Northern Star's Golden Gamble vs GQG's Adani Troubles

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Welcome to Equity Espresso’s Market Recap.

The Australian S&P/ASX 200 index made a modest gain on Monday, rising 11.7 points to 8,447.9, driven by a rally in Technology (+0.91%) stocks that followed strong performance from U.S. tech giants on Friday.

The market's gains were tempered by stronger-than-expected retail sales data, suggesting interest rates may remain higher for longer. The Discretionary (+0.87%) sector got a boost from the retail sales data, with Wesfarmers (+1.99%), JB HiFi (+0.35%), and Premier Investments (+0.46%) some of the best performers.

Gold stocks faced pressure as the U.S. dollar strengthened, with the precious metal falling 0.7% to $US2,622.84/oz. Northern Star Resources (-5.25%) fell after announcing plans to acquire De Grey Mining in a $5 billion deal. West African Resources (-3.96%) and Evolution Mining (-3.95%) also saw sharp falls.

Australian retail sales showed stronger-than-expected growth in October, rising 0.6% month-over-month compared to a forecasted 0.4%, marking the third consecutive month of gains. The growth represents a significant acceleration from September's modest 0.1% gain, with retailers reporting stronger sales activity driven by early discounting ahead of Black Friday events.

The gains were broad-based across multiple retail sectors, with other retailing rising 1.6% and household goods up 1.4%, while food retail and hospitality services increased by 0.3%. However, the positive momentum was partially offset by declines in clothing and footwear (-0.6%) and department stores (-0.3%). The growth was geographically widespread, with all states except the Northern Territory recording increases in retail turnover.

Company News

• GQG Partners' (-14.04%) shares plunged following UBS's downgrade to a "neutral" rating and a 30% price target reduction to $2.30. The decline comes amid concerns over GQG's Adani investment, as founder Gautam Adani faces U.S. prosecutors' indictment for an alleged $250 million bribery scheme.

• Metcash (+2.24%) reported mixed half-year results, with group revenue up 6.3% to $9.6 billion despite challenging conditions. Strong food division performance and liquor growth offset hardware segment struggles, while statutory profit increased slightly to $141.8 million in the period ending October 2024.

• Northern Star (-5.25%), Australia's largest gold miner, has agreed to acquire De Grey Mining (+29.61%) for $5 billion, gaining access to the undeveloped Hemi gold mine in Western Australia's Pilbara region. The mine is projected to produce 530,000/oz annually in its first decade. The deal offers De Grey shareholders 0.119 Northern Star shares per De Grey share, a 36% premium over recent trading.

• Telstra Group (+0.51%) will acquire Boost Mobile, a mobile virtual network operator with a retail presence across 10,000 Australian shops, for $140 million.

Wall Street

U.S. stock markets reached new heights during the shortened Black Friday session, with the S&P 500 rising 0.56%, surpassing its previous intraday record. The Dow Jones (+0.42%) and Nasdaq (+0.83%) also showed substantial gains, driven by strong performance in technology stocks like Nvidia (+2.15%) and Tesla (+3.69%).

Optimistic Black Friday retail forecasts further supported the positive market momentum. Adobe Analytics predicted record online spending of $10.8 billion, up 9.9% from the previous year. Major retailers like Target (+1.68%) and Macy's (+1.75%) saw their shares rise, while investors responded favourably to retreating Treasury bond yields.

According to CME Group's FedWatch, traders are pricing in a 66% probability of a 25-basis-point rate cut from the Federal Reserve in December. However, they anticipate a pause in further reductions during January.

Semiconductor equipment manufacturers saw their stocks rise after reports that potential new U.S. restrictions on China-bound chip technology exports might be less severe than initially proposed. American companies, including Applied Materials (+1.98%), KLA Corporation (+2.36%), and Lam Research (+3.23%), while Dutch company ASML's shares increased by 2.41%.

Robinhood (-0.29%) shares declined following SEC approval for 24 Exchange's plan to create a 24-hour stock trading platform. The company's stock has surged 66% in November amid investor optimism about potential deregulation benefits.

S&P500 Sector Performance

Economic Data

• Australian Retail Sales increased 0.6% month-on-month in October 2024, beating expectations of a 0.3% gain after a 0.1% rise in September.

• The Eurozone Annual Inflation rate accelerated for a second month to 2.3% in November 2024 from 2.0% in October, matching market expectations.

• Canadian GDP expanded by 0.3% from the earlier quarter in the three months to September 2024, slowing from 0.5% expansions in the first two quarters of the year.

• China's NBS Non-Manufacturing PMI stood at 50.0 in November 2024, missing the market consensus of 50.2, which was also October's figure.

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🌎️ Around The Globe

• BlackRock is reportedly nearing a deal to acquire HPS Investment Partners for around $12 billion. The private credit firm, which previously considered an IPO at a $10 billion valuation, could announce terms with the world's largest asset manager after Thanksgiving.

• Bluesky is reportedly working with legal counsel to ensure compliance with E.U. digital regulations following accusations of non-compliance.

• Meta is reportedly investing over $10 billion in a 40,000-kilometre global subsea fibre-optic cable project. The cable bypasses geopolitically sensitive regions like the Red Sea and South China Sea.

• Mexican officials warn that retaliatory measures would follow any proposed 25% U.S. tariff, suggesting such action could eliminate 400,000 American jobs and increase U.S. consumer prices.

• SpaceX's Starlink and T-Mobile have received conditional FCC approval to launch their satellite-to-phone service. This approval allows them to use up to 7,500 second-generation Starlink satellites to cover areas beyond T-Mobile's traditional network.

• Stellantis CEO Carlos Tavares resigned after profit warnings and a 40% drop in company value. The automaker will seek a replacement by mid-2025. The resignation stemmed from disagreements between major shareholders, the board, and Tavares over issues including cash burn.

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*1-year, 3-year and 5-year returns are calculated as of October 31 2024.

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