Weekly review: Market brushes off Brexit and jumps on trade hopes

Brexit trade market banks miners stocks ASX
WEEKLY MARKET REPORT

Once again the Australian share market has managed to brush off worries about Brexit and instead focussed on the improving trade outlook to end another week higher.

All sectors rose following reports that US Treasury Secretary, Steve Mnuchin, was ready to ease tariffs on Chinese imports as the world’s two largest economies continue to tussle over trade.

The Australian market ended up 0.5% higher after adding 30 points to the ASX 200 which closed the week at 5879.6 points.

That marked the second week in a row in which the market finished higher, adding 105 points or 1.8% for the week as December worries began to fade.

It remains a far from a convincing rally with the very real concern of an unruly Brexit hovering in the background and the US Federal Government shutdown, along with ongoing worries about the US – Chinese trade talks.

Banks lead the recovery

Even the beaten down Aussie banking sector was up strongly after US banks posted some better than expected results this week.

All of the banks were higher for the week with ANZ (ASX: ANZ) up 3.3% to $26.07, Commonwealth (ASX: CBA) rose 2.2% to $73.23, Westpac (ASX: WBC) lifted 2.1% to $26.15 and NAB (ASX: NAB) added 1.4% to $24.89.

Macquarie Group (ASX: MQG) rose an impressive 4.4% for the week to close at $118.20, while insurers Suncorp Group (ASX: SUN) jumped 5.7% higher to $12.90 over the week and QBE Insurance (ASX: QBE) also gained 4.4% for the week to close at $10.96.

Miners also strong

The mining sector was stronger, helped by a strong performance by Fortescue Metals (ASX: FMG), up 1.8% on Friday and BHP Group (ASX: BHP) up 0.7%, while Rio Tinto (ASX: RIO) was also up 0.3% despite a mixed December quarterly production update.

Afterpay Touch keeps on growing

The standout stock was in the IT sector, with shares in buy now, pay later company Afterpay Touch (ASX: APT) jumping 13% or $1.85 to $16.10 after reporting a 140% increase in first half underlying sales to more than $2.2 billion, while late fees as a percentage of total income fell to below 20%.

More than $260 million of its underlying sales in the first half of the fiscal year were processed through its US platform.

Online retailer Kogan.com (ASX: KGN) was also a solid performer, surging another 15% after adding 22% on Thursday on the back of solid sales over the Christmas trading period.

Royal commission rocks aged care stocks

Aged care stocks took a hit on Friday as the royal commission into the sector began.

Regis Healthcare (ASX: REG) fell 2.14%, Estia Health (ASX: EHE) down 4.91%, Aveo Group (ASX: AOG) shed 1.57%, with Japara Healthcare (ASX: JHC) getting slammed 5.35%.

The sector took its first blow back in September last year when Australian Prime Minister Scott Morrison warned the nation to brace itself for “bruising” information from the investigation into the nation’s $20 billion ailing aged care sector.

Investors in the the above companies will be waiting nervously to witness the outcome of the commission with many experiencing heavy loses over the past 12 months, down around 40% across the board.

Small cap stock action

The Small Cap index rallied on Friday to finish up 0.95% and 2.38% higher for the week.

ASX 200 vs Small Cap Ords January 2019 recovery
ASX 200 vs Small Cap index

A handful of companies with noteworthy news this week included:

CardieX (ASX: CDX)

Digital health technology company CardieX has signed a co-marketing agreement with the United States’ largest health insurer Anthem Inc (NYSE: ANTM) to promote CardieX’s subsidiary’s health plans and services.

CardieX’s subsidiary inHealth Medical Services offers telehealth plans and virtual health coaching, clinical programs and research.

Under the agreement, these will be promoted across Anthem’s customer network, which includes the Blue Cross Blue Shield Association of health insurance providers, which provides health plan coverage to more than 106 million people in the US and internationally.

The commercial-in-confidence five-year agreement expands on an earlier service agreement between the parties.

Esports Mogul (ASX: ESH)

Esports Mogul has continued cementing its place in online gaming after adding more popular games to its proprietary online platform Mogul.gg.

