The S&P/ASX 200 Index (ASX: XJO) has just capped off its best week since November 2020 and risen to its highest level in 11 months.
The index surged a significant 3.5% last week, propelling the ASX 200 to 6,840 points. That's its highest level since the coronavirus-induced market crash in March last year. It also puts the index within a whisker of the psychologically-important 7,000 point mark, which was briefly crossed in 2020 before the pandemic struck.
The almost-singular reason for last week's dramatic surge in value? The Reserve Bank of Australia (RBA).
Image source: Getty Images
RBA lights ASX's fire
The RBA held its monthly meeting on Tuesday last week, as it does on the first Tuesday of every month. No one was expecting the RBA to announce a change in interest rates, given the Bank has previously flagged that rates will be 'lower for longer'. And, as predicted, it didn't.
However, what did come as a surprise was a doubling down of the Bank's quantitative easing (QE) program, with another $100 billion of government bonds to be purchased by the RBA. Also unexpected was the news the RBA is not 'expecting' to increase interest rates until 2024. Yet that's precisely the update investors received on Tuesday.
This unexpectedly dovish outlook on monetary policy was more than enough to get investors hot under the collar. This is because they know low interest rates and QE is generally a recipe for higher share prices, and such a long-barrelled commitment from the RBA essentially means this powerful tailwind isn't going away any time soon.
The result was a party all round for ASX shares. ASX 200 blue chip shares, particularly the ASX banks, had a fantastic week, with National Australia Bank Ltd (ASX: NAB) topping the big four with a 7.18% rise over the week. Wesfarmers Ltd (ASX: WES) was also a strong blue chip performer, reaching a new record high on Friday.
ASX growth shares, especially in the tech space, did even better. Afterpay Ltd (ASX: APT) rose 12% over the week to close on Friday at a new record high of $151.30. That helped push the entire S&P/ASX All Technology Index (ASX: XTX) to its highest level ever.
How did the markets end the week?
We've already established that the ASX 200 had a phenomenal week, but let's dig a little deeper.
Monday started the week off with a rise of 0.84%. Tuesday backed this up with a hefty 1.5% rise on the back of the RBA announcement. Then Wednesday saw investors pile on with another 0.92% gain. Thursday saw the only red day of the week with a 0.87% fall, but this was quickly forgotten on Friday when the index delivered another 1.11% rise. Since the ASX 200 started the week at 6,607.4 points and finished up at 6,840.5, it recorded a vigorous 3.53% gain for the week.
Meanwhile, the All Ordinaries Index (ASX: XAO) also finished up strong (and back well over 7,000 points), starting at 6,870.9 points and finishing up at 7,112.9 points, up 3.52% for the week.
Which ASX 200 shares were the biggest winners and losers?
Time for our most salacious segment, where we gossip over last week's biggest winners and losers. So put the kettle on and fetch the biscuits while we start with the losers:
| Worst ASX 200 losers | % loss for the week |
|---|---|
| Worley Ltd (ASX: WOR) | (8.3%) |
| Northern Star Resources Ltd (ASX: NST) | (7.6%) |
| Unibail-Rodamco-Westfield (ASX: URW) | (7.4%) |
| Service Stream Limited (ASX: SSM) | (6.8%) |
Last week's wooden spoon went to engineering business Worley. This company delivered a profit warning last week, in which it told investors it expects revenue of $4.4 to $4.5 billion in the first half of FY2021 instead of the ~$6 billion it had previously flagged. A strong Aussie dollar and the pandemic were blamed. This meant Worley shareholders unfortunately missed out on the market's euphoria last week.
Northern Star also had a clanger. As a gold miner, Northern Star was probably ditched by investors as the market moved to 'risk-on assets' over the safe haven of precious metal.
Unibail-Rodamco-Westfield, a feature in the week prior's winners' list, turned from 'you're hot' to 'you're cold' for investors. In last week's wrap, we discussed how URW's high short positions had spooked short sellers in the wake of the GameStop Corp (NYSE: GME) saga. It appears these fears have now subsided – it's wrong when it's right, perhaps. When it comes to short selling, it's never black or white. Maybe URW and its investors will kiss and make up this week.
