Gambling stocks skyrocket during Crown buyout talks as insurers hit hard

The Australian stock market rose as Crown stocks surged following a takeover bid and driving other gambling stocks higher.

The ASX 200 closed up 0.7%, or 44 points, at 6,752 points.

After struggling for the direction of early trade, most sectors of the local market gained ground, with the exception of mining stocks.

The Australian dollar was weaker, buying around 77.25 US cents at 4:30 p.m. (AEDT).

Crown shares jumped 21.4% to $ 11.97 after the casino operator received an $ 8 billion takeover offer from US private equity giant Blackstone.

Today’s surge has pushed the stock above the offer price of $ 11.85 per share.

The news pushed shares of rival casino operator The Star Entertainment Group up 3.9%, while Tabcorp (+ 2.4%) and Aristocrat (+ 1.5%) also gained ground.

The main banking stocks ended up, in particular the Commonwealth Bank (+ 0.4 pc) and ANZ (+ 0.5 pc).

In separate announcements, the ABC and ANZ have said they have agreed to settle a 2016 class action lawsuit filed in the United States for alleged benchmark interest rate rigging.

The lawsuit was filed by US-based investment funds and a derivatives trader against 17 global banks.

Australia’s two banks said they did not admit liability under their settlements, adding that the terms of the settlements were confidential but would not have a significant impact.

Telstra shares gained 1.3% to $ 3.25, after providing more details on its plan to restructure the company.

The telecommunications company will be divided into four divisions and shareholders will hold shares in a new holding company under the same name.

Telstra’s physical infrastructure, such as its fiber, data centers and exchanges, will operate under a new fixed InfraCo unit, while InfraCo Towers will include its mobile towers.

The customer-oriented unit will become ServeCo and international trade will be a separate unit.

Telstra expects the restructuring to be completed by December.

Insurers Prepare for Flood Losses

Insurance stocks have fallen sharply due to heavy rains causing flooding and property damage, with severe weather warnings in place for most of New South Wales.

Shares of IAG (-2.3%), Suncorp (-2.1%) and QBE (-3%) all ended lower.

The Insurance Council of Australia has declared a disaster for large parts of the state, to “step up and prioritize the insurance industry response for affected policyholders.”

“It is too early to understand the extent of the property damage in the affected areas and to estimate the insurance damage bill, but insurers have received more than 5,000 claims in the past few days,” said the CEO of Counsel, Andrew Hall.

IAG said more than 2,100 claims were filed with the company as of Sunday evening, mostly covering property damage.

S&P Global analysts said that while the losses of individual insurers would vary, they would be manageable.

“We believe that Australia [property and casualty] insurers are well placed to assess and process claims that arise, with reinsurance protection protecting large insurers against disproportionate losses, ”the rating agency said.

Bank stocks hang around Wall Street

Movements in the local market follow a mixed finish for Wall Street on Friday.

The Nasdaq ended higher, supported by Facebook and energy stocks, while the Dow Jones Industrial Average lost 0.7% and the S&P 500 ended slightly lower.

The S&P 500 banks index fell after the U.S. Federal Reserve said it would not extend a temporary capital relief put in place to ease pandemic stress in the finance market.

“Banks have seen such a big rise this year and this news has only acted as a catalyst for profit taking,” Art Hogan, chief strategist at National Securities, told Reuters.

The measure, called the additional leverage ratio exemption, was put in place during the pandemic, to alleviate stress in the financing market.

“The exemption actually meant that banks could exclude [US Treasury bonds] UST and central bank deposits when measuring the size of their balance sheets are used to estimate the minimum level of capital they are required to hold, ”NAB strategist Rodrigo Catril wrote in a note.

Mr Catril said that the lapse of the exemption removes an incentive for banks to hold US Treasuries, “so the concern is that the move will exacerbate the current high level of volatility” in the bond market.

ABC / Reuters