The ASX200 enjoyed a strong Monday taking its lead from US indices both on Friday night and the S&P500 futures during our day session i.e. the broad-based US index rallied +1.9% on Friday and the futures were up another +0.7% when the ASX closed yesterday. The buying was broad-based on Monday with over 75% of stocks rallying as “risk on” was clearly the theme of the day with the IT, Resources & Energy Sectors all rallying by over 2% – at least one day this week when the local market followed the MM roadmap! The big news yesterday was ANZ’s acquisition of Suncorp’s bank for $4.9bn which in our opinion added further credibility to yesterday’s advance:
- ANZ Bank is seeking to raise $3.5bn from its shareholders at $18.90, a 12.7% discount to Friday’s close, the bank was in suspense yesterday but it’s likely to weigh on the index when it reopens on Thursday at a guess down ~$1.50.
- This raise will cause some funding style selling, most common in correlated stocks yet the ASX200 managed to end Monday’s session on its high up +1.2%.
- ANZ’s main rivals CBA, NAB and Westpac the ideal funding vehicles still rose an average of 1.4% on Monday, outperforming the ASX200, helped by the strong gains by the US Banking Sector on Friday night.
As we mentioned earlier the ASX has commenced the week with a very clear “risk on” attitude which MM believes will last at least into August, if we prove correct and the ASX200 can test the 6850-6900 area over the coming weeks this may deliver potential opportunities to de-risk portfolios through switching if the sector performance rotation continues in the vein we saw yesterday:
- Winners: Financials +1.4%, Energy +2.2%, Materials +2.4% and Tech +2.9%
- Losers: Utilities -0.2%, Consumer Staples -0.5% and Healthcare -0.5%
Lastly while it’s very early days it was extremely encouraging to see that some companies delivered positive fundamental news yesterday plus we saw some positive market interpretations on what only looked average on the surface, this bullish market feel led to 9% of the ASX200 rallying between 5% & almost 14% including 3 we will look at in today’s report – sentiment has changed for now, in April & May a company had to deliver excellent news to advance, now “not too bad” appears ok i.e. the markets found itself too bearish.
Overnight we saw US stocks reverse early gains with the S&P500 closing down -0.9% with Apple Inc (AAPL US) weighing on the index and sentiment after announcing plans to slow hiring reminded investors that a recession could be looming on the horizon. Overnight we saw Goldman Sachs (GS US) deliver better than expected earnings which helped the stock rally in sync with the sector’s recent reports, Netflix (NFLX US) steps up next and this is one that will be watched with bated breath after the stocks more than 70% plunge since November. The SPI futures are pointing to the market surrendering 25-points of Monday’s gain with the resources stocks likely to be best on ground following solid gains +4.5% by oil and +2.6% by copper.
MM remains bullish the ASX200 short-term targeting the 6850 area, or ~2.5% higher
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