The Monday Report – 02 December 2019

Daily Market Reports | Dec 02 2019

By Greg Peel

Profit-Taking I

The ASX200 eased back on Friday, having run up 2.3% through the week to Thursday’s close as momentum recovered from the earlier bank-led plunge. Investors had snuck back into the banks during the week, but every time they do they get another kick in the teeth.

The latest issue of Westpac ((WBC)) having to let off investors who applied for new shares in the bank’s Share Purchase Plan ahead of the AUSTRAC news is impacting on that SPP as the VWAP (volume-weighted average price) period is underway to determine the ultimate buy-price. Westpac shares fell another -0.7% on Friday and “outperformer” during the scandal period, Commonwealth Bank ((CBA)), fell -1.0%.

That took financials down -0.5%, matching a fall in materials as the iron ore price slipped back below US$90/t once more.

Utilities (-0.9%) saw the greatest profit-taking after a solid week in which momentum was as much about defensives as cyclicals.

Energy (+0.2%) was the best performer on the day but that will all change today with oil prices down -5% on Friday night.

Telcos (+0.1%) remained in favour as did healthcare (+0.05%), with the race now on to raise target prices on CSL ((CSL)). Macquarie has now moved to $300 from $250 and Credit Suisse to $305 from $249.

The market continues to consider consumer staples (+0.04%) as the better bet over discretionary (-0.4%) heading into Christmas, perhaps believing austere Australian consumers won’t overspend this year on unnecessary gifts but will at least still pay overs for prawns.

(Here’s a Christmas tip: There’s no such thing as a fresh prawn. They’re snap-frozen on the boat. Buy now and stick them in your freezer and you won’t have to queue up at the Fish Market at 2am.)

Among individual stocks, Virgin Money UK ((VUK)), the artist formerly known as CYBG, or Clydesdale Bank for the purists, jumped 24.5% on Friday after reporting a better than expected net interest margin and a -6% reduction in costs.

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