The Match Out: The Fed pushes back on the rebound, carsales raising money

Equities markets took a hit over the last 12 or so hours following Jerome Powell’s comments overnight as the Head of the Fed turned more hawkish. Traders priced in a larger chance of a 50bp hike at the next meeting following the comments in direct contradiction to his Aussie counterpart Philip Lowe who took a more dovish tone at the RBA’s rate call yesterday. As a result, the USD rallied strongly causing pressure across commodities which was the main drag on the index today. Tech fell, but held up surprisingly well considering the weakness in the index, contradicting the impact higher rates have on the sector, supporting our view that growth has legs vs value after a period of relative underperformance.

• The ASX 200 finished down -56pts/ -0.77% at 7307
• The Healthcare sector was best on ground (+0.25%) while Telos (+0.17%) were the only other sector in the black
• Energy (-4.24%) was the weakest, weighed on by sector heavyweight Woodside (ASX: WDS) paying a chunky dividend. Index heavyweight sectors of Materials (-1.12%) & Financials (-0.71%) were also soft.
• Nuix (ASX: NXL) -15.23% gave back most of its recent strength after former CEO Edward Sheehy lodged an appeal on the recent Federal Court decision in favour of the firm. Sheehy is arguing he is owed $169m in relation to lapsed options he was granted when he was in charge of Nuix prior to its listing.
• Mesoblast (ASX: MSB) +14.05% jumped thanks to the FDA accepting their updated submission in relation to their steroid treatment for graft v host disease in children. The FDA s expected to announce its decision by August – rallying on an announcement to make an announcement!
• Qantas (ASX: QAN) +2.89% rallied to a 3-year high after the ACCC Commission noted in a report that domestic airfares remained above 2019 prices and most airlines had improved delay and cancellation rates over the last few months. i.e. the printing press can continue!
• Citi cut their expectations for Coal stocks today, downgrading New Hope (ASX: NHC) to Neutral & $4.90 PT i.e. ~10% below today’s close while they pulled back their price target for Whitehaven Coal (ASX: WHC) to $9, from $9.25. Their thesis is around the mild winter impacting coal prices, but in our view, this is already very much a ‘known known’ and in the price of both coal and the coal stocks. Today, NHC fell -2.48% while WHC was off -3.83%
• Carsales.com (ASX: CAR) halt, didn’t trade today as they work through a $500m capital raise – more on that below.
• Iron Ore was ~0.66% higher in Asia today, though the best performer was Rio Tinto (ASX: RIO) which still fell -0.1%
• Gold continued its selloff from overnight, falling $US2.50/-0.14% in Asian trade today, settled $US1811 at out close.
• Asian stocks were mixed, Nikkei +0.5% but Hong Kong down -2.40% and China -2.83%.
• US Futures are largely unchanged

ASX 200 Chart

Carsales.com (ASX: CAR) $22.64

CAR halt: the online car classified business spent the day in a trading halt as it manages a $500m capital raise to fund a further stake in Brazil’s Webmotors. Carsales is buying a 40% stake, taking their total holding in the business to 70%, paying $353m, valuing the business on 21.7x FCY22 EBITDA. The business is number one in the Brazilian market, the 5^th largest car market globally, with an EBITDA compounding annual growth rate (CAGR) of 28% since 2017. The deal will see carsales end up with around 50% of their revenue and earnings coming from international markets. The sizable raise will be completed through an entitlement offer for shareholders, while additional funds are being raised to reduce debt to provide flexibility for other growth options.

Broker Moves

• Megaport Cut to Sector Perform at RBC; PT A$6
• Mineral Resources Cut to Neutral at Citi; PT A$94
• Liontown Resources Cut to Neutral at Citi; PT A$1.80
• Core Lithium Cut to Sell at Citi; PT 90 Australian cents
• Lynas Raised to Overweight at JPMorgan; PT A$8.60
• InvoCare Cut to Hold at Morgans Financial Limited; PT A$12.19
• RXM AU Rated New Speculative Buy at Morgans Financial Limited
• New Hope Cut to Neutral at Citi; PT A$4.90
• Eagers Cut to Hold at Bell Potter; PT A$15.25
• McMillan Shakespeare Cut to Neutral at Macquarie; PT A$14.78

Major Movers Today

Have a great night

The Market Matters Team

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