Global markets tumbled overnight (in the worst session since October last year (S&P 500 index -2.6%) as investors took profits and turned cautious. Microsoft’s strong quarterly result was lost in the noise, with both Tesla and Facebook falling in after-hours trade post result announcements which did not meet expectations.
In Europe, markets were lower as a spat between the EU and AstraZeneca over vaccine delays descended further with the two sides disagreeing over whether a planned call to resolve the issue would take place. The EU’s vaccination pace is lagging the US and UK. Economic data didn’t help the tone as German consumer confidence fell to -15.6 from -7.5, a much bigger fall than expected with confidence at its lowest level since last June. French consumer confidence also fell.
The growing manic bubble in a few short-squeeze stocks might have contributed to more cautious sentiment among Wall Street investors. GameStop, which roughly quadrupled in the past week after becoming a plaything of retail online day traders, rose another +135% on Wednesday. With bullish day traders keeping the upper hand over short sellers who have started to capitulate, GameStop, a loss making gaming company, now has an incredible market cap of $24 billion.
Finally, there was not much new news at the latest US Federal Reserve Meeting, with Chair Jerome Powell saying it saw economic activity in the United States moderating, pledging to keep interest rates low and to continue buying bonds to support the flow of credit through the economy.
Coca-Cola Amatil (CCL:ASX)
CCL released full year 2020 profit guidance above market consensus with performance improving in the 4th quarter, yet the profit beat was arguably low quality. The Coca-Cola European Partners (CCEP) takeover proposal, which remains low at A$12.75 per share, remains the key share price driver.
Clearly the market thinks there could be another higher takeover offer for CCL. In saying that, reports in the media are that traders believe it is some of the noisiest investors who have been calling for a higher offer from CCEP that took advantage of recent liquidity and a strong share price to trim their stakes.
We were previously BUY rated on CCL as an income play and are happy with the share price rally. We see no reason to buy the stock currently and investors who do not want to take the risk that a new offer eventuates may want to lock in gains by selling now.
Australia & New Zealand Market Movers
The Australian market slipped on Wednesday (ASX 200 index -0.7%) as Fortescue Metals Group paced a sell-off in iron ore miners on concerns about Chinese demand for the steelmaking raw material.
Oil Search shares were lower as it announced a 4th quarter revenue miss on soft production/sales volumes, a less oily sales mix and weaker gas/LNG pricing.
The New Zealand market was in positive territory yesterday (NZX 50 index +0.4%) as A2 Milk led the New Zealand share market higher as solid dairy demand and a reassurance of friendly trade relations with China helped lift the stock from a two-year low.
Meridian Energy reported 1st half 2021 operational statistics with implied operating earnings of $422m, $44m (-10%) lower than a record prior year. Performance was broadly in line with consensus, although depleted dam levels and low snow cap relative to last year will make it difficult for Meridian to achieve consensus expectations
Two more community COVID cases have been detected, on Auckland's North Shore, both of which were in MIQ together with the Northland community case. Government officials noted that there is still no evidence of community transmission.
3 Things Markets will be Watching this Week
- The week ahead is dominated by the busiest week of earnings in the US with 122 S&P 500 companies reporting including: Apple, Microsoft, Tesla, Facebook, Visa, Samsung Electric, J&J, Mastercard, Chevron, McDonald’s and Caterpillar.
- Also in the US, we have the US Fed interest rate decision and release of quarterly GDP figures.
- In Australia, ResMed releases earnings and quarterly production reports are due from Fortescue, Oil Search, Oz Minerals, Origin Energy, Newcrest Mining and Evolution Mining.
Team