Fed to the rescue
The ASX 200
(ASX:XJO) caught up to Wall Street’s
Friday falls, dropping another 2.2% and taking the losing streak to three consecutive days. The weakness was driven by a combination of cyclicals and the financial sector, with energy down another 3.4% along with consumer discretionary.
(ASX:WES) lead the sector lower falling -3.4%, whilst Myer Holdings Ltd
(ASX:MYR) announcement that KPMG
had been engaged to advise the company was not well received, falling 6.0%. The losing streak, however, appears to be coming to an end as quickly as it started as all three US indices including the S&P 500
(IND:SPX) managed to recoup initial falls of 2.5% to finish up between 0.6% and 1.4%.
The driver was the Federal Reserve’s
follow through on its pledge to buy US corporate bonds
on the secondary market. The outlook is also improving in China with industrial production
, -4.4%, unemployment
falling to 5.9% and retail sales
down just -2.8% on the previous year in May, which compared to a drop of -7.5% in April; this bodes well for the Australian economy despite increasing trade rhetoric, expect BHP Group Ltd
(ASX:BHP) to bounce today.
Weakness to be expected
The FTSE 100
(IND:UKX) couldn’t manage a similar recovery, falling 0.7%, as investors struggle to come to terms with one of the weakest economies in history falling a 20% contraction on the previous month and -25% on the same time the previous year.
It was another busy day for the Australian companies seeking to navigate the post-COVID-19
malaise with Super Retail Group Ltd
(ASX:SUL), announcing a $203 million capital raising at $7.19 to ‘support strategic initiatives’ for the business. Despite reporting a strong recovery in sales from its Rebel Sport and Super Cheap Auto franchises, up 26.5% in May, the company seems to be preparing for the end of the Job Keeper
program like many others.
Building product supplier Boral Ltd
(ASX:BLD) bucked the trend, adding 1.7% as the board announced Zlatko Todorsevski
as its new CEO, bringing a strong track record in charge of the financials of both Brambles Ltd
(ASX:BXB) and Oil Search Ltd
(ASX:OSH) in recent years. This is a positive move and may trigger a revaluation of the company as non-core business lines are demerged or sold to free up capital.
Private equity is just warming up
continued strategy of capitalising on short-term weakness announcing it will acquire the Primary Care, or General Practice business of Healius Ltd
(ASX:HLS) previously Primary Healthcare
, for close to $500 million.
City Chic Ltd
(CCX) as specialist supplier of so call ‘plus-size’ ladies clothing rallied close to 6% after management elected to close 14 of its 100 stores due to lack of progress in renegotiating new leases with its landlords. This move is a positive and a sign of the power once again moving to the tenant.
is a popular holding among small cap managers including Pendal Group Ltd
(ASX:PDL) and Wilson Asset Management
. Globally, BP Plc
(LON:BP) continues its transition to a lower carbon business under the new CEO, writing down the value of assets by some $17.5 billion and cutting its workforce by 14% or 10,000 people. It is a direct reaction to changing expectations for cleaner energy and fragile energy markets that may actually put the company in a stronger long-term position.
The daily report is written by Drew Meredith
, Financial Adviser and Director of Wattle Partners