The S&P/ASX 200 (INDEXASX: XJO) is set to take a backwards step at the open this morning according to the latest SPI futures. Here’s what ASX investors need to know.
ASX 200 share market recap
The S&P/ASX 200 (ASX: XJO) weakened 0.2% on Monday, with the announcement of an easing to Victoria’s Stage Four restrictions not enough to trigger a rally in the Australian share market.
The IT and Banking sectors led the market lower, with Westpac Banking Corp (ASX: WBC) falling 0.4% after announcing another $1.2 billion in writedowns. Again, these were centred on its ‘software costs’ and the insurance division.
The news of the day was the unexpected (on Friday at least) $9.3 billion bid for Coca-Cola Amatil (ASX: CCL) by Coca-Cola European Partners.
The $12.75 per share offer sent CCL shares 16.3% higher to $12.50. It seems to me there is very little likelihood of a secondary bidder.
Following on from the bid for Link Administration Holdings Ltd (ASX: LNK), the Coca-Cola Amatil takeover highlights the global search for growth that is occurring and washing over to Australian shores.
Cashed-up global businesses are using the opportunity to diversify and add alternative growth streams at a time when debt has never been cheaper. This can make even mature businesses like CCL attractive.
Increased offer for Link, IPO bubble deflating?
As flagged last week, private equity giant Carlyle Group increased its offer for Link Group shares, sending the Link share price 0.8% higher to $4.95. Link shares are still well below the revised $5.40 offer price. The acquirers also flagged the support of 14% of the share register including asset manager Bennelong, suggesting they are serious about closing the deal.
As part of the proposal, Carlyle is offering investors a number of options, including the opportunity to retain shares in the fast-growing PEXA property settlement platform, an asset I have been keen on for some time. In the recent investor video below, Owen Raszkiewicz and I talked about the potential in Link and the buy now, pay later (BNPL) sector:
The Link board is yet to approve formal due diligence, but will hopefully do so this week, which should see the discount reduced.
Elsewhere it seems the froth is coming out of the IPO bubble, Adore Beauty Group Ltd (ASX: ABY) falling 16.2% and now well below its float price and the latest BNPL group Zebit (ASX: ZBT) falling over 20% on listing.
US markets tumble, economic weakness growing
US markets have fallen the most in a month overnight, the S&P 500 and Nasdaq down 1.9% and 1.6% respectively.
Cyclical business, including cruise liner Carnival Corp (NYSE: CCL), were the worst performers as US coronavirus cases hit a new high of close to 70,000 overnight, increasing the risk of further economic shutdowns and a stalled economic recovery. This has been exacerbated by the now very unlikely introduction of a much-needed fiscal stimulus package.
Shares of SAP SE, Europe’s most valuable technology firm and specialist software and systems designer, fell the most in 24 years, down 21.9%, after flagging a 20% cut to full-year earnings. Despite the company’s huge demand flow, as digital transformation gathers steam, European restrictions are starting to bite.
It’s a big week ahead for markets, with Australian banks offering quarterly updates, inflation figures due out and each of the FANG stocks set to report. I’m expecting a negative finish to the month.