The ASX200 again scaled fresh all-time highs on Monday but on a day when the banks struggled following regulator AUSTRAC’s investigation into money laundering at National Australia Bank (NAB) it was one step too far for the index to close above 7300. Only 45% of stocks closed down for the session but when the influential financials slip its always tough going for the local market to rally, especially when the resources didn’t particularly trouble the scoreboard. Overall it was a nothing day for the ASX bar a couple of major announcements on the stock level.
Australia enjoyed some reassuring news on Monday with the S&P Global Ratings Agency revising our rating to AAA “stable” taking us off the potential downgrade list – the boom in commodity prices and our relative control of COVID undoubtedly the determining factors here. This will help keep mortgage rates extremely low as the cost of money for our banks will not kick up as it would if a downgrade had been forthcoming. The strong post pandemic local economic recovery was illustrated perfectly yesterday when job adds made a 12 ½ year high in May implying unemployment is poised to fall further into Christmas.
As most subscribers probably know Altium (ALU), MM’s latest purchase only 2-weeks ago, received a takeover offer yesterday sending the stock up almost 40% on the day. Two key takeout’s for us:
- When considering stock selection in 2021 remember money remains extremely cheap but financial markets are targeting rate rises in 2023, the futures are currently targeting 4 hikes by mid-2024. Hence some suitors are likely to get their skates on over the next year if they need money to fund acquisitions i.e. when looking at stocks to purchase being a likely takeover target adds some attractive spice to the mix.
- We mentioned a potential assault on 8000 in a recent report, perhaps some “Fear of missing out” (FOMO) takeover activity might get us there sooner rather than later.
Overnight US and European equities experienced a mixed session with the Dow falling -0.4% while the NASDAQ rallied +0.2%, in similar fashion to the ASX yesterday the financials retreated slightly. The SPI futures are calling our market to open unchanged this morning as it feels like we’re already drifting towards a school holiday hibernation.
MM remains a happy buyers of market pullbacks
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