Afternoon Report / US Senate reaches deal, stocks rally (QAN, IVC)

By Market Matters 25 March 20

US Senate reaches deal, stocks rally (QAN, IVC)

Market Matters Afternoon Report 25th March 2020

WHAT MATTERED TODAY

The ASX came out of the blocks hard early this morning following a ~10% rally in the US overnight, however the early optimism was sold into and the market traded well off intra-session highs. The market peaked at 5024 around 10.30am before sellers emerged, weakness in US Futures which traded down ~2% during our time zone + news that Cochlear (COH) were tapping the market for $850m through an institutional placement also sapped some buying, particularly from CSL which ended marginally lower (was down more so earlier). However, right on our close the US Senate reached an agreement around fiscal measures and the market spiked hard. The index was up around 110pts just before the close and ended +262pts / 5.54% higher.    

Some of the fallen angels picked themselves up off the mat today, Qantas rallied +26%, Afterpay (APT) put on 33% while Funeral Operator Invocare fell by -12%, travel stocks up, funeral businesses down, seems optimistic! More on that below from Harry.

Overall, the ASX 200 added +262pts / +5.54% today to close at 4998 - Dow Futures are trading up +44pts/+0.21% (they rallied late, there were down 2% during out time zone)

ASX 200 Chart - US senate reached a deal, stocks spiked late

ASX 200 Chart

CATCHING MY EYE:

Qantas (QAN) +26.25%: had its best day out in a long while as the airline moved to secure it's balance sheet. In what's been a tough time for all travel related stocks, Qantas managed to secure a little over $1b in liquidity at an interest rate of just 2.75%, secured against a few unencumbered aircraft. The deal takes the cash balance to nearly $3b, with another $1b in undrawn facilities, while the net debt position remains around $5b. Qantas is in a strong position despite the issues in the industry and today's announcement shows the amount of balance sheet flexibility they have. Webjet on the other hand remain stuck in a trading halt, now going for a 5th session as they struggle to complete a capital raise.

Qantan (QAN) Chart

InvoCare (IVC) -12.15%: had largely been spared from the broader market sell off until this week, funeral home operator InvoCare fell on its own sword today. Scott Morrison specifically talked to attendance at funeral's in a press conference last night in limiting gatherings to 10 people, forcing the hand of InvoCare to cut some of their services. As a result of the impacts, IVC has already implemented a hiring freeze and pushed back a number of capital expenses. InvoCare continues to operate in the meantime however - not the same can be said for a number of other businesses. The longer term impacts of delaying growth projects will hurt their value though.

InvoCare (IVC) Chart

BROKER MOVES:

  • Transurban Raised to Neutral at Credit Suisse; PT A$10.65
  • Iluka Raised to Overweight at Morgan Stanley; PT A$10.05
  • IGO Raised to Overweight at Morgan Stanley; PT A$5.15
  • Evolution Raised to Overweight at Morgan Stanley; PT A$4.10
  • OZ Minerals Raised to Overweight at Morgan Stanley; PT A$10
  • Fortescue Raised to Equal-Weight at Morgan Stanley; PT A$10.05
  • REA Group Raised to Outperform at Macquarie; PT A$90
  • Aurizon Raised to Buy at UBS; PT A$5.55
  • Magellan Financial Raised to Buy at Citi; PT A$40
  • Healius Raised to Buy at Citi; PT A$2.80
  • Newcrest Raised to Buy at Citi; PT A$30.40
  • Navigator Global Raised to Outperform at Macquarie; PT A$3.36
  • Domino's Pizza Enterprises Cut to Hold at Morningstar
  • Adairs Cut to Neutral at Goldman; PT 70 Australian cents
  • Integral Diagnostics Raised to Buy at Jefferies; PT A$3.55
  • GrainCorp Cut to Hold at Bell Potter; PT A$3.15

OUR CALLS

No changes to the portfolios today

Major Movers Today

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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