia Bank lifted 2.15% to $25.23 and Westpac closed up 2.03% at $22.15.
But when we look at the three months to Friday, the big four banks stand out.
Together the big four have boosted their collective market value by more than $106 billion in the past three months.
Commonwealth shares rose 6.14% last week to take the three-month gain to 27% and its market cap to $155 billion.
NAB shares rose 7.2% last week for a gain of 28.9% for the last three months and a lift in the market value to more than $81 billion.
ANZ shares rose 5.8% over the week which took its gain for the past three months to 28.3% and its market value to more than $74 billion.
Westpac lagged, as it has been doing for the last 18 months with a gain of 4.8% last week and 24.6% over the three months which lifted its market cap to $79 billion.
The big iron ore miners have done well in the past three months as global iron ore prices hit a series of multi-year highs. BHP shares are up 26%, Rio shares up 21% and Fortescue shares are up 40%.
And a previous darling, CSL has seen an 8.5% slide in its share price in the past three months so it has underperformed the wider market, despite its key role in COVID vaccine production and enhancements.
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Global sharemarkets hit new highs on Friday on investor hopes of more stimulus from Washington (looking good) and better economic times that also lifted crude oil prices to nearly $US60 a barrel and boosted copper and gold.
MSCI’s all-country world index, which captures equity performance in 50 countries (but is heavily weighed to US stocks, especially megatechs), rose 0.62% to cap its best week in three months with a gain of 4.35%.
MSCI’s gauge of Asian shares outside Japan was up 0.66% on Friday, while Japan’s Nikkei rallied 1.5%.
Japanese shares rose 4% over the week and Chinese shares were up 2.5%.
Wall Street saw solid weekly gains for the major markers – the best since November.
Friday’s weak jobs report for January with only 49,000 new gigs created (but the jobless rate slipped to 6.3% because over 400,000 people left the work force) didn’t grab the attention of investors, even though the weak December figure of a 140,000 fall was expanded to a bad loss of 247,000 jobs and November’s gain was trimmed sharply.
The US jobs market has added just 88,000 people in the past three months, a fraction of what it was mid-year.
But all this was ignored and thee Nasdaq and S&P 500 also hit new highs thanks to stronger-than-expected corporate results in the fourth quarter which now sees companies on track to post earnings growth for the first quarter instead of a fall (See US earnings preview).
The Dow rose 92.38 points, or 0.3%, to 31,148.24, the S&P 500 added 15.09 points, or 0.39%, to end at 3,886.83 and the Nasdaq added 78.55 points, or 0.57%, at 13,856.30.
For the week, the S&P 500 was up 4.65%, the Nasdaq added 6.01% and the Dow rose 3.89%.
The small-cap Russell 2000 index rose 7.7% for the week, its biggest weekly percentage gain since the week ended early last June.
Longer-dated US Treasury yields rose after a weak January labour force report with fewer jobs than forecast in January. The yield on US 10 year bonds rose to 1.169% at the end of the week – up 8.23 points.
That was the highest the 10 year yield has been since mid March, 2020, when they were on the way down as the pandemic started sweeping across the US.
That came as the US Congress was taking early votes on approving President Joe Biden’s $1.9 trillion COVID-19 relief package.
In Europe, stocks closed little changed at the end of an upbeat week. Falling German industrial orders didn’t help confidence and Germany’s export-oriented DAX index slipped 0.03%, but France’s CAC 40 rose 0.9% to close at a two-week high on Friday.
But Europe’s STOXX 600 index saw its best weekly performance since November, rising 3.5%, despite the weakness on Friday. The index ended at its highest level since early 2020.
Oil hit its highest level in a year, above $US59 a barrel, supported by hopes for the new stimulus package and supply curbs by the OPEC and its producer allies such as Russia
Brent crude futures rose 50 cents to settle at $US59.34 a barrel. US West Texas crude futures settled up 62 cents at $US56.85 a barrel.
