As governments around the world scrambled to respond to the Coronavirus pandemic, the local market posted its worst weekly result since the GFC and one of the worst in its history. Investors were largely unswayed by measures to uphold the global economy, instead paying closer attention to a rapid rise in the number of cases outside of China. Central banks also intervened in the market during the week, stemming what would have otherwise been deeper losses. The ASX 200 fell 10.9% last week to finish at 5,539.3 points, with the index shedding more than $200bn in value.
Which shares excelled?
Last week’s best-performing stocks represented a broad range of companies, with some of them only sliding into the list on account of a strong rebound during Friday’s trading session where a remarkable turnaround took place in the late afternoon.
Topping the results were Xero (ASX: XRO) and Cochlear (ASX: COH), which put on weekly gains of 6.9% and 5.4% respectively. Despite an absence of news from both companies, the stocks were two of the most prominent beneficiaries of Friday’s late rally, with Cochlear shares turning around almost 30% from their low.
The next-best stock from last week was Costa Group Holdings (ASX: CGC), which advanced 5.4%. Shares in Costa Group have been trading sideways since news of the Coronavirus first rose to prominence, with investors seemingly split on the company’s fortunes.
Elsewhere, Fortescue Metals Group (ASX: FMG) bucked the trend, with its shares gaining 3.4% last week. Although the other iron ore miners were under significant selling pressure, FMG shares were largely propped up by some strong buying activity, including from Andrew Forrest, who tipped in for the second time in as many weeks with another large on-market purchase.
Finally, Coles (ASX: COL) featured among the best-performing stocks for the second week in a row, this time edging higher by 2.2%. Given the company has seen a frenzy of buying activity at its supermarkets right across the country, investors may be positioning themselves towards a resilient and defensive business that could perform well during the current circumstances.
Which shares dragged on the market?
Unsurprisingly, it was travel stocks under pressure yet again, with their market valuations crumbling in recent weeks. As more countries impose tight restrictions on travel around the world, the sector is facing significant pressure and some experts have even cast doubt over the futures of airline and travel agency businesses. Shares in Qantas (ASX: QAN) were savaged, with Australia’s leading airline dropping 31.8%, while Flight Centre (ASX: FLT) declined 27.7% following news that it would close 100 stores across the country.
Oil stocks were also pummelled last week, with Santos (ASX: STO) and Oil Search (ASX: OSH) both losing 31.6%. Following OPEC’s failure to strike a deal with its allies, Russia and Saudi Arabia have been slashing oil prices and increasing production, which saw the commodity record its biggest daily drop in nearly 30 years and pushed the commodity to a multi-year low.
Afterpay (ASX: APT), one of the market’s favourite stocks, was not spared from the brutal sell-off, with the BNPL heavyweight sinking 29.5%. Although the company sought to clarify its funding position with shareholders, the market adopted a ‘sell first, ask questions later’ approach as concerns grow around the prospect of a recession and the willingness of funding entities to provide cash in such an event.
Another heavyweight stock to suffer the market’s wrath last week was Boral (ASX: BLD), with the stock sinking 27.5% amid the risks that weigh over the economy. A host of other stocks also featured on the list of the worst-performing shares, with St Barbara (ASX: SBM), Credit Corp Group (ASX: CCP), Reliance Worldwide (ASX: RWC), Unibail-Rodamco-Westfield (ASX: URW) and Amcor (ASX: AMC) just some of the names.
This week’s trading outlook
While US markets roared higher in Friday’s offshore trading session, a multitude of countries around the world introduced lockdowns and strict entry requirements over the weekend. This could weigh on the ASX at the open, and if recent trading sessions are any indicator, volatility may well persist.
Bearish ETFs are once again likely to capture attention in the week ahead, with BBOZ and BBUS among those stocks that have seen a weight of capital support them. If the market has any chance of recording a bounce, it could be stalwart health care stocks like Cochlear and CSL (ASX: CSL) that underpin movement, however, a rising market may require a broader catalyst or market intervention from the RBA.
Tuesday’s RBA meeting minutes will be studied closely, with economists expecting to see further commentary around not only another interest rate cut, but what is now seen as the growing prospect that QE could play a role in the outlook of the Australian economy. House price and unemployment data is also on the agenda, albeit likely to be overshadowed by forward-looking risks. Arguably more important for the local market will be data coming out of China regarding fixed asset investment, industrial production and retail sales.
Meanwhile, in the US, the Federal Reserve has just cut interest rates once again, while also announcing it would purchase US $700bn worth of Treasury bonds and mortgage-backed securities. Markets have also been awaiting President Trump’s touted stimulus package, which was unexpectedly sidelined last week. These events could act as a minor catalyst for the market if better-than-expected, though investor sentiment will need a significant boost.
Carsales (ASX: CAR) and Crown Resorts (ASX: CWN) are the two biggest names set to declare dividends, with the stocks trading ex-dividend on Wednesday and Thursday respectively.
Finally, Vicinity Centres (ASX: VCX) and AMP (ASX: AMP) are both in a strong downtrend and trading at their all-time lows, while Coles, as mentioned earlier, has managed to show some resilience in recent weeks as one of the market’s better-performing shares.
We’ll be back next week with another Weekly ASX Trading Wrap Up – until then, have a great week!
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