The rally runs out of puff

James Gerrish

Market Matters

The market edged higher today, however gains were very lacklustre considering the +2% rally in US markets overnight. The ASX 200 peaked early on 6387, up ~55pts before a slow and steady grind lower into the close, as the intra-day chart shows below. The catalyst of the selling was a combination of weaker-than-expected domestic GDP data printing 0.4% on the quarter bringing the YoY growth to a sluggish 1.8%, while we also saw weaker-than-expected services data from China.

Economic Data Today

At the sector level, tech did well thanks to a strong NASDAQ and also a decent Afterpay announcement. REITs provided the most drag.

Overall today, the ASX 200 added +26 points or +0.41% to 6358. Dow Futures are trading up +26pts/+0.10%.

ASX 200 Chart

ASX 200 Chart


Vocus (VOC) -17.69%: EQT left as quickly as they came in a whirlwind eight days in the data room of Vocus. The Swedish private equity name has gotten back on the plane without a more formal offer being put forward since their $5.25 proposal announced last Monday. Shares tumbled today to trade below the pre-offer level, with many investors appearing to throw in the towel. The fear for those selling is that the data room threw some curveballs that frightened EQT with Vocus potentially sitting on a soft result heading into the end of financial year. Vocus did reiterate EBITDA guidance of $350m-$370m with an investor update due at the end of June.

It doesn’t look like this will be the last play at Vocus with EQT not the only interested party. AGL Energy was reportedly running the numbers prior to the EQT bid, and Vocus clearly has a data room up and running for any suitor that may want to put a figure on the table. Despite the CEO saying they aren’t running just for a takeover, it appears he and the board would be happy to sell.

Vocus (VOC) Chart

Broker moves:

UBS downgraded the banks today, reducing earnings expectations for FY20-22 on the back of lower interest rates which will likely put pressure on margins. In FY20 they cut earnings by 1.6% to 3% with CBA being least impacted v WBC being hardest hit while in FY22, the earnings impact ranges from 3.9% to 6.4%, again with CBA and WBC on either end of the spectrum. It now means that UBS expect no growth in ANZ’s earnings per share between FY20-22, a decline of -1.9% for CBA, a bigger decline in NAB of 7% & a decline for WBC of 5% - some fairly bearish assumptions. They prefer ANZ & CBA in the sector. We covered banks in today’s income note (click here)

ANZ Chart

  • NRW Holdings Upgraded to Buy at UBS; PT A$3.05
  • NRW Holdings Downgraded to Neutral at Hartleys Ltd; PT A$2.32
  • Senex Upgraded to Buy at Citi; PT A$0.39
  • Beach Energy Upgraded to Buy at Citi; PT A$2.01
  • Oil Search Upgraded to Neutral at Citi; PT A$7.08
  • ARQ Group Ltd Downgraded to Hold at Wilsons; PT A$1.75
  • Seven Group Upgraded to Hold at Morningstar
  • Crown Resorts Upgraded to Buy at Morningstar
  • Credit Corp Upgraded to Hold at Morningstar
  • Bionomics Cut to Speculative Hold at Bell Potter; PT A$0.13

Never miss an update

Stay up to date with the latest news from Market Matters by hitting the 'follow' button below and you'll be notified every time I post a wire.

Market Matters publishes daily market reports and sends SMS alerts when we transact on our portfolio. To get our latest market views and hear when we take new positions, trial Market Matters for 14 days at no cost by clicking here.

1 topic

2 stocks mentioned

James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment