Global markets were mixed on Friday, as US Markets (S&P 500 Index -3.6%) went into free-fall on the back of a wave of weak results from some of the largest companies in the world. The S&P 500 is well into correction territory again being down -14% from its all-time high reached early January.
Global interest rates also moved higher following surprise US wage inflation data and European inflation data which spooked investors ahead of the Federal Reserve’s policy decision later this week. The market has now aggressively priced in a 50 basis point hike (which has been well telegraphed by the Fed recently), while now leaving the door open for 75 basis point hike in June meeting.
The US tech index NASDAQ’s sell off was worse, falling -4.5%, entering well into bear market territory down -23% from its all time high.
Amazon sunk about 14% — its biggest drop since 2006 — after the e-commerce giant reported a surprise loss and slowest revenue growth since 2001 and issued weak revenue guidance for the second quarter, citing consumers returning to normalised spending habits and “returning back to shops”. After a large hiring binge since the onset of the pandemic saw costs inflate as it struggled wage hikes and other cost inflation. Apple shares fell -3.7% after management said supply chain constraints could hinder fiscal third-quarter revenue, which overshadowed a strong result beat. Intel (-6.9%) and Chevron (-3.2%) both fell after issuing weak results and guidance for its fiscal second quarter.
While most companies are delivering fairly strong results, the larger and what had been more resilient companies are now feeling the pinch (or guiding) of macro-level issues from rising interest rates, weakening demand, supply chain issues and cost inflation with weaker guidance than the market had priced in (many companies priced to continue to deliver strong growth) across the board. This has triggered more volatility which we think will persist over the near-term until some of these headwinds start to settle down.
European markets (Stoxx 600 index, +0.7%) closed higher on a busy day of stronger earnings, with basic resources leading gains with most sectors ended in positive territory.
Australasia outperformed over the month, the NZX 50 fell -1.9% in April, the ASX 200 was down -1%, while the S&P 500 and Nasdaq fell -8.7% and -13% respectively.
De.mem (DEM:ASX)
Waste water treatment business De.mem reported a strong quarterly update, delivering its best March quarter performance with $5.14m in cash receipts, +49% above the same corresponding period last year. Growth momentum has been strong with 12 consecutive quarters of cash receipt growth, high margin recurring revenue segments continue to drive growth representing 78% of total cash receipts, up from 70% last year.
We remain BUY rated on De.mem
Australia & New Zealand Market Movers
The Australian market was up on Friday (ASX 200 index, +1.1%), helping the index claw back mid-week losses to end the week down just -0.5% with modest gains across the board with all sectors trading in the green for the last day of April.
The Tech sector was the best performer leading gains, thanks to a tech rally from Wall street from a session full of mostly strong earnings results.
Kogan.com slumped -13.9% after reporting its gross profit fell -11% in the first quarter. Ramsey Healthcare fell -0.5% after its profits halved in the first quarter citing supply chain issues impacting revenue.
The New Zealand market was a touch higher on Friday (NZX 50 index, +0.1%), to end a volatile week flat.
It was a mixed board across the market, with Pushpay leading gains up +5.6%, prompted by a strong lead from Wall street, which gave investors confidence across other growth stocks. Fisher and Paykel Healthcare finally found some support as it rose +0.7%.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated with the Russia/Ukraine conflict.
- Central bank interest rate decision from RBA and the Fed, and employment data in New Zealand
- US earnings continues, locally earnings seasons beings starting with the banks ANZ, Macquarie and NAB are all due to report this week