Global Markets Overview – 4/22/14
By Evan Lucas, IG Markets Strategist | April 22, 2014 9:35 AM EST
Easter corporate auctions
There have been some very interesting corporate developments over the Easter break around corporate auctions. AstraZeneca, the UK's second largest pharmaceutical company, received a takeover bid from US giant Pfizer, Newmont Mining and Barrick Gold are in talks for a 'merger of equals' as US medical company Allergan is under interest from investment activist William Ackman - a deal which is believed to be worth over US$50 billion.
AstraZeneca has agreed to buy U.S. company Ardea Biosciences for $1.26 billion, giving it a new gout drug to bolster its weak pipeline in a deal that feeds a wave of M&A in the biotechnology sector.
The AstraZeneca deal is believed to be worth in the vicinity of £60 billion and would create the world's largest medical company, which would comfortably inside the top ten largest companies in the world with an estimated market cap of £150 billion (AU$270 billion). This will be a deal to watch as it could be a major catalyst for more mega deals.
From an Australian-centric point of view, the possible Newmont-Barrick Gold merger will be keenly watched by gold bugs and gold play shareholders. The proposed deal sees Barrick offering Newmont shareholders a 13% premium to the previous 20-day average in an all-up scripted deal. However, there is talk that the deal is breaking down due to disagreements as to which Australian and New Zealand assets should be spun out. This could be an interesting situation for the likes of NCM, PRU, NST and RRL, which may see Merger and acquisition talk of their own.
NST is an interesting one as it has some of the cheapest production costs and best production lines on the ASX, though are these Newmont-Barrick assets appealing? The deal also puts NCM in the sight of predators. It is very cheap on metrics; its 12-month P/E is 6.7 times on a forward blending basis and it is trading at 15.7 times earnings. I don't doubt there is still plenty of work to be done at NCM to lower costs and improve production, however there is enough tier-one assets at NCM for it not to be looked at.
Easter has also seen the best US rally of 2014, with five consecutive positive prints, which looks like carrying on to the open of the markets tonight. So far 18% of US companies have reported, 74% have beat estimates on the earnings line and seen quarterly growth of 3.6% and profit growth has been 1.4% which is 40 basis points ahead of expectations. All this bodes well for a further positive print.
Ahead of the Australian Open
The SPI futures have been closed since midnight on Thursday, so there is plenty of catch up to be done on the open considering the positive prints in the US and Japan over that time. There have also been some interesting individual moves.
Woolworths made a record all-time high and record-closing high on Thursday. It also registered its second highest volume trade of the year, double that of 30-day average on no news; 4.97 million shares were traded and option settlement is today, so more will go through.
Woodside Petroleum has closed at $40 for the first time since July 2011, as its production report came in ahead of expectations; this puts the Shell overhang as a real possibility. With the corporate actions from the weekend, anything is possible here and Shell could either sell out on-market or to a new major holder.
The six-year intraday high on April 10 of 5503.5 is firmly back in sight, with the market looking to add 0.6% on the 10am bell (AEST) to 5488. Volumes will be extremely thin as most traders in Australia will have taken extended leave for Easter and ANZAC day, which may see the buying overshoot this call and could see the ASX making a new six-year record.
[Kick off your trading day with our newsletter]
More from IBT Markets:
Follow us on Facebook
Follow us on Twitter
Subscribe to get this delivered to your inbox daily
Most Popular Slideshows
- Kate Middleton Suffocated in Kensington Palace, Queen Elizabeth Reported War With The Duchess [PHOTOS]
- Chris Martin Dating Reports: Jennifer Lawrence Vs Gwyneth Paltrow [PHOTOS]
- 2014 MTV Video Music Awards: Everything To Know [PHOTOS]
- British Style Icon Kate Middleton Fashion Talk With Camilla Parker-Bowles Daughter-In-Law [PHOTOS]
Join the Conversation
- Companies Push Back IPO Plans Due to Mega Alibaba Share Launch
- Vodafone Buys Ericsson Equipment to Replace 5-Year-Old Network Technologies
- Small Businesses Claim Positive Financial Situation but Negative on Outlook
- Perfume Maker Elizabeth Arden Blames Poor Q4 Financial Results on Justin Bieber Scent
- 4.7-Inch, 5.5-Inch iPhone 6 Models Confirmed with Similar Build, Cam Features & 300+ Screen Pixels on Release Date
- Saudi Arabia: Brothers Beheaded For Smuggling Marijuana Into The Kingdom
- ISIS: More Journalists Beheading To Come After James Foley and Steven Sotloff [Video]
- Moto X+1 is Likely Nexus 6 Template; Motorola Shamu is 1st Android Silver with Snapdragon 810 – Reports
- James Foley: More Chilling Information Revealed By Escaped Journalists
- James Foley’s Executioner Has British Accent—A Chilling Reminder That ISIS Has Foreign Members
- Xiaomi Mi4 vs iPhone 6: Why Forecasts Favor Mi4 as The Next Best Phone Against iPhone 6