Global markets continued to fall overnight, with US Markets (S&P 500 Index -1.8%), closing at their lowest level of 2022, and down almost 12% from its January 3rd high slipping deeper into correction territory. The market remains on edge after Russia’s military excursion into Eastern Ukraine but there have been few fresh developments overnight. Ukraine are reporting cyber-attacks on its Government and Banking websites from Russia.
All sectors were in the red, except for Energy (the current benefactor to the threat of war, and sanctions onto Russia, as well as acting as an inflation hedge), while consumer discretionary and tech stock led losses. Retailers were hit hard as consumer confidence and spending is expected to be weaker in a high inflationary environment, as well as cost inflation hitting margins of many retailers large and small.
European Markets ending the session lower (Stoxx 600 index -0.3%), weighed down by heightened geopolitical risks.
Closer to home, the RBNZ announced a 0.25% hike in the OCR to 1.00%, which was mostly expected by the market but some did contemplate a 0.5% hike. The RBNZ stated that it will look to target an OCR rate of 3.25% by the end of 2024 (ahead of its peak guidance of 2.5% in November) and would move in 0.5% increments if needed. The implications include the RBNZ forecasting housing prices could fall -9% from the end of 2021 to mid-2024.
WiseTech Global (WTC:ASX)
WiseTech Global shares were up +4.4% after the logistics software company released a sound half year result, achieving a +18% increase in revenue to $281m and a 77% jump in underlying net profit after tax to $77.3m. More encouraging was that strong performance has led to management upgrading its 2022 full year earnings (EBITDA) guidance $275m to $294m.
We remain BUY (High-Risk) rated on WiseTech Global as a solid growth tech stock, which is also to benefit from when global supply chain issues subside.
Spark (SPK:NZX)
Spark shares rose +1.2%, after delivering a strong result for the first half of 2022 financial year,. Revenue and earnings growth was driven by improved mobile performance, and cost cutting initiatives, while partially offset by weaker broadband revenue. Spark lifted its earnings (EBITDAI) guidance for the full year to the top end of $1.13 billion to $1.16 billion, and will explore the introduction of third-party capital into TowerCo, a separate entity – the book value of the assets around $100m.
We remain BUY rated on Spark, due to its attractive dividend yield, with hopes of marginal growth from 2024 onwards, well-funded by its growing free cash flow.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index +0.6%), as a wave of strong earnings outweighed Russia-Ukraine nervousness. Investors traded with a risk on appetite, with tech stock leading gains, as buy now pay later stocks leading a strong rebound from its recent sell-off, while only the defensive utilities and real estate sector was the only sector in the red.
Woolworths shares were up +1.4%, after revealing a mixed result which ended up ahead of expectations, which included higher sales, but lower earnings due to supply chain issues.
Dominos Pizza slumped -14%, after reporting slowing revenue growth and challenges with rising consuming prices which raised the cost of ingredients.
The New Zealand market was up on Wednesday (NZX 50 index +0.2%) shrugging off global sell off and a hawkish tone from the RBNZ regarding their medium-term outlook for the OCR, with investors appearing more comfortable being given some sort of certainty.
Sky TV led the market rising +9.8%, as market anticipates a strong result from them today. While Air NZ (+2.5%) and Auckland International Airport (+2.3%) were also trading higher heading into their result today – with investors hoping for encouraging outlooks.
Precinct Property rose +4% on its earnings beat, confirming its full year dividend guidance, as well as partnership deal with to sell majority stake in 5 of its properties (worth ~$590m) to allow capital to fund further developments and acquisitions.
Meridian Energy fell -5% after its reported flat earnings for the month, due to providing low energy pricing to Tiwai Point aluminium smelter.
3 Things Markets will be Watching this Week
- Geopolitical Risks – Russia/Ukraine
- US housing data, and CPI (inflation) data from Eurozone. The RBNZ makes an interest rate decision.
- Local earnings with its busiest week, A2 Milk, Costa, Heartland Bank, Woolworths, Rio Tinto, Wisetech, Air NZ, Scales Corp, Summerset, Qantas, Delegat, Harvey Norman and Tourism Holdings reporting.