Finally, Service Stream fell for no apparent reason, so probably some profit-taking going on there.
Now with the losers out of sight and mind, let's look at last week's winners:
| Best ASX 200 gainers | % gain for the week |
|---|---|
| Virgin Money UK (ASX: VUK) | 22.8% |
| Zip Co Ltd (ASX: Z1P) |
19.4% |
| Credit Corp Group Limited (ASX: CCP) | 17.1% |
| News Corporation (ASX: NWS) | 16.9% |
A top week for the gainers last week!
First up we had NAB's old flame Virgin Money UK. Virgin Money appears to have benefitted from market sentiment, in addition to a well-received quarterly update, in which the bank outlined that its business lending was on the rise.
Zip also had a fantastic week. There wasn't any major news out of Zip that might have ignited this rally. But market sentiment and Afterpay's new high (which had somewhat left Zip in the dust in recent months) may have helped.
Credit Corp posted a much-welcomed half-year earnings report which included a 10% bump in profits and a lift in guidance for the year.
Meanwhile, New Corp was bumped up following a quarterly update in which its net income more than doubled from last year's result.
A wrap of the ASX 200 blue chip shares
Before we go, here is a look at the major ASX 200 blue chip shares as we start another week in ASX paradise:
| ASX 200 company | Trailing P/E ratio | Last share price | 52-week high | 52-week low |
|---|---|---|---|---|
| CSL Limited (ASX: CSL) | 45.54 | $276.33 | $342.75 | $242.67 |
| Commonwealth Bank of Australia (ASX: CBA) | 21.68 | $88.64 | $91.05 | $53.44 |
| Westpac Banking Corp (ASX: WBC) | 34.76 | $22.15 | $25.96 | $13.47 |
| National Australia Bank Ltd (ASX: NAB) | 23.25 | $25.23 | $27.49 | $13.20 |
| Australia and New Zealand Banking Group Ltd (ASX: ANZ) | 20.89 | $25.29 | $27.29 | $14.10 |
| Fortescue Metals Group Limited (ASX: FMG) | 11.53 | $23.23 | $26.40 | $8.20 |
| Woolworths Group Ltd (ASX: WOW) | 44.75 | $41.20 | $43.96 | $32.12 |
| Wesfarmers Ltd (ASX: WES) | 38.83 | $55.64 | $56.33 | $29.75 |
| BHP Group Ltd (ASX: BHP) | 21.23 | $43.80 | $47.54 | $24.05 |
| Rio Tinto Limited (ASX: RIO) | 19.56 | $113.33 | $127 | $72.77 |
| Coles Group Ltd (ASX: COL) | 24.93 | $18.28 | $19.26 | $14.01 |
| Telstra Corporation Ltd (ASX: TLS) | 20.6 | $3.15 | $3.94 | $2.66 |
| Transurban Group (ASX: TCL) | – | $13.69 | $16.44 | $9.10 |
| Sydney Airport Holdings Pty Ltd (ASX: SYD) | 89.86 | $5.91 | $8.43 | $4.26 |
| Newcrest Mining Ltd (ASX: NCM) | 22.76 | $24.87 | $38.15 | $20.70 |
| Woodside Petroleum Limited (ASX: WPL) | – | $25.44 | $34.44 | $14.93 |
| Macquarie Group Ltd (ASX: MQG) | 20.32 | $134.52 | $152.35 | $70.45 |
| Afterpay Ltd (ASX: APT) | – | $151.30 | $151.30 | $8.01 |
And finally, here is the lay of the land for some leading market indicators:
- S&P/ASX 200 Index (XJO) at 6,840.5 points.
- All Ordinaries Index (XAO) at 7,112.9 points.
- Dow Jones Industrial Average Index (DJX: .DJI) at 31,148.24 points after rising 0.3% on Friday night (our time).
- Gold (spot) swapping hands for US$1,814.25 per troy ounce.
- Iron ore asking US$153.74 per tonne.
- Crude oil (Brent) trading at US$59.34 per barrel.
- Australian dollar buying 76.477 US cents.
- 10-year Australian Government bonds yielding 1.19% per annum.
That's all folks. See you next week!
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