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ASX 200 (XJO) morning report – M&A activity heats up

The S&P/ASX 200 (ASX: XJO) is tipped to open lower on Tuesday according to ASX futures. Here’s what you need to know.

ASX share market recap

A positive lead from Wall Street and news that AstraZeneca plc (NYSE: AZN) had resumed their vaccine trial sent the ASX 200 0.7% higher on Monday. Positive news on the vaccine front supports the energy and industrial sectors amid hope of a faster return to normal.

The biggest detractor was Macquarie Group Ltd (ASX: MQG), retreating 4.6% after providing a first-quarter update and guiding to a 35% fall in first-half earnings. The fall is driven by two factors, the first being the company’s strong performance in 2019 making comparisons difficult and the second a general slowdown in transactional activity, including IPOs and major asset sales. Management refused to offer guidance for FY21 citing the growing uncertainty surrounding the economic recovery.

Viva Energy Group Ltd (ASX: VEA) appears to have staved off the closure of its Geelong refinery after the Federal Government announced support for the sector, including minimum stockpiles and import duties. Viva Energy shares finished 5.6% higher.

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Cleanaway shares drop 7%, Citadel surges 40%

The Australian newspaper reported that industrial property investor, Logos Group, had entered the bidding war for a portion of the $2 billion Moorebank Logistics terminal from Qube Holdings Ltd (ASX: QUB). The industrial property sector continues to outperform as large companies like Woolworths Group Ltd (ASX: WOW) seek well-located warehouses in an effort to streamline their supply chains post-COVID. Qube remains a unique recovery play for our export markets.

Elsewhere, Cleanaway Waste Management Ltd (ASX: CWY) was forced to respond to reports that its CEO engaged in ‘overly-assertive’ behaviour with staff during the pandemic, hitting shares to the tune of 7.2%. Despite the change, the company is well-positioned to continue growing market share in this defensive and highly profitable sector.

Meanwhile, Pacific Equity Partners lobbed a $503 million takeover bid for software and data analytics firm Citadel Group Ltd (ASX: CGL), sending shares up over 40%.

M&A activity heats up, Europe continues to lag

The US market recovery after two weeks of losses continues to gain traction, with the S&P 500 finishing 1.6% higher and the Nasdaq rebounding 1.9% after recent underperformance. It was a combination of acquisition activity and a bullish statement from Pfizer Inc. (NYSE: PFE) CEO suggesting a vaccine will be ready before the end of 2020 that sent markets higher.

Oracle Corporation (NYSE: ORCL) jumped 7.9% after reports that it had beaten off Microsoft Corporation (NASDAQ: MSFT) for the right to purchase the US operations of Tik Tok. The software company is seeking a data edge from the acquisition.

Gilead Sciences Inc. (NASDAQ: GILD) announced the US$21 billion acquisition of cancer drugmaker Immunomedics, with the COVID-19 market offering a solid hunting ground for larger companies with capital to deploy.

European markets continue to lag, the Euro Stoxx down 0.6%, as investors fret about a no-deal Brexit and spiking COVID-19 cases heightens the risk of a second wave of lockdowns.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.

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Disclosure: At the time of publishing, Drew owns shares of Cleanaway.

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