All Ords hit pre pandemic high

Daily Market Update (4)
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All Ords hit pre-pandemic high, ASX200 up 0.6%, Vocus (ASX:VOC) in play again

The ASX200 (ASX:XJO) finished the week the same way it finished, adding 0.6% on Monday supported by a broad-based rally covering most sectors.

Materials and discretionary retailers were the biggest beneficiaries of the risk-on mood, with BHP (ASX:BHP) and Wesfarmers Ltd (ASX:WES) finishing 2.4% and 1.0% higher respectively.

The biggest driver appears to be the ‘reflationary’ trade, referring to the Australian and global economy returning to pre-crisis levels of activity.

The biggest beneficiaries in this environment tend to be commodities and energy, both of which are major inputs into activities including construction and travel.

On the flipside, the utilities and property or A-REIT sectors were sold off after the 10-year bond rate reached 1.26%, that being the highest since March 2020.

These sectors are traditionally seen as ‘bond proxies’ due to their consistent income, but when investors can buy lower risk government bonds yielding higher amounts, they tend to fall out of favour.

Merger and acquisition activity picked up once again with telecommunications network owner Vocus Group Ltd (ASX:VOC) receiving an unexpected bid for Macquarie Group’s (ASX:MQG) Macquarie Infrastructure and Real Asset or MIRA division.

The offer values the company at $3.4 billion, a 25% premium to the last traded price and a long-awaited opportunity for patient investors.

Shares finished 12.8% higher on the news and whilst some are predicting a bidding war for this ‘modern infrastructure’ asset, there are few guarantees in this market.

Charter Hall REIT (ASX:CLW) increases dividend, Argo (ASX:ARG) cuts their own, Treasury Wine (ASX:TWE) continues to tank

The Charter Hall Long WALE (Weighted Average Lease Expiry) REIT delivered a strong operating result for the first half of the financial year, reporting a 3.6% increase in earnings and an identical increase in the distribution to 14.5 cents per share.

The trust, which owns service stations, offices, and telecommunications assets worth $4.5 billion, increased the value of its underlying portfolio by 5.1% from depressed 30 June levels.

Management reiterated guidance for a 2.8% increase in earnings, primarily rent, for the full year, evidencing the quality of their tenants and the resilient nature of these assets. 

Argo Investments (ASX:ARG) cut its dividend by 12.5% to just 14 cents per share after the net profit of the trust fell 43% in the first half to $67.4 million.

The key driver was widespread dividend cuts on their key holdings which include Westpac (ASX:WBC) and the Commonwealth Bank (ASX:CBA) seeing income drop from $124.3 to $73.9 million.

Management remains hopeful of a quick return to dividend payments during the reporting season; shares added 2.5% on the report.

The share price remains significantly higher at $8.94 than the value of its underlying holdings, $8.01, suggesting investors value the franking credits on the balance sheet.

Treasury Wine Estates (ASX:TWE) continued to punish investors seeking global exposure via ASX companies, falling 11.8% after announcing they were not considering a spin out of the Penfolds brand.

Triple highs, Tesla (NASDAQ:TSLA) buys Bitcoin, oil continues to rise

The three key US markets touched intra-day trading highs on Monday, the six straight day of positive returns. The Nasdaq continues to lead the way, 0.8%, with the S&P500 and Dow Jones delivering 0.5% and 0.6% respectively.

Earnings season continues en masse this week and has been quite positive thus far, with 57% of companies reporting and signs the ‘earnings recession’ is over.

Falling COVID-19 cases due to the rollout of the vaccine saw the price of oil reach US$60, suggesting an economic recovery is underway with inflation likely lying ahead.

Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk confirmed that the company had purchase US$1.5 billion of Bitcoin, sending the cryptocurrency to an all-time high. Tesla reported it will accept Bitcoin as payment for its products in the coming years.

Finally, Biden’s stimulus package appears likely to be passed in the coming weeks, offering additional support to airlines, airports, and train systems among others.

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