United Kingdom

How good news on the Australian economy will boost the share market

Australians with supermarket and bank shares are set to get richer this week if numbers showing the end of a deep recession are better than anticipated.

Official national accounts data for the September quarter, due out on Wednesday, is expected to show the economy surging by three per cent in just three months.

Australia's gross domestic product plunged by a record seven per cent in the June quarter alone, as a result of the coronavirus shutdowns from the end of March.

The worst global pandemic in almost 100 years ended Australia's world-record run of 29 years without a recession, following six months of contraction.

Westpac, Australia's second biggest bank, is expecting the September quarter national accounts data to show a three per cent gross domestic product expansion in three months.

Australians with supermarket and bank shares are set to get richer this week if numbers showing the end of a deep recession are better than anticipated. Official national accounts data for the September quarter, due out on Wednesday, is expected to show the economy surging by three per cent in just three months. Pictured are Sydney shoppers in the Queen Victoria Building

Fat Prophets head of research Greg Smith said a healthy GDP number could see bank shares surge by ten per cent in December 2020, adding to a strong November rally. 

'We could see another ten per cent potentially in a short space of time,' he told Daily Mail Australia. 

'You could see them push along into 2021 if there's a bit of a whiff dividends are going to increase.' 

CMC Markets chief market strategist Michael McCarthy said better-than-expected result from the Australian Bureau of Statistics was more likely to excite ordinary shareholders rather than the major institutional investors who own large blocks of shares in companies.

'That sort of headline-grabbing news can inspire retail investors,' he told Daily Mail Australia.

'So we might see what's sometimes referred to as the household name effect - that is, good support for those businesses that are very well known, clearly in the public space.

'It's quite possible that a strong GDP print might flow through into good support for stocks like Coles and Woolworths as investors know those businesses.'

Australia's supermarket giants have made steady gains since the share market bottomed out in March and shoppers engaged in the panic buying of toilet paper.

During the past eight months, Coles shares have surged 21.5 per cent from $14.76 to $17.94 while Woolworth shares have climbed by 8.2 per cent, from $34.71 to $37.56. 

CMC Markets chief market strategist Michael McCarthy said better-than-expected result from the Australian Bureau of Statistics was more likely to excite ordinary shareholders rather than the major institutional investors who own large blocks of shares in companies

Bank shares have rallied much more spectacularly during the past three weeks as investors anticipated a strong economy recovery in the September quarter.

Westpac shares since November 10 have soared by 15.7 per cent from $17.76 to $20.55 as of Monday morning during the first hour of trade.

ANZ shares during the same time frame have surged 20.8 per cent from $19.22 to $23.22. 

In three weeks the Commonwealth Bank, Australia's biggest home lender, has seen its share price soar by 15.1 per cent from $70.31 to $81.06 while NAB, Australia's biggest business lender, has surged 19 per cent from $19.76 to $23.52. 

Despite the strong rallies since March, none of Australia's big four banks have regained the all-time highs reached in February, which means there's still room for growth.

Australia's supermarket giants have made steady gains since the share market bottomed out in March and shoppers engaged in the panic buying of toilet paper. During the past eight months, Coles shares have surged 21.5 per cent from $14.76 to $17.94 while Woolworth shares have climbed by 8.2 per cent, from $34.71 to $37.56

'We sometimes forget that financial stocks, in particular banks, are leveraged to the economy and a recovery in the economy is good news for financials,' Mr McCarthy said.

While a three per cent expansion in the economy in just three months would be good news, Westpac pointed out Australia's GDP in the year to September 2020 would still be 3.9 percentage points below where it was at the same point in 2019.

Still, the bank predicted Australia's economic expansion during the September quarter would have been stronger if Melbourne hadn't been placed into a strict, stage four lockdown in August. 

The prospect of stronger global growth has boost oil and gas stocks with Woodside during the past month surging by 29.7 per cent from $17.52 to $22.73.

Bank shares have rallied much more spectacularly during the past three weeks as investors anticipated a strong economy recovery in the September quarter. ANZ shares (Melbourne branch pictured) during the same time frame have surged 20.8 per cent from $19.22 to $23.22

The Australian share market was firmer on Monday with the benchmark S&P/ASX200 up 0.59 per cent or 39 points to 6640.10 - a level that is 7.3 per cent below the February 20 peak of 7,162.5 points.

With pharmaceutical giants Pfizer, Moderna and AstraZeneca having COVID-19 vaccines that are more than 90 per cent effective, Westpac senior economist Andrew Hanlan said a moderate economic recovery was possible next year.

'The 2021 year will be a period of transition as the momentum from the reopening effect fades. Legacies from the virus, social distancing and international travel restrictions, and legacies from the recession, high unemployment, as well as the fragilities pre-COVID, will act to temper the pace of recovery,' he said.

'That said, positive news on vaccines is encouraging.'

Football news:

Liverpool have not scored any of their last 87 shots in the Premier League. The team has 4 consecutive matches without goals
Leroy Sane: Pep teaches so that I started to hear the little man in my head
Jamie Carragher: The championship is slipping away from Liverpool. They'll start worrying about getting into the top 4, not the title
Liverpool lost at Anfield for the first time in 69 Premier League games (and Burnley). Klopp's team has yet to score in 2021
Sevilla are Interested in Papu Gomez
Rookie of the Urals Ibrahimi: will Manifest itself in RPL - sparkle everywhere. Good league for pumping
Juventus have signed Switzerland U21 striker Lungoyi and returned him on loan to Lugano for 1.5 years