ASX Market Wrap: Markets up while David Jones crashes

British private equity firm withdraws bid for the upmarket retailer

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 2, 2012 5:46 pm AEST

The S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) rose 0.9% to close at 4,133, following a 2% jump on Wall Street and a 1.2% jump on our markets on Friday. Most sectors of the market were up today, led by Energy and Gold, up 2% and 3.1% respectively. Consumer discretionary and health care sectors were the only ones bleeding red ink.

Newcrest Mining, Macquarie Group and Woodside Petroleum were the best performing stocks in the top 20, with all three rising by more than 2.5%.

In the biggest news of the day, EB Private Equity (EBPE) has withdrawn its bid for David Jones Limited (ASX: DJS), citing recent publicity around its proposal had made it difficult to proceed. DJs shares subsequently plummeted 10% to close at $2.33. The question remains, is someone else likely to take a pop at the company in the near future?

Pacific Brands Limited (ASX: PBG) was up 1% to 50.5 cents, after announcing that it had paid down $25m of its $175m debt, and extended the terms of the debt facility to July 2015. The clothing, footwear and bedding maker of iconic brands such as Bonds, KingGee, Rio and Sheridan has been struggling in the current tough retail environment. Paying off some of its debt is a good first step in a move to strengthen its balance sheet, should conditions continue or deteriorate further.

In a letter to shareholders today, Westpac Banking Corporation (ASX: WBC) advised that growth in the financial services sector is likely to remain modest in the medium term, as consumers reduce their debt levels and increase savings, and businesses limit new investment (apart from the mining sector). The bank believes that these changing economic and business forces are structural in nature, and the company is being forced to adapt. That's not good news for bank shareholders, including those of the other big majors, Australian and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank (ASX: NAB).

Foolish takeaway

Takeover announcements can never be regarded as absolute certainties, and EBPE's withdrawal of its offer and today's fall in David Jones' shares perfectly illustrates that point. It's never a wise idea to invest purely on speculation – or hope – of a takeover.

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Motley Fool writer/analyst Mike King owns shares in Woodside. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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