Wall Street on a High, Rub off Effect on ASX Listed Stocks too

Summary

• US markets posted gains on Monday, driven by a recent rally in suppressed areas, including airlines, travel, banks.
• ASX closed higher today, and pre markets suggest solid opening for US futures.
• Super Retail Group announced capital raising and City Chic announced closure of stores.

Last week, US markets recovered after falling on 11 June 2020, indicating investors, having ample liquidity, are ready to bid. On 12 June 2020, the hardest hit shares recovered in S&P 500.

Within S&P 500, United Airlines climbed 19.03% or $6.34, Norwegian Cruise Line was up 18.84%, American Airlines was up 16.41%, Carnival Corp gained 14.56% and Royal Caribbean Cruises increased 12.24%.

NASDAQ Composite index hit its life-time high last week after closing at 10,020.35 points on 10 Jun 2020. Stock of Nasdaq Inc also recorded highest ever close at $121.30 on Monday.

The uptrend continued on 15 June 2020 as well, with the Fed announcing purchase of corporate bonds boosted the animal spirits. Raytheon Technologies Corp. was up $1.68 to close at $67.05, highest gainer in Dow Jones Industrial Average. Goldman Sachs was up 2.25% for the second consecutive day with a 3.94% up move on 12 June 2020, American Express Co. was up 2.25%, 3M Co. ended 1.85% higher.

US 10-year yield firmed up and stood at 0.747%.

Developments that are to be closely watched

People restrictions and lockdowns peaked in April. Of late, the economic activity has been picking up, countries are opening again, crude oil prices have recovered after historic lows. But some health experts are warning about a potential second wave.

US protests have also gathered momentum across most part of the country, adding risks of further transmission of the virus. Markets have reflected optimistic about the economic recovery, but last week’s pullback tumbled the optimism.

US Federal Reserve was also cautious of the economy, expecting interest rates to remain lower for a few years. In its projection, the members see US GDP contracting anywhere between 10% and 4.2%, and U.S. will likely grow between 2% and 6%.

Unemployment rate shall be within 7% to 14% by the end of this year that is expected to moderate to 4% to 8% by the end of 2022. Monetary policy decisions will dependent inflation target and full employment mandate.

Federal Reserve is ready to keep buying asset classes, including US treasuries, corporate bonds, mortgage-backed securities as well as support money markets. Since March sell-off, the market has seen the worst in the economy, but a medical breakthrough and limiting virus transmission shall make case for a range of scenarios.

2020 has made us see a pandemic, stock market crash, riots and bankruptcies, still investors are finding reasons to buy. Of late, credit markets have found footing and high yield issuances also resumed.

Global markets saw a rally on 16 June 2020. Australian market took ques from the US market and Fed’s decision to buy corporate bonds, ASX 200 closed 3.9% higher at 5,942.

Viva Energy Group Limited (ASX:VEA) topped the gainers chart with 15% gains, followed by Ooh!media Limited (ASX:OML) up 12%, , Nearmap Ltd (ASX:NEA), IOOF Holdings limited (ASX:IFL) & AP Eagers Limited (ASX:APE) were up over 11%. Market darling Aftepay limited (ASX: APT) was up 10%, hitting a new 52 week high.

On the sector indices front, S&P/ASX 200 Energy topped the charts with gains of 5.79% and closed at 7,654 levels, followed closely by the IT Index S&P/ASX 200 Information Technology up 5.72%, closed at 1,538.

ASX Stock Updates

Boral Limited reported appointment of Zlatko Todorcevski. Mr Todorcevski will take the position of Mike Kane, who is retiring after an accounting scandal. He will vacate a seat at the Board of Adbri Limited (ASX:ABC), erstwhile Adelaide Brighton.

Related: Banks and Tech Shares Hit Hard Today, What’s Bucking the Trend

Healius Limited (ASX:HLS) sold medical centres for $500 million. Managements intends to simplify portfolio and focus on its leading verticals and noted sale achieved an attractive valuation for the business. Its Primary Care business would be sold to PE firm, BGH Capital.

Super Retail Group (ASX:SUL) announced an underwritten placement for around $203 million at a fixed price of $7.19. It seeks to invest in omni channel capacity, business model simplification and support working capital.

Uniti Group (ASX:UWL) disclosed acquisition scheme to acquire OptiComm Limited. Consideration for the transaction is $532 million, which would be funded by $270 million fully underwritten placement and new debt facility.

City Chic Collective (ASX:CCX) reported to close 14 stores, where its agreements did not work with landlords with respect to lower rents during the closed period. Its stores in ANZ are now at full capacity.