Afternoon Report / Has the deal been struck!? (MQG)

By Market Matters 02 November 18

Has the deal been struck!? (MQG)

Market Matters Afternoon Report 2nd November 2018

WHAT MATTERED TODAY

For the third day running, the market was bid up strongly on the close to finish higher again, and now the 6th day of consecutive gains. What a rebound this is.

Late this afternoon, global equity and future markets rallied following reports US President Trump was said to have asked his to draft a possible trade deal with China President Xi. Draft Possible Trade Deal With Xi.Plenty of news flow still to come here but clearly a positive move for markets if this is the end to the trade war for now.

Overall, the index closed up +8 points or +0.14 % today to 5849 – up  +3.25% on the week. Dow Futures are trading up 133 points / +0.51%.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE

Broker Moves; Citi initiated with a sell on the old market darling Blackmores (BKL). The vitamins company was once the most adored stock in the ASX after rising 10 fold in 2013 – 2015 on the back of a strong China growth story, but is now trading around half of the highs. Citi are looking for an increase in marketing spend to eat away at margins, as well as Chinese regulation to stagnate growth.

Blackmores (BKL) Chart

 

RATING CHANGES;

·         Blackmores Rated New Sell at Citi; PT A$100

·         Crown Resorts Upgraded to Buy at Morningstar

·         Seven Group Downgraded to Sell at Morningstar

·         AMP Downgraded to Hold at Morningstar

·         CSL Upgraded to Overweight at JPMorgan

·         REA Group Upgraded to Overweight at JPMorgan; Price Target A$79

·         BHP Upgraded to Buy at Investec; Price Target 17.74 Pounds

Macquarie Bank (MQG) $122.42 / +3.86%; Investment bank Macquarie today released results for the first half to September 30, comfortably beating their guidance. Net profit was up 5% on the first half of FY18, to $1.31B, although this is in line with the second half of FY18. This helped the interim dividend rise around 5% to $2.15. As has been the case over the past few years, Macquarie used the first half figures to revise guidance higher, now looking for 10% profit growth over the year, implying a big $1.5b second half ahead.

Rumours AMP is in the sights of Macquarie have been circling for the past few weeks, growing more since the fire sale of assets by AMP last week. The deal makes some sense – AMP’s bank is performing well and the combined business would grow to rival the big 4 size, Macquarie taking control of AMPs funds could stem outflows and value remains in AMP’s platform infrastructure among many other synergies. MQG is yet to purchase any shares under the buyback announced at the full year result, potentially holding capital for a big acquisition

Macquarie (MQG) Chart

Sectors this week; the two worst in October, Healthcare, led by its biggest weight CSL, and IT strongly outperformed this week. Safe haven real estate stocks struggled. Energy, although moving higher, underperformed as concerns the market will tip into oversupply.

Weekly Movers and Losers

Stocks this week; AMP staged a solid rebound this week after the market rushed for the exit late last week. The lithium names, as well as a number of growth stocks which were particularly poor in October found some love. Corporate travel the worst as the market takes the cautious side following the short thesis by VGI which we have previously discussed.

Weekly Movers and Losers

OUR CALLS

No changes the portfolios today.

 

Watch out for the weekend report. Have a great night,

James / Harry & the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

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