One eye on the budget (SAR, NST)
WHAT MATTERED TODAY
The ASX was hesitant to make any meaningful move in either directrion today, chopping around par throughout the session as investors have one eye on tonights Fedral Budget. The papers have been drip feeding pieces of information for the past few days though nothing is really set in stone until the much anticipated document lands. If the rumours are to be believed we are set to see increased income support, tax cuts and employment subsidies to help replace Jobseeker and Jobkeeper payments that have begun to roll off. The RBA was unmoved today, keeping rates on hold at 0.25% as expected though finished off their statement with perhaps a more accomodative line than expected, looking at “how additional monetary easing could support jobs” while the economy goes through a choppy recovery. The Aussie dollar saw a brief rally against the greenback on the announcement but traded back to pre-announcement levels soon after as the market digested the news – or lack thereof. The key message from the RBA was jobs today with inflation seemingly taking a step back until employment gets under control. I expect a similar message from the PM and Treasurer tonight – that the budget will spend some time in the red with big spending planned until we near ‘full employment.’
Tech followed the Nasdaq higher, while energy continued its recent rebound as oil prices jump off multi-month lows. Health and utilities were less sought after. The big winners were two fo the gold names in Northern Star (NST) & Saracens (SAR). Asian indicies were broadly stronger today and US futures spent most of the night trade in the black.
By the close, the ASX 200 was up by 20pts / +0.35%. Dow Futures are trading up 234pts/+0.85%
ASX 200 Chart
ASX 200 Chart
CATHCING MY EYE
Northern Star (NST ) +10.64%, Saracen (SAR) +9.58%: when there’s smoke rang true again today with rumours coming true - JV partners in the Super Pit mine are now looking to merge as Saracen folds into Northern Star. The deal would see Saracen shareholders receive 0.3763 NST share for each SAR share, along with a 3.8c special dividend to create a $16b market cap, top 10 global gold name on completion in February. While still pending final shareholder and court approval, the board has recommended the deal and the market seems to like on first run. It would create a gold miner with 19 million oz reserve, and a 49 million oz resource. The new company could realise up to $2b in synergies with a number of mines operating in close proximity as well as reduced management costs. It’s a pretty good deal if they can realize the plans presented today. The gold space is poised for an M&A super cycle with a number of cashed up miners as well as a strong gold price encouraging deals. We own Newcrest (NCM) in the Platinum portfolio but are looking to add to gold exposure.
Saracen (SAR) Chart
BROKER MOVES
· Westpac Raised to Outperform at Macquarie; PT A$18
· ANZ Bank Raised to Outperform at Macquarie; PT A$18.50
· Nanosonics Rated New Underweight at JPMorgan; PT A$5.05
· Coles Group Raised to Outperform at Credit Suisse; PT A$20.16
OUR CALLS
No changes today
Major Movers Today
Have a great night
Harry & the Market Matters Team
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