A wild day, here’s why (WSA, AMP)
WHAT MATTERED TODAY
A wild day for stocks thanks to a wayward interpretation of an interview by White House trade adviser Peter Navarro on Fox News, with the outcome being reported that the China / US Trade deal was caput. The ASX was testing the 6000 level, up ~50pts looking strong when the news hit US newswires, flowed pretty quickly into a large turnaround in US Futures which saw global ‘risk off’ hit currencies, commodities & stocks, the ASX 200 losing ~115pts in 20mins. The sell-off was short lived though as Trump quickly reconfirmed all was okay, nothing to see here and the markets rallied off the lows, closing about mid-range.
The reaction by markets was instant risk off which shows how skittish they are to negative news, particularly given how unlikely it would be for Navarro to be the one to terminate the deal, that would be very unTrump like, however it does speak to a general increase in anti-China rhetoric by the U.S. administration in recent weeks; a theme that can be expected to intensify in coming months ahead of the U.S. election.
By the close of trade, stocks had recovered locally, US Futures were back trading marginally higher while Asian markets ended higher.
Overall, the ASX 200 added +9pts / 0.17% today to close at 5954 - Dow Futures are trading up +25pts/0.10%
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
Ausbiz this AM: Quick chat on Ausbiz this morning covering overnight markets, AMP, CGF and the banks...CLICK HERE
Western Areas (WSA) +16.02%: the best performer on the 200 today on some positive drilling results at the South Australian Western Gawler Project. The initial drill results have the project on course for a similar set up as Oz Minerals key development project at West Musgrave. We spoke about Nickel in the AM report today eyeing off Western Area’s recent purchase of Panoramic (PAN) as a potential M&A lead. The price of nickel has been under pressure over recent years but as we increasingly turn to the use of batteries, the demand profile over the medium term looks positive and prices should adjust accordingly.
Western Areas (WSA) Chart
AMP +7.93%: announced to the market that the sale of AMP Life had received all necessary regulatory approvals after the RBNZ secured capital commitments from the buyer, Resolution Life. AMP had targeted 30 June for the completion of the sale, and today’s approval paves the way to meet that goal just a week out from the end of the financial year. The sale will bring back over $1b in capital for AMP, money which can be used to clean up the final customer remediation claims. Shareholders may also see a dividend after it has all settled – the last AMP dividend was paid in February last year. While the stock popped, the AMPPB hybrid – which we own in the Income Report – was fairly muted. It looks particularly good value now that the AMP capital position has been improved. More to come on the Life sale when details come through next week.
AMP Chart
BROKER MOVES:
Bells have been a supporter of CGF for a long while and today Laf cut the rating to sell, with a $4.30pt. The stock today closed at $4.80, down 9.77% and importantly below the $4.89 underwritten placement price. In terms of Bells note they sighted the weak demand environment for annuities which is likely to remain depressed and Challenger’s life book is seen declining through until the end of FY22 as new sales prove elusive.
RATING CHANGES
· Northern Star Raised to Equal-Weight at Morgan Stanley
· Galaxy Resources Cut to Underweight at Morgan Stanley
· IGO Cut to Equal-Weight at Morgan Stanley; PT A$4.95
· Evolution Cut to Underweight at Morgan Stanley; PT A$4.40
· Mineral Resources Cut to Equal-Weight at Morgan Stanley
· Incitec Resumed Overweight at JPMorgan; PT A$2.60
· Nick Scali Raised to Overweight at Wilsons; PT A$7.70
· Treasury Wine Raised to Buy at Morningstar
· Stockland Raised to Buy at Jefferies; PT A$3.81
· James Hardie GDRs Raised to Hold at Jefferies; PT A$27.20
· Challenger Cut to Sell at Bell Potter; PT A$4.30
OUR CALLS
No changes today
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
Disclosure
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