Global markets were mixed overnight, as US market (S&P 500 index, down -0.2%) slipped despite strong earnings from big box retailers, primarily as inflation concerns linger.
Retail giant Target posted beats in terms of top line revenue and bottom line profit, however noted rising costs may have an impact on the company going forward as it plans to absorb those costs rather than pass them onto the customer – causing the stock to fall -4.7%. Home improvement giant Lowe’s saw its shares rise +0.4%, after the company not only topped estimates from the Street but also raised its full-year sales forecast. TJ Max shares jumped +5.8% after the apparel and home retailer reported a quarterly earnings beat on the top and bottom lines.
Visa shares slumped -4.7% after Amazon said it will stop accepting payments made with Visa credit cards issued in the UK starting next year, after Visa raised its interchange fees for transactions between the UK and European Union. Likewise, Mastercard, which has also increased its UK.-EU interchange fees fell -2.8%.
European Markets (Stoxx 600 index +0.3%) were higher as a wave of strong earnings outweighed worries that high natural gas prices were fueling inflation.
Contact Energy (CEN:NZX / CEN:ASX)
Contact Energy revealed another solid trading update for the month of October, with strong hydro generation being the key feature. Unfortunately, Contact shares, like its gentailers peers have been under pressure as interest rates continue to rise, which make their dividends less attractive and weighs on valuations.
We remain BUY rated on Contact energy as the most attractive gentailer on the NZX in our view, as it is transitioning to renewable being fully energy based and still providing an attractive dividend – especially over the medium-term. However, we believe Contact Energy’s shares price may face further downside pressure like it has done so recent from rising rates over the near-term, so would suggest keeping it on your watch list and “averaging in” to your position over the near-term.
Australia & New Zealand Market Movers
The Australian market was down on Wednesday (ASX 200 index -0.7%).
The ASX’s two largest sectors Financials and Materials, which make up half the market, dragged the market lower despite nine sectors ending the session in the green.
CBA slumped –8.1%, its largest fall since March 2020, after reporting margins had tightened during their September ending quarter due to record low interest rates in a similar fashion to Westpac earlier this month, which resulted in losses across its banking peer group ANZ (-2%), NAB (-1.1%), and Westpac (-1.7%).
Nufarm was hardest hit down -8.6% despite swinging back into a profit, as their CEO commented that they expect margins to be weaker due to higher costs.
Tech shares posted the largest gains helped by Afterpay rising +2.1%, while Wisetech was also up strongly gaining 3% on the day.
The New Zealand market was down on Wednesday (NZX 50 index -0.5%) with most stocks trading lower.
Plexure Group led losses falling -13% after reporting its net loss had risen to $8.5m in the six months ended September, up significantly from the previous period.
Interest rate sensitive stocks were also generally weaker again as the gentailer, property and retirement village sector stocks were mostly lower.
Investore Property had the day’s biggest gain, climbing 3.8% to $1.93, as analysts retained a positive view of the stock despite its recent earnings miss.
3 Things Markets will be Watching this Week
- Key events this week include CPI (Inflation) and employment data across the Eurozone and UK, and third quarter GDP in Europe.
- A raft of US housing market data is due along with retail sales and a data dump in China (retail sales, IP and fixed assets investment).
- Locally, CBA will release its first quarter result, AGM’s and Investor days held by Aristocrat, Incitec Pivot, Ryman Healthcare, Afterpay, Seek, a2Milk, BlueScope Steel, Goodman Group, Resmed, Wisetech and Next DC.