The mobile new games include Hearthstone, Mobile Legends: Big Bang, Clash Royal and Arena of Valor.

Only a few days later, Esports reported it was adding PC titles Overwatch, Call of Duty: Black Ops 4, Rainbow Six Siege and StarCraft II to its platform.

The addition of the popular game titles is part of the company’s $275,000 Silver Slam tournament series in partnership with Razer Inc, which will be launched next month and will include 16 PC, console and mobile titles.

Tando Resources (ASX: TNO)

Vanadium explorer Tando Resources continued the positive news run at its SPD project in South Africa after reporting high-grade drill results from its phase two campaign and encouraging concentration and mass recoveries on ore samples.

The company received its first assay batch from the phase two drilling program on Wednesday, with the highlight intersection being 20m at 1.20% vanadium pentoxide from 86m, including 7m at 1.48% vanadium pentoxide.

Meanwhile, using a davis tube to concentrate earlier drill samples returned 7m at 2.17% vanadium pentoxide from 3m, 35m at 2.11% vanadium pentoxide from 47m, and 24m at 2.16% vanadium pentoxide from surface.

Tando’s is fast-tracking to project with a scoping study underway and a resource upgrade due before the end of the current quarter.

Strike Energy (ASX: STX) and Petrel Energy (ASX: PRL)

On the energy front, Strike Energy and Petrel Energy will be mobilising a rig to the Warrego gas project in Western Australia.

Petrel Energy will be merging with Warrego Energy via a reverse takeover, giving it exposure to the project, which Strike operates.

According to Strike, the rig is one of the most powerful land rigs available in Australia and the spud date for the West Erregulla-2 well has been set for early May.

Strike and Petrel will be targeting a gross prospective resource of 1.162 trillion cubic feet of gas (on a best-estimate basis).

Atomos (ASX: AMS)

Recent ASX debutant Atomos has secured a royalty-based licence agreement with RED.com, which produces professional digital cameras of which many Hollywood movies are shot on.

The agreement covers certain RED patents and recording and/or playback of two video codec standards that Atomos implemented in certain products.

Earlier this month, Atomos launched its ProRes RAW capturing for Nikon’s Z 6 and Z 7 cameras.

Atomos’ technology unlocks the potential of digital cameras by enabling higher quality video and greater creative flexibility at a lower cost.

MGM Wireless (ASX: MWR)

MGM Wireless is taking its SPACETALK smartwatch further afield after announcing plans to launch the watch in the UK in April 2019.

The company expanded internationally in November last year, when the watch was made available in New Zealand.

According to MGM, the UK market is three times the size of Australia and New Zealand, with a population of more than 66 million people.

The company also noted the children’s smartwatch product was better known among UK parents than Australian and New Zealanders.

Impression Healthcare (ASX: IHL)

As part of its diversification strategy, Impression Healthcare has received the relevant licences to sell or supply scheduled cannabinoid substances wholesale.

Locking-in the licences now enables Impression to sell cannabis, cannabidiol, tetrahydrocannabinols and dronabinol health products throughout Australia under the country’s Special Access Scheme and Authorised Prescribers network.

Impression plans to be selling its medical cannabis products before the end of the current quarter and has struck multiple deals with medical cannabis manufacturers and producers.

The company plans to import its products and export Australian products to the world market.

The week ahead

Locally, the highlight of the coming week is the monthly job figures that are released on Thursday, although the Commonwealth Bank’s measure on economy-wide sales for December will be closely watched on Monday, as will consumer confidence figures which are out on Tuesday.

The continuing government shutdown in the US means the release of many expected economic indicators is expected to be delayed, although the outcome is uncertain.

There will be no such problems in China, with the economic growth figures out on Monday potentially the biggest market mover.

Analysts expect the Chinese economy grew by 6.5% during 2018 but is slowing so that getting 6% to 6.5% for 2019 is more likely.

In addition, the final 2018 numbers on retail sales, industrial production and investment should complete the picture of how the Chinese economy is weathering slower growth and the trade war with the US.

Weekly top stocks

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