Market Wrap – 22nd June 2018

Market Summary

The Australian market closed higher for the second consecutive day, with index heavy banks and CSL Limited (ASX: CSL) leading the market higher (this is the highest closing level since the first week of 2008). Sentiment was riven the passing of a Bill in the Senate (37 to 33) for reductions in personal income tax by $144 billion over the next seven years (as outlined in the Federal Budget released last month). Though such is a ‘step-up’ procedure (tax cuts will be implemented in different stages); the most controversial reform will come into effect in seven years, when the tax rate will flatten for a larger bracket of individuals (those earning between $41,000 and $200,000 will all pay the same tax rate). Major indices in the United States fell as investors continue to speculate the end-result of current trade tensions between the United States and China. The Dow Jones Industrial Average fell for the eighth consecutive day. Globally, automakers fell heavily, as German car manufacturer Daimler highlighted that the company’s bottom-line earnings could be impacted by the aforementioned trade tensions.

 

US markets were down – Our market is expected to open lower 

 

  • AUSTRALIA:
    ASX200  was up 59.5 points or 0.96% to 6,232.1
    ALL ORDINARIES up 58.3 points or 0.9% to 6,332.90
    SPI futures contract is down 30 points to 6,151

 

  • U.S.A:
    DOW  -0.8% to 24,461.7
    S&P500 -0.6% to 2749.8
    NASDAQ -0.9% to 7,713

 

  • ASIA: 
    HANG SENG  -1.4%
    NIKKEI +0.6%
    SHANGHAI -1.4%
    CSI 300 -1.2%

 

  • EUROPE: 
    CAC  -1.1%
    DAX -1.5%
    EURO STOXX 50 -1.1%
    FTSE 100 -0.9%

 

  • COMMODITIES: 
    WTI Crude Oil  +0.5%
    Brent Crude -2.3%
    Gold -0.2%
    Aluminium +0.6%
    Iron Ore -0.9%
    Copper -0.4%

 

  • BONDS: 
    US 10-year yield  moved to 2.899% from 2.940%
    AUS 10-year yield moved to 2.644% from 2.680%

 

  • CURRENCIES: 
    AUD  0.00% to US 0.7380
    US Dollar Index -0.3% to 94.54

 

Top Performers on ASX200:                                                                                             

  • APN Outdoor Group (APO): +12.14%
  • Appen Limited (APX): +7.15%
  • Gateway Lifestyle Group (GTY): +6.54%

Bottom Performers on ASX200:

  • Ramsay Health Care (RHC): -53%
  • TPG Telecom (TPM): -76%
  • Vocus Group Limited (VOC): -2.34%

 

Stock News                                                                                                                      

  • APN Outdoor Group (APO): +12.14% – the outdoor advertising company rose to the top of the index on Thursday after it announced that it was the recipient of an unsolicited, non-binding, conditional takeover offer from French company JCDecaux SA (JCD) at $6.52 per share. Note that the offer represents an 11.5% premium on APN Outdoor Group’s closing price as of 20th An interestingly condition to such a proposal is that APN Outdoor Group does not proceed with its own acquisition attempt of Adshel (a subsidiary of HT &E Limited), which it announced on 22nd May 2018.the company’s Board has advised shareholders to take no action as it commences its own assessment of the offer.
  • Gateway Lifestyle Group (GTY): +6.54% – the company announced that it had received a non-binding acquisition offer from Brookfield Property Group at $2.30 per share. Though it hasn’t conducted due diligence in its entirety, the company considers the offer from Brookfield to be superior to the offer received from Hometown Australia Holdings Pty Ltd at of $2.10 per share (this first offer was announced on 13th June 2018). Note that the Board has advised shareholders to take no action with respect to the proposal received.
  • Ramsay Health Care (RHC): -7.53% – the private hospital operator fell to the bottom of the index on Thursday after maintaining its view of challenging conditions in the United Kingdom market. The primary result of such is a £70 million ($125 million) charge related to an onerous lease provision and asset write-downs (with respect to six of the company’s sites). Note that the company does not forecast any immediate benefits from recent funding boosts for the National Health Service (NHS) in the UK. Furthermore, Ramsay has flagged weak growth in procedural work and inpatient admission in Australia. In consequence, the company downgraded its FY18 Core EPS growth to 7%, as compared to original guidance of 8-10% growth.

 

Economic News                                                                                                               

  • Bank of England Interest Rate and Quantitative Easing Decision: the Bank of England left interest rates unchanged in June at 0.5% (following a 6-3 verdict from the Monetary Policy Committee). Most intriguing however, was the move from Chief Economist Andy Haldane (on the committee), joining the minority, favouring a rate hike to 0.75%. This drove market expectations that the Bank of England will raise its interest rates for only the second time since the global financial crisis a decade ago, to 0.75%. Furthermore, the Bank of England provided guidance surrounding its quantitative easing strategy. More specifically, it viewed the commencement of British government bond (£435 billion pounds) sale to come to fruition when interest rates are at 1.5% (as compared to previous guidance of 2%).

 

This week we are awaiting the following economic news

  • Today Euro Areas Flash Consumer Confidence Data for June 
  • Today Japan Inflation Rate Data as of May   

Roger Haidar | Research Analyst & Dealing Assistant

Christopher Youssef | Dealing Assistant

Laurence Parker-Brown | Senior Vice President
Level 9, Chifley Tower, 2 Chifley Square, Sydney, NSW 2000
T: +61 2 9955 3151 E: dealingdesk201@kosec.com.au
W: www.kosec.com.au