Global markets were higher overnight, with US markets (S&P 500 index +1.9%) staging a two-day relief rally to end the month down -5.3%, as investors snapped up beaten down shares. The recovery has possibly been spurred by the S&P 500 hitting correction territory, down just over -10% from its peak at one point. January marked the S&P500’s worst month since the start of the pandemic and reported its largest January decline since 2009.
The US technology index NASDAQ rose +3.4% overnight, adding to its 3% gain on Friday clawing back to end the month down -10%. Heavily sold off tech shares reported strong gains over the last two session as investors bought the dip, and a number of heavy weight stocks recovered following broker upgrades adding to market confidence, Tesla (+10.7%), Netflix (+11.1%), and Spotify (+13.5%) were big gainers overnight after a rough start to the year,
European Markets (Stoxx 600 index +0.6%) made more muted gains with most sectors were in the green, with a lower concentration of Tech stocks, the Euro Stoxx 600 index (the largest 600 listed companies in Europe) ended the month down -4%, faring better than other markets.
We believe the year a head will be full of volatility and create buying opportunities as the market juggles rising rates, inflation, supply chain issues and mixed corporate earnings while the overall backdrop strong of strong economic outlook should provide some fundamental support. The big overhang for the market being the Fed’s upcoming rate hikes over the next 12-months.
Schrole Group (SCL:ASX)
Schrole (SCL) shares jumped +11% yesterday after delivering a solid December ending quarterly result. Quarterly cash receipts rose +44% from September quarter to $1.7m, gaining strong traction in new markets of Europe and Americas which has been encouraging increasing Schrole HR SaaS customers by +9% from the previous quarter following the wind down of the International Schools Services alliance agreement. The wind down means Schrole reports only 50% of the cash receipts from customer renewals but does not incur any ISS distribution fees.
Operating cashflow for the quarter came in at $277,000 its largest since September 2021, helped by growing revenue and expanding soft ware margins. Cash receipts for the quarter were up +44% from the same corresponding period last year while Schrole community grew +18% to 198,000 members.
We remain BUY rated on Schrole with a High-Risk rating, and expect its relatively ‘cheap’ valuation versus other technology names at ~2x revenue will create some immunity to current market volatility.
Australia & New Zealand Market Movers
The Australian market was down on Monday (ASX200 index -0.2%) after a choppy session ahead of the RBA’s announcement today, with the index ending the month down -6.3%.
Technology, property and consumer discretionary sectors lead gains ahead of the RBA’s announcement, being sectors experiencing the sharpest sell off over the month. Financials which have outperformed most sectors over the month lead losses, while tech shares which were heavily sold over the month start to bounce back.
BHP slipped -1.2% as it became the largest company in terms of market capitalisation on the ASX after ditching its London listing.
Ansell tanked -14.3% yesterday after downgrading tis full year guidance stating demand for single use gloves slumped and margins were compressing.
The New Zealand market (NZX 50 index +0.3%) edged higher yesterday, to end the month down -8.8% as the market looks for some stability.
It was mixed trading sessions with strong gains from some tech names like Vista Group (+4.5%), E-Road (+4.3%) and Gentrack (-4.1%) finding support, whilst others continue to slide lower such as Pushpay (-2.7%), and Trade Window (-2.8%). Pacific Edge led the market lower, down -4.4% as a growth name who’s valuation and support is very sensitive to rising interest rates especially as it is yet to deliver a profit.
Likewise it was mixed bag amongst the large cap stocks, with Fisher and Paykel (-0.9%), Mainfreight (-0.6%) and Fletcher Building (-0.5%), all trading lower, while Contact (+3.7%), Auckland International Airport (+1.1%), and Ryman Healthcare (+0.5%) were up.
3 Things Markets will be Watching this Week
- A big week of data, with US employment numbers (nonfarm payrolls), Bank of England and ECB meetings due this week
- US earnings from Alphabet, Meta Platforms (Facebook), and Amazon are set to be reported this week
- Locally, the RBA announcement on the cash rate will be made today and NZ employment data will be closely watched.