ASX falls on muted day of trading – Sydney Morning Herald

“Rates markets are at odds with equities on the outcome and any fallout would dampen the relief that our market has rallied on in the last week.”

Woolworths shares slid 1.2 per cent to $32.30. The supermarket giant announced on Monday its $1.7 billion share buyback had received overwhelming demand from retirees and superannuation funds chasing franking credits. The buyback price was set at $28.94 a share.

Suncorp Group fell 2.2 per cent to $13.60 after chief executive officer Michael Cameron resigned from the job, effective immediately, after less than four years at the helm of the financial services company.

The major iron ore miners were firmer on Monday as the price of iron ore remained above $US100 a tonne. Ongoing supply tightness in the iron ore market has pushed the price of the bulk to a five-year high.

BHP Group added 1.3 per cent to close at $37.94 and Fortescue Metals Group advanced 2.8 per cent to $8.45. Rio Tinto rose 1.8 per cent to $103.02, its highest level since 2008.

Vocus Group rose 17 per cent to $4.55 after announcing Swedish private equity company EQT Infrastructure had made a $3.3 billion takeover bid for the telecommunications company.

The offer is worth $5.25 a share, at a 35 per cent premium to the company’s Friday closing share price of $3.89. EQT has been granted a non-exclusive access to Vocus’s books, with The Australian Financial Review’s Street Talk reporting on Sunday a number of approaches had been made.

TPG Telecom also rose, adding 4 per cent to close at $6.50, while Telstra shed 2.5 per cent to end the session at $3.53.

The local tech darlings were among the market’s best performers on Monday. Appen rose 4.6 per cent to $26.24, Nearmap advanced 3.6 per cent to $3.44, Wisetech Global climbed 2.6 per cent to $23.22 and Altium finished at $30.65, up 3.6 per cent.

Stock watch

COCHLEAR

Macquarie remains heavily underweight Cochlear, saying the company is trading at a very high valuation given the increasing competitive pressures. The broker noted that competition from Advanced Bionics, which had recently gained market share, posed a risk to Cochlear’s earnings. “We estimate unit sales growth would need to increase to over 13 per cent per annum over the next five years in order to justify the current share price,” said analyst David Bailey. “In our view, this implies market share gains with limited impact from competitor product launches.” Macquarie reduced its price target on Cochlear to $166, or a 17 per cent discount to its Friday close of $200.11.

What moved the market

IRON ORE

Iron ore prices could remain elevated for another year, according to CBA, which believes the price could remain above $US80 a tonne until May 2020. The price of iron ore remained above $US100 a tonne on Friday, as both supply and demand factors keep the price elevated. “The balance of risks to our price outlook is to the downside, with Brazilian regulators the main negative risk for iron ore prices,” said CBA mining and commodities analyst Vivek Dhar. He is forecasting the price of iron ore will settle to a normal level between of $US60 and $US70 a tonne by 2021.

CRUDE

Brent crude prices remained below $US70 a barrel despite a fall in the number of US oil rigs and ongoing supply cuts by OPEC. Last week, the number of US oil rigs fell to 797, its lowest level since March 2018. That news came a day after oil prices suffered their biggest one-day loss of the year as US inventories rose ahead of expectations. Trade war concerns remain a concern for the oil market, with the potential for demand to dry up if the US-China tensions escalate. According to Reuters, the US Commodity Futures Trading Commission reported money managers had cut their net long positions in US crude futures last week.

THE POUND

The British pound moved higher at the end of last week after UK Prime Minister Theresa May confirmed she would resign as leader of the Conservative Party pending the conclusion of a leadership contest. While Ms May’s resignation lifted the currency temporarily, the move opens the door for candidates looking to pursue a ‘hard’ or no-deal Brexit to take her place. The pound is likely to trade defensively, with the UK poised to leave the European Union on October 31 if no other agreement can be made.

EU ELECTIONS

The result of the European elections was broadly positive for the euro, as far-right and Eurosceptic parties mostly failed to gain traction. While Nigel Farage’s Brexit Party took almost a third of the vote count in the UK, ballots in continental Europe were more pro-EU. “The result was seen as a positive for the euro as it makes further Brexit-style departures from the EU less likely,” said Western Union Business Solutions currency strategist Steven Dooley. “The Australian dollar was lifted by the more positive mood that followed the EU elections.”