Global markets were higher overnight, with US Markets (S&P 500 Index, +1.1%) rising as investors took a more risk-on approach, despite bond yields rising another 6 basis points to 2.38% following the Fed’s hawkish comments on Monday. Goldman Sachs has come out and forecast a 0.5% interest rate hike at the next 2 Fed meetings.
Surprisingly, technology stocks were higher bouncing back overnight from their losses on Monday. Most of the mega cap tech names gained more than 2%, Tesla being the standout rising +7.9% after delivering tis first model Y cars made in Europe. Nike shares rose +2.2% after its result beat expectations both on the top and bottom line buoyed by strong demand and manufacturing issues and margin pressures were not as bad as feared. Alibaba rose +11% after lifting its share buyback programme to $25 billion.
All sectors traded positively except for Energy as oil prices slipped with reports that EU members can’t agree on a Russian oil embargo, with Germany and Hungary holding out on such an agreement.
European Markets edged higher (Stoxx 600, +0.9%) as banks stocks led gains on rising bond yields with most sectors trading in the green.
De.mem (DEM:ASX)
De.mem shares were up +2.4% yesterday, after announcing the strategic acquisition of Stevco, a supplier of pumps, small water treatment equipment and related operations and maintenance services to industrial and municipal clients in Victoria.
The consideration will be $1.25m in cash and $250,000 worth of Dem shares, and an additional $210,000 for the inventory. The acquisition allows De.mem to cement exposure in Victoria as they continue their Australia wide expansion and cross sell Stevco’s long-term customer base for other De.mem products such as waste water treatment equipment, services and chemicals. The acquisition is earnings accretive being well priced at 4.5x operating earnings (EBITDA).
We welcome the acquisition, as De.mem has done well with recent acquisitions so far and remain BUY rated.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX200 index, -0.9%).
Energy and materials stocks lifted the market as brent crude consolidated above US$110/barrel on reports European importers could impose full on bans on Russian oil. The major iron miners did most of the heavy lifting, with BHP up +5.1%, Rio Tinto lifting +3% and Minerals Resources rising +4.9%.
Rising bond yields around the globe saw tech shares lead losses, with real estate sector also performing softer.
Ramsay Healthcare rose +1.3% after it confirmed speculation that is had received a takeover proposal from IHH Healthcare Berhad. Macquarie rose +1.3% after getting a broker upgrade stating it could benefit from increased commodity trading from recent global market volatility.
The New Zealand market was up on Tuesday (NZX 50 index, up +0.2%) on another mixed day as NZ bond yields rise to a 6-year high.
The Warehouse rose +4.4% after its reported first half profit fell -8.2% due to supply chain issues which were better than feared.
Tower slipped -1.4% after completing its share buy back and announcing its 2022 net profit after tax guidance remains unchanged between $21m to $25m, that the estimated costs of the Tonga eruptions and Tsunami to be $7.6m and NZ cyclone Dovi at $3.6m – comfortably within their threshold.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include CPI inflation data in the UK.
- Locally, earnings from Kathmandu and The Warehouse, Z Energy holding its Scheme meeting to vote on Ampol’s takeover offer.