July 31, 2021

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ASX to open weaker as investors farewell 2020

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The All Ordinaries closed for the year 1.3 per cent, or 92.3 points weaker at 6850.60.

Market analysts expect investors to switch back to a buying mood in the new year. Jessica Amir, market analyst at Bell Direct, expects the banking and financial sector, in particular, to recover strongly led by banks that will be driven by record-high mortgage applications.

“The down breath stocks of 2020 are likely to see a continued buying, this has been taking place of late and the impetus for this will continue in 2021, as the economy expands and we get vaccinations going into circulation overseas.”

Miss Amir added mining stocks – partcularly iron ore, copper and nickel – were also set to rally as the world recovers and China’s demand for Australian exports grows.

Meanwhile, the “stay at home economy” would continue to lift stocks such as online retailer Kogan after periods of lockdown forced more people to adopt online shopping. “If everything continues, it should be a cracking 2021,” Miss Amir said, with the ASX likely to rally 8 to 10 per cent over the year.

David Bassanese, chief economist at BetaShares, also said the ASX was placed to do well in 2021. “The combination of vaccines being made available by mid-year and central banks looking likely to keep interest rates on hold for several years, which is the big difference from coming out of typical recessions, all of that bodes well for the market.”

“Investors will be probably looking to take on risk and for those that haven’t already invested in the market, looking to get exposure,” Mr Bassanese said.

“Overall, the market is pretty well placed to do well, the earnings outlook is pretty upbeat and valuations, given where interest rates are, are not that outrageous.”

Overnight, Wall Street nudged higher and the US dollar dipped to its lowest in more than two years. All three major US stock indexes were up modestly as recently enacted stimulus and the ongoing rollout of COVID-19 vaccines fed optimism over economic recovery in 2021.

The Dow Jones Industrial Average rose 0.2 per cent, or about 74 points, to post a near-record close of 30,409.56. The S&P 500 gained 5 points, or 0.13 per cent, to 3732.04 and the Nasdaq Composite added 19.78 points, or 0.15 per cent, to 12,870.

“2021 is going to be the beginning of it,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “My anticipation will probably be more robust in the latter part of 2021.”

“Once there’s the sense of an all-clear sign, we would anticipate a robust response from the consumer,” Mr Keator added.

For now, he suggests the markets are in wait-and-see mode.

“The markets are saying ‘what have you done for me lately?’ and people are going to be focusing on what’s going to happen if we see more and more restrictions due to the pandemic,” he said.

Britain approved a coronavirus vaccine developed by Oxford University and AstraZeneca in the latest development in the rapid progression, testing, approval and deployment of drugs to battle the disease.

Meanwhile, European stocks reversed gains to end a five-day winning streak, closing lower as investors locked in year-end gains.

The pan-European STOXX 600 index lost 0.34 per cent and MSCI’s gauge of stocks across the globe gained 0.33 per cent.

Crude oil prices inched higher on the back of the weaker dollar and a dip in US inventories, but gains were capped by dimming hopes of a demand rebound.

US crude futures gained 0.83 per cent to settle at $US48.40 per barrel and Brent settled at $US51.34 per barrel, up 0.49 per cent on the day.

Gold prices rose, countering a dip in the greenback, although global COVID-19 vaccine rollouts and increased risk appetite limited the safe-haven metal’s gains.

Spot gold added 0.6 per cent to $US1,888.28 an ounce.

With Reuters

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Technology and business journalist, with digital experience.
Stints at Business Spectator, The Australian. Better than average cook, pretty handy with knives and guitar.

Business reporter at The Age and Sydney Morning Herald.

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