Global markets were mixed overnight, with US markets (S&P500 index -0.9%) falling and giving back some of the previous session gains, as investors appeared to take profit and digest Wednesday’s Fed decision to start hiking rates next year.
Technology stocks, being most sensitive to higher interest rates, dragged the market lower as the tech heavy Nasdaq index (-2.6%) shed more than it gained in the previous session. Apple fell -3.9% and major semiconductor stocks like AMD (-5.4%) and Nvidia (-6.8%) were also hit hard. Shares of Adobe fell more than -10% after the company’s forward guidance came in lower than analysts expected.
On the flipside, Financials and Materials were up – with Bank stocks benefiting from a higher interest rate environment and materials were supported by a jump in commodity prices.
In contrast, European Markets (Stoxx 600 index +1.2%) rallied as oil and gas stocks jumped leading the market with all sectors trading in the green.
The Bank of England hiked interest rates for the first time since the start for the pandemic, surprising most given concerns over the rapid spread of the omicron variant in the UK. The bank increased its main interest rate to 0.25%, from its historic low of 0.1% as inflation pressures mount, and that economic data satisfied policymakers criteria for a hike.
The ECB took a more dovish tone than England, announcing it would continue to support its monetary policy support into 2022 and lefts its main rate unchanged at 0.0%, but will commence cutting its bond buying program.
CSL Limited (CSL:ASX)
Pharmaceutical Giant CSL fell –8.2% yesterday after exiting its two-day trading halt. CSL announced it completed its $6.3 billion equity raise, the biggest in Australia’s history to fund its $17.2 billion acquisition of Vifor. CSL will issue fresh shares at A$273.00 a piece, an -8.3% discount to what CSL was trading at pre-announcement and lower than what most had anticipated.
The deal is expected to diversify CSL’s earnings base and create positive cost synergies going forward from the two businesses, and be highly earnings accreditive for CSL by 2023 financial year. We are BUY rated on CSL.
Schrole Group (SCL:ASX)
Schrole Group (SCL:ASX) shares were up +10% yesterday after providing an encouraging update up to the month of November, recording new Connect sales for the month of US$104,000, an increase of +32% from the previous year and up +19% on November 2019.
Attendance rates for their events have also been strong, helping to contribute to 18 new Schrole events across the world, with an additional 5 recruitment events scheduled through to April.
We remain BUY rated on Schrole as a quality SaaS company with solid growth potential, but with a High-Risk caveat since it is a micro-cap and given the current lack of liquidity can be quite volatile.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX 200 index -0.4%) as CSL dragged the market lower on a generally upbeat day.
The big banks were also generally weaker. Tech and real estate stocks were stronger taking Wall street’s lead.
Mesoblast recovered +10.9% after saying it would conduct another phase three trial of its drug for back pain, following feedback from the US FDA.
Understandably healthcare sector lead losses, CSL's slump dragging other healthcare stocks lower as well.
The New Zealand market was down again on Thursday (NZX 50 index -0.5%) driven largely by the fed’s rate hike decision. NZ’s third quarter GDP slipped -3.7%, which was better than expected given covid restrictions and below the -4% drop that was anticipated.
Metro Performance Glass (-4%) led the market lower, with most of the market trading lower given their sensitivity to higher interest rates.
Sky TV managed to buck the trend rising another +3.8% after confirming the sale of its Mt Wellington campus to Goodman, taking its rise over the last ten days to +54%.
E Road climbed +4.3% after being included in the NZX50 index from Monday.
3 Things Markets will be Watching this Week
- A busy week ahead with an interest rate decision from the US Federal Reserve, European Central Bank and Bank of England. Inflation data from the Eurozone and UK, and a raft of housing data from the US.
- Locally, Australia’s employment data and NZ‘s third quarter GDP.
- AGM’s held by Westpac, ANZ, NAB and Nufarm.
