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ASX Coverage Overview – Wednesday, June 4
Welcome to the live coverage of the ASX for Wednesday, June 4. This new format aims to bring you the latest market updates in real-time. Please refresh your browser for continuous updates and share your feedback here.
Virgin Australia Plans $685 Million IPO
Virgin Australia is poised to re-enter the ASX with a planned Initial Public Offering (IPO) aimed at raising $685 million. This move values the airline at $2.3 billion in market capitalisation and a total enterprise value of $3.6 billion, with shares being offered at $2.90—a 30% lower price compared to Qantas. Bain Capital, which rescued Virgin from administration, will decrease its stake to 40%. Meanwhile, Qatar Airways’ shareholding will dip from 25% to 23%. Strong demand has already been noted from key investors like UBS, Goldman Sachs, and Barrenjoey.
IDP Education Experiences Significant Downgrades
IDP Education’s shares plummeted nearly 50% following a severe earnings downgrade. The company’s adjusted EBIT fell approximately 30% short of analyst expectations primarily due to policy ambiguities and a notable decline in student placement volumes. Key broker actions today include:
- UBS upgraded the stock to Buy but cut its target from $12.00 to $4.95.
- Morgan Stanley downgraded to Equal-weight, reducing the target from $17.95 to $4.25.
- JPMorgan retained a Neutral stance, lowering its target from $11.90 to $4.25.
The market’s sentiment has turned cautious due to the significant earnings downgrades and ongoing risks related to execution and profitability.
OECD Adjusts Global Growth Outlook
The OECD has revised its global growth projections downward, signalling heightened inflation concerns and weakened investment prospects in advanced economies. Key findings include:
- The Global Growth Forecast is slashed from 3.3% in 2024 to 2.9% in both 2025 and 2026, attributed to rising trade barriers and economic policy uncertainties.
- US Growth is downgraded from an anticipated 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026, influenced by increased tariffs, retaliatory measures, reduced migration, and federal workforce cuts.
- Risks indicate a potential for further economic slowdown or higher-than-expected inflation pressures.
- Inflation Trends suggest G20 headline inflation may moderate but project US inflation to almost reach 4% in 2025 and remain elevated in 2026.
- The report highlights the positive impact of AI on US productivity, potentially exacerbating the productivity gap with the rest of the world.
Notable Articles from Livewire
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Nanosonics – A Turnaround Journey: Following FDA approval delays that caused a sharp decline, Nanosonics’ stock has rebounded by 50%. With its solid Trophon disinfection system generating recurring revenue and a potential new product poised to enter a substantial market, investor sentiment is shifting positively.
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Australian Corporate Bonds Offer High Yields: As interest rates in Australia decrease, corporate bonds are garnering attention for their attractive yields exceeding 5%, especially with options like Betashares’ defined income ETFs and Schroders’ High Yielding Credit Fund available to income-focused investors.
- US Earnings Season Highlights Growth: The latest earnings reports from major US companies, especially driven by AI advancements, have shown resilience. With the S&P 500 index nearing all-time highs, companies such as NVIDIA and Meta demonstrate significant revenue and income growth despite tariff headwinds.
Market Influences
Major US indices closed positively, with the Nasdaq regaining earlier losses for the year. In a low-key trading session, several factors influenced market movements:
- US April job openings exceeded forecasts, reported at 7.39 million compared to expectations of 7.1 million.
- Remarks by Federal Reserve policymakers indicated concerns regarding stagflation.
- TSMC’s CEO noted ongoing robust demand for AI, despite anticipated impacts from tariffs and foreign exchange movements.
Morning Update
S&P/ASX 200 futures are indicating a potential increase of 23 points (+0.27%), bringing the index to within 1% of the record high set on 14 February. For those new to our coverage, check out today’s Morning Wrap for a quick overview of market developments.
Stay tuned for further updates throughout the day!
