TPG Telecom’s merger with Vodafone Hutchison Australia was blocked by the Australian Competition and Consumer Commission, sending its shares lower this week. While both companies have vowed to challenge the decision in Federal Court, ACCC chairman Rod Sims said he was confident the move was defensible. TPG’s shares slid 7 per cent to $6.35 and Hutchison Australia closed 21.2 per cent lower at 13¢. Telstra rose 0.9 per cent to $3.41.
Lithium miners closed higher this week after Kidman Resources’ share price rose above the $1.90 offer from Wesfarmers, sparking speculation there were other interested buyers in the market. Kidman’s shares added 2.9 per cent this week to finish at $1.92.
Galaxy Resources advanced 1.6 per cent to $1.61 and Pilbara Minerals climbed 6.3 per cent to 76.5¢.
Morgan Stanley downgraded Adelaide Brighton’s price target in the wake of its guidance downgraded on Thursday. The broker said the company was in a difficult position and facing residential construction softness at a period where competition in its key market was particularly heightened. “Increased competition in the Queensland cement and concrete markets and South Australian cement markets appear to be key drivers of this weakness,” said analyst Andrew Scott. “This provides a cause for concern as end market conditions are likely to remain difficult and it is not clear what levers Adelaide Brighton has to improve the situation.” Morgan Stanley retained its ‘equal-weight’ recommendation but cut its price target from $4.75 to $4.
What moved the market
Safe havens have been in high demand over the past week, as investors looked to hedge against the uncertainty of the US-China trade negotiations. Over the last week, the Japanese yen and gold have underperformed the US dollar, benefiting from concerns over the global economic outlook. Oil and commodity sensitive currencies, including the Australian, New Zealand and Canadian dollars, have been the worst hit over the past week amid concerns any escalating trade spat between the US and China would lower demand.
Iron ore prices continued to firm on Thursday even as iron ore shipments from the world’s largest bulk export terminal in Australia’s Port Hedland rose during April. Shipments from the port rose by 15.4 per cent for the month but that wasn’t enough to offset a weak March as shipments fell by 1.4 per cent on an annualised basis. Vale is expecting up to 75Mt to be sidelined following the fatal dam collapse at its Feijao iron ore mine, with production at it Brucutu mine now halted for a second time. Iron ore prices are within reaching distance of $US100 a tonne.
The Australian dollar endured a turbulent day of trading on Friday as the Reserve Bank of Australia released its Statement on Monetary Policy and the US imposed tariff increases on Chinese imports. The Aussie dollar was trading at US69.90¢ through the morning after recovering from its fall on Thursday. It rose as high as US70.20¢ following the RBA’s release. Despite the central bank reducing many of its forecasts, many of the changes had already been anticipated. The Aussie settled down to US69.95¢ following the US tariff increase, awaiting a reaction from China.
Economists are still divided as to whether the RBA has shifted its bias, with many reading the central bank’s Statement on Monetary Policy as conveying very different messages. “Taken together with Tuesday’s post meeting Statement it doesn’t sound like the RBA have moved to an easing bias,” said CBA’s Kristina Clifton, who is yet to forecast rate cuts this year. AMP’s Mark Roberts read it differently. “We read the RBA’s commentary as having an implicit easing bias given that their forecasts assume two rate cuts which is still not enough to get underlying inflation significantly higher from here.” he said.
William McInnes covers markets from Sydney including editing the Markets Live blog.