Global stocks were higher overnight, (S&P 500 index +0.4%) as investors grow confident ahead of upcoming second quarter earnings reporting season with the S&P 500 index closing at record high for the 10th time in 12 sessions.
Most sectors traded higher with financials leading the market ahead of major banks kicking off earnings season. All 11 sectors of the market are set to post growth with energy, industrials, consumer discretionary, financials and materials seeing the biggest gains as the economy reopens. Walt Disney was up +2.3% following a solid debut for its Blackwidow film – earnings $80m at domestic box office the most of any film released in the covid era, and an additional $60m from the movie in Disney+ sales.
European stocks were higher overnight, with the Stoxx 600 index up +0.7%, as defensive names like real estate, utilities and healthcare performed well while travel and leisure stock were weaker as the more contagious delta variant became the more dominant covid-19 strain. Interestingly, ECB head Lagarde put the market on notice that there would be “some interesting variations and changes” at the central bank’s meeting next week.
Wesfarmers (WES:ASX)
Wesfarmers (WES) shares were up +0.5% yesterday after announcing a $680m takeover offer for wholesaler Australian Pharmaceutical Industries (API). The offer price is a 21% premium to API's last closing price which jumped +19.7%, with API's largest shareholder Washington H. Soul Pattinson and Co which owns 19.3% agreeing to vote in favour of the proposal.
Wesfarmers said it’s well positioned to bring capital and unique capabilities to support investment that will strengthen the competitive position of API and its community pharmacy partners.
While the acquisition should add value, we remain HOLD rated on Wesfarmers largely due to its full valuation pricing in strong growth to continue from its existing key businesses such as Bunnings which may start peaking out soon, in our view.
Australia & New Zealand Market Movers
The Australian market was up Monday (ASX 200 index +0.8%) as investors shrugged off Sydney's expected lockdown and surging covid-19.
Most sectors were up led by Materials, major miners performing well BHP (+3.2%) and Rio Tinto (+1.75%), as well as gold miners as price of the precious metal climbed marginally higher to US$1801 per ounce.
The major banks were higher recovering from Friday's sell off as well as Banking regulator APRA announced they would need to have their systems prepare for zero or negative interest rates.
The New Zealand market rose yesterday (NZX 50 index +0.6%) recovering Friday's losses and joining in on the global market rally over the weekend
Yields on NZ government slipped lower, which helped drive Meridian Energy, leading the market higher up +3.5% along with a handful of other higher companies which pay attractive dividends.
Software stocks also performed well, Serko up +2.7% and Pushpay climbing +2.4%, while Vista group was up +2.2% following Hollywood blockbuster Black Widow which debuted with record post-covid box office take as people are returning to cinemas.
Summerset ended the day up +1.9% following its impressive second quarter sale results.
Retailers exposed to NSW lockdown were lower with Hallenstein Glasson Holdings dropping -1.2% after announcing 13 Glasson stores were closed over the weekend, likewise Kathmandu fell -1.3%.