Outside of the Melbourne Cup, the Reserve Bank of Australia garnered all the attention on Tuesday with a range of ‘experts’ predicting rate hikes may be brought forward and yield curve control would be abandoned.
As usual, they were only partially right, with the RBA keeping rates on hold at 0.1%, reiterating they may raise in 2022 or 2023 should inflation be sustainably within their target range.
But they did discontinue the yield curve control strategy. This has been central to supporting the balance sheets of the major banks during the pandemic.
ASX 200 weakens
The result was a mixed market that opened stronger only to fall as much as 0.7% during the session and ultimately finish 0.6% lower.
The materials and financials sectors were the biggest detractors with Westpac Banking Corp (ASX: WBC) falling another 2.7% and the Commonwealth Bank of Australia (ASX: CBA) down 0.5%.
The energy sector remains under pressure as Whitehaven Coal Ltd (ASX: WHC) tanked another 9%.
Insurance Australia Group Ltd (ASX: IAG) was another major detractor, falling 7% after announcing its insurance profit margins would fall by around 20% due to ballooning costs and claims.
Netwealth lobs Praemium offer
Outside of the RBA decision, the platform space dominated headlines on Tuesday after Netwealth Group Ltd (ASX: NWL) made a widely expected move, proposing a takeover of its smaller rival Praemium Ltd (ASX: PPS) for $785 million.
Praemium has long been known as the platform with the best technology and Netwealth with the first-mover advantage, with any tie-up creating a $94 billion superannuation and investment administration giant.
The deal is an all-scrip offer, with Netwealth using its lofty valuation and the synergistic nature of the acquisition to provide 1 Netwealth share for every 11.96 Praemium shares held.
Praemium’s management quickly hosed down the offer, saying the bid ‘undervalues’ the company. It wouldn’t be surprising if a bidding war breaks out. The Praemium share price finished the day nearly 15% higher on the news.
2-year Praemium share price chart
Goodman upgrades
Goodman Group (ASX: GMG), Australia’s largest property trust, gained 5.8% sending the entire real estate sector higher after announcing a first-quarter update, revealing earnings growth was expected to be a full 30% higher than previously flagged.
The company has benefitted from a partnership with Amazon (NASDAQ: AMZN) and its specialisation in industrial and logistics property to hit a $42 billion valuation. The development pipeline has grown 19% to $12.7 billion with assets under management now exceeding $70 billion.
ASX 200 today
Looking ahead, the ASX 200 is expected to open higher on Wednesday, following a positive lead from US markets overnight. For all the latest, check out my US stock market report.