Viewpoint: Bullish
The Shell-branded service station operator recently acquired Coles Express for ~$300m, the deal created the largest fuel/convenience footprint owned by one company in Australia. VEA is an interesting option for more defensive/lower risk portfolios, the stocks trading on an Est PE of 6.4x for 2022 earnings while it’s estimated to yield around 3.7% over the next 12 months.
The ASX200 slipped another -0.45% on Monday on broad-based selling which saw well over 60% of the main board close down for the day with the resources coming off the boil catching our attention after we trimmed our exposure last week. Elsewhere in what felt like a fairly quiet day with central banks sitting poised to dominate the news some buying crept into the tech space but there have been many false dawns on this front through 2022:
The correlation between growth stocks, and especially the influential Tech Sector, and bond yields is extremely close although stocks do have a tendency to lag bonds, at this stage, unfortunately, there’s no clear lead being provided by either.
European equities, like their US and Australian peers, put their recent bullish advance on hold while they await the next move from the Fed, Bank of England and ECB i.e. not a great surprise considering its significance.
Last week saw US equities surrender some of their recent +17.4% gains after strong economic data increased fears that the Fed might maintain its extremely aggressive fight against inflation i.e. bond yields higher.
The ASX200 struggled last week following the move by the RBA although the relatively minor pullback still leaves room for an assault on fresh 6-month highs, especially if the miners remain well-bid e.g. BHP Group (BHP) rallied +3.8% last week and its gains paled into insignificance compared to say Fortescue (FMG) +8.7%.
US stocks enjoyed a better session overnight with the broad-based S&P500 finally closing up +0.75% supported by a strong Tech Sector i.e. the market looks comfortable between 3050 and 4000.
The ASX200 fell another -0.7% on Thursday dragged lower by broad-based selling and specific weakness across the influential banks and large-cap miners. A combination of the RBA hiking rates at the same time as growth data has started to soften has weighed on already nervous growth names while the China reopening play has started to lose momentum after pushing our Resources Sector significantly higher over recent weeks.
Sandfire Resources has soared almost 70% from its late October low helped by BHP Groups’ (BHP) bid for OZ Minerals (OZL) i.e. its been elevated to the best pure copper exposure in Australia.
Crude oil made fresh 11-months lows overnight as recession fears grow, at MM we feel these economic concerns are very warranted but crudes already drooped more than ~20% in just one month which feels overdone with China looking to reopen its economy.
