ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares

A well-received federal budget and the looming United States presidential election has helped the S&P/ASX 200 Index (ASX: XJO) record its best week since April. The ASX had a stunning week, pushing 5.37% higher to 6,102 points – its highest level since early September.

It was undisputedly the government's delayed 2020 budget announcement last week that was the catalyst for the ASX 200's massive surge. You can read some of our coverage of the budget here. But in summary, the government basically announced it would not stop focusing on stimulatory measures as opposed to 'budget repair' until the economy is once again healthily growing and the unemployment rate is under 6%.

Government spending and stimulus is obviously good news for all ASX shares. Thus, this announcement that the massive government spending the coronavirus pandemic has necessitated is set to continue for a period which is likely to last a number of years was met with metaphorical cheers from investors. Even though measures like JobKeeper and the coronavirus supplement are still scheduled to be wound up over the next six months or so, investors were comforted by other measures such as the bringing forward of already-scheduled tax cuts and the new JobMaker subsidy.

The other factor helping investor sentiment last week was the increasing possibility that the US elections could result in at least a chance of Joe Biden's Democratic Party achieving a 'clean sweep' of the Presidency as well as both houses of Congress. If the American government remains divided, the chances of heavy stimulus bills or wide-ranging tax cuts passing into law remain low. But if the Democrats win 'the trifecta', many pundits are starting to predict a flurry of new stimulus spending, which is obviously good news for the American economy and, by extension, the global economy. Speculation over an additional pre-election round of stimulus cheques didn't hurt sentiment either. Nor did President Trump's seemingly rapid recovery from COVID-19.

On the ASX 200, blue chips and small-caps alike rose. But it was once again the ASX tech shares leading the gains. WAAAXers like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) had fantastic weeks, rising by 12.38% and 9.86% respectively. Xero also made a new all-time high of $114.27 during the week.

How did the markets end the week?

As we touched on earlier, the ASX 200 had a massive week of gains, rising 5.37% from 5,791 points before Monday's open to 6,102.2 points at Friday's close. We had a rare week of 5 for 5 gains last week. Monday saw a 2.6% surge, which was backed up on Tuesday with another more-muted 0.35% gain. Then Wednesday brought with it another 1.3% gain as investors welcomed the budget. Again, this was backed up by a 1.1% rise on Thursday, with Friday's 0.33% gain the cherry on top.

Meanwhile, the All Ordinaries Index (ASX: XAO) also had a top week, rising 5.5% last week from 5,983.2 points to 6,312.5 points.

Which ASX 200 shares were the biggest winners and losers?

Time to pour some tea for our Foolish and still-salacious answer to the gossip pages – the week's winners and losers. As always, we'll start with the losers:

As you can see, it wasn't really a bad week for any ASX company, with last week's wooden spoon recipient – cloud connector Megaport – only copping a 1.88% loss. That was despite no major news coming out of the company last week. Megaport has been one of the more successful companies in 2020, with the Megaport share price remaining up 50.8% year to date. As such, I'm sure last week didn't really bother shareholders too much. 

Next up we had heath care company Nanosonics, which was not too popular with the brokers last week, leading to the company's relatively insignificant 1% drop.

It was a similar loss for toll road king Transurban. Transurban held its annual general meeting last week, in which it informed investors that traffic volumes remain depressed. Not a recipe for higher share prices.

And lastly, Bravura was also a little out of favour with investors, again despite no major news stemming out of the fintech company.

With the losers out of the way, let's now check out the winners:

As you can see, the winners' column was far more dramatic than the losers last week.

First up we had National Australia Bank Ltd's (ASX: NAB) old flame, Virgin Money UK. There was no major news out of this British bank, but all ASX bank shares had been beaten down in recent weeks, and had an excellent week last week. It seems a rising tide lifts all banking boats in this case.

Next up we had engineering company CIMIC which, alongside Virgin Money, managed to increase its market capitalisation by more than a fifth last week. The catalyst for this move appears to have been the release of a quarterly update on Friday, given the shares moved up nearly 10% on that day alone.

Again, there was no major news out of auto dealer Eagers, so this is a share that I would speculate has been caught up in the general euphoria over the government's budget.

And finally, we had buy now, pay later (BNPL) wunderkind Zip, which turned out to be the best performer out of the ASX tech sector last week. General tech euphoria, a bad month last month for the Zip share price, as well as a promising update from fellow BNPL player Sezzle Inc (ASX: SZL) appeared to be the main drivers of Zip's outperformance last week.

What does this week look like for the ASX 200?

There's a few annual general meetings and quarterly updates due this week, including from Cleanaway Waste Management Ltd (ASX: CWY) for the former and BHP Group Ltd (ASX: BHP) the latter. Aside from these events, I think sentiment this week will continue to be dominated by the unpacking of last week's budget, as well as the US elections, which are drawing ever closer. I'm expecting any major market-moving events to come from the US this week, so that's an area I'm keeping a close eye on.

So before we go, here's a snapshot of how the major ASX 200 blue chips are fairing before we start the week:

And finally, here is the lay of the land for some leading market indicators:

•    S&P/ASX 200 (XJO) at 6,102.2 points
•     All Ordinaries (XAO) at 6,312.5 points
•     Dow Jones Industrial Average at 28,586.9 points after rising 0.57% on Friday night (our time)
•     Gold (Spot) swapping hands for US$1,930.33 per troy ounce
•     Iron ore asking US$124.76 per tonne
•     Crude oil (Brent) trading at US$42.85 per barrel
•     Crude oil (WTI) going for US$40.60 per barrel
•     Australian dollar buying 72.39 US cents
•    10-year Australian Government bonds yielding 0.85% per annum.

Foolish takeaway

Last week again proved how futile it is to try and predict what the markets are going to do next. After weeks and weeks of downtrending ASX 200 shares, last week gave us the best week since April. Go figure! It just highlights how important it is not to get swept up in all of the noise out there and have an eye firmly on the long-term horizon. So on that note, stay safe, stay rational and stay Foolish, friends!