ECB, Theresa May Gets Support | TPG Tumbles

14 December 2018

Global markets were mixed overnight as shares on Wall Street were mostly lower with stocks paring back early gains.

Investors had been boosted by further signs that US President Donald Trump and the Chinese government were working to cool their trade war. UK Prime Minister Theresa May's successful vote to keep the leadership also supported investor sentiment. May won a party room confidence vote by 200 to 117, although there is still pressure as a deal for Britain to exit the European Union looks no closer to passing through parliament. 

Overnight the European Central Bank announced it would end the stimulus program that helped nurse the Euro zone back to health over the past four years. As we have touched on in the past, major central banks around the world are removing stimulus from markets, and it will be interesting to see how markets trade without central bank intervention/support. 


Stock in Focus: TPG Telecom (TPM:AX)

Gains for the ASX were limited by a slump from the telco sector after the competition watchdog raised concerns over TPG Telecom's planned merger with Vodafone Australia.

TPG shares fell -16% after the ACCC expressed delayed its decision on the $15 billion merger by three months, worried it would result in a "substantial lessening of competition" in the sector. The ACCC has called for submission from interested parties, leaving open the possibility that the competition watchdog may block the deal. Customers could end up "paying higher prices" for "less innovative" mobile and fixed broadband plans if the companies are allowed to merge, the Australian Competition and Consumer Commission (ACCC) said in a statement.

We are cautious on the extremely competitive Aussie Telco sector, and a blocked deal would be a major set-back for TPG.

We currently have a HOLD rating on TPG Telecom.

Australia & New Zealand Market Movers

The Australian share market was in positive territory overall on Tuesday (ASX 200 index +0.14%) as it continues a 3-day run, , buoyed by gains from the major banks and miners. Out-of-favour financial stocks were also among the best performers, while the major miners BHP, Rio Tinto, and South 32 also had a string trading session.


The New Zealand market was higher for a 3rd session on Thursday (NZX 50 index +0.63%) as investors around Asia remained optimistic that trade tensions between China and the US will ease. Fletcher Building led the market higher as it rebounded +4.5% to $4.91. A notice to the NZX yesterday showed Australian fund manager Perpetual increased its stake in the building company to 11%. The stock is also coming off a 14-year low in November, and an announcement on the sale of the Formica international business is expected in coming weeks.


3 Things Markets Will be Watching this Week

  1. Tensions between the US & China following the arrest of Huawei’s chief financial officer will likely dominate headlines.
  2. The latest US inflation figures are published on Thursday morning (AU/NZ time).
  3. Australian house price data is published on Tuesday. 


Have a Great Day,


Overnight the European Central Bank announced it would end the stimulus program that helped nurse the Euro zone back to health over the past four years.

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