Stocks kicked off the week on a very positive footing following the strong gains in Europe and the US on Friday but it was the sterling performance from the large cap miners that caught my attention e.g. BHP Group (BHP) and Fortescue Metals (FMG) both closed up over +3%. MM has been looking for some weakness in the Resources Sector to increase our exposure but its currently proving to be a long wait! Bond yields drifted lower which was expected as the COVID picture deteriorates but the ASX sectors hadn’t read the script, they bought the value stocks as opposed to growth names seemingly implying nobody believes Sydney’s lockdown will spread & / or last more than 4-6 weeks, or if it does, Government stimulus will kick in to underpin the economy.
The $A falling under 75c may also be attracting some overseas buyers back into the Australian market, offshore investors who believe that the reflation trade is simply experiencing a small hiccup would be attracted to our resources stocks with the $A well under 75c, especially if they’re switching some of their profits following the huge run by the US tech names. However on this occasion the catalyst was more likely the recent monetary easing in China creating an obvious tailwind for the sector with China being the major consumer for the likes of Australian iron ore, gas and coal.
M & A activity again raised its head yesterday with Wesfarmers (WES) bidding $687m for the owners of Priceline Pharmacy, Australian Pharmaceutical Industries (API), at a 21% premium to Fridays close. With major shareholder Soul Patts. (SOL) supporting the deal it feels like a very good chance of succeeding hence the stock closed within 1c of the bid. However, the main takeout for those not involved in the 3 stocks mentioned is simply don’t underestimate how much money is on the sidelines looking for a home as new deals are flashing across my Bloomberg with as much regulatory as a Japanese shuttle plus its providing one of the main reasons the market is ignoring supposedly bad news and being bought on dips.
Overnight US stocks maintained their upside momentum into earnings season with most major indices rallying around +0.35%, similarly the SPI futures are looking for a +0.3% gain early on open by the ASX.
MM remains a very keen buyer of stocks into decent pullbacks
Add To Hit List
