The Match Out: Market down on global growth concerns, Metcash (MTS) sees solid trading
A poor session for the ASX today with weakness amongst the Energy, Utilities, & Material stocks dragging down the broader market while IT & Healthcare edged higher. That in itself tells an interesting story given bond yields traded sharply higher overnight (US 10 years +15bps) while a similar but less aggressive trend played out in Australia today (Aussie 10 years +5.5bps). Higher value IT & Healthcare generally struggle under that scenario however today they benefitted from a move out of those sectors more exposed to global growth - Energy & Materials hit by more than 2% a pop.
- The ASX 200 finished down -97pts/ -1.42% at 6729
- The IT sector was best on ground (+0.33%) while Healthcare (+0.17%) was also positive despite the broader weakness.
- Energy (-2.88%), Utilities (-2.11%) & Materials (-2.06%) the weakest links.
- We hosted a webinar yesterday titled Post Reporting Playbook with a focus on stocks we like and the levels we would trade them – Click Here to view
- Aussie GDP came in at +0.9% QoQ which was inline with expectations while the YoY result of 3.6% was a touch better than the 3.4% expected.
- Obviously the interest rate decision yesterday gained a lot of airtime however there is now a decent divergence between what economists are saying and where the market is pricing rates.
- We lean on UBS research who now think there will be 2 more hikes of 25bps each with the cash rate topping out at 2.85%, a far cry from the nearly 4% being priced by the market. We think the UBS call will prove to be more accurate than the markets.
- Metcash (ASX: MTS) +0.49% held their AGM today and gave a trading update, saying sales were good and supply chain pressures are easing somewhat. Labour shortages are still an issue. We own MTS in the Income Portfolio
- Macquarie were active on their bank calls today, upgrading CBA, ANZ & Bendigo Bank (ASX: BEN), downgrading NAB & Bank of QLD (ASX: BOQ) – a call on relative valuation.
- They think earnings overall will improve near term given expanding margins (increasing borrower rates quicker than savings rates) however they remain cautious around asset quality further out.
- APA Group (ASX: APA) -0.66% is having a few issues securing Basslink, apparently the bidding is getting more competitive. We sold APA above $12 and are once again starting to see value as it approaches ~$10.
- Lots of stocks trading ex-dividend today so while portfolios took a hit, bank balances will get a boost soon!
- We used today’s weakness to pick up a few new positions across MM Portfolios given our cash levels were high.
- Iron Ore fell ~1.5% in Asia today.
- Gold fell back below $1700/oz.
- Asian stocks were down, Hong Kong hit -1.79%, Japan -0.65%% while China was off 0.10%.
- US Futures are all lower, but not by a lot (-0.20%) + they have recovered throughout our time zone today.
ASX 200 Chart
Metcash (MTS) $4.14
MTS +0.49%: the food, liquor and hardware distributor hosted their AGM today coming with positive commentary since their April year-end. Sales for the first 17 weeks of the year are up 8.9%, led by a 19.5% jump in hardware, supported by 11.5% growth in liquor, and 4.9% in food. Inflation has certainly helped support the growth, while also likely pushing costs higher however the company noted pressures had started to ease in recent weeks. COVID-related costs were also easing while supply chains are opening up again which should provide some relief on the cost front as well.
- BetMakers Technology Rated New Hold at Barclay Pearce Capital
- Carsales.com Raised to Outperform at Macquarie; PT A$24.40
- Alumina Cut to Underperform at Macquarie; PT A$1.10
- Ventia Services Rated New Hold at Barclay Pearce Capital
- Silex Systems Rated New Underperform at Barclay Pearce Capital
- Monash IVF Rated New Hold at Barclay Pearce Capital; PT A$1.05
- Navigator Global Rated New Buy at Barclay Pearce Capital
- ASX Raised to Neutral at JPMorgan; PT A$80
- ANZ Bank Raised to Outperform at Macquarie; PT A$24
- NAB Cut to Neutral at Macquarie; PT A$30.25
- CBA Raised to Neutral at Macquarie; PT A$90.50
- Bank of Queensland Cut to Neutral at Macquarie; PT A$7
- Bendigo & Adelaide Raised to Neutral at Macquarie; PT A$9
- Playside Studios Rated New Buy at Shaw and Partners
- Starpharma Reinstated Speculative Buy at Bell Potter; PT A$1
- Sandfire Raised to Neutral at JPMorgan; PT A$3.80
Major Movers Today
Have a great night
The Market Matters Team
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James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...