Global markets were lower overnight, US Markets (S&P 500 Index, -0.1%) edging lower, in a volatile session, which saw the market close its losses in the final hour of trade, and the S&P500 on the edge of entering into a bear market (being down -20% from its peak).
Blue-chip names were generally lower Apple slipped -2.7% which is now down -22% from its peak, while many heavily beaten down tech stocks experienced a strong rebound the likes of Roblox (+19%), Upstart (+17%), Peloton (+10.4%), Palantir (+9.4%) attracting strong buyers as they trade at record lows. The recovery in smaller tech names was enough to for the NASDAQ to end the session flat despite losses for its heavy weigh constituents Apple, Microsoft, Google, and Tesla.
European markets (Stoxx 600 index, -0.6%) were down with most sectors trading lower as investors digested the hot US inflation data, with material stocks leading losses on the back of falling commodity prices.
Xero (XRO:ASX)
Xero share slumped -11.6%, down to its lowest level since March 2020and nearing pandemic sell-off lows, after delivering 2022 full year result. Revenue for the year rose +29% from last year to $1.1 billion on the back of a +19% increase in total subscribers to 3.3 and a +7% increase in average revenue per user. The company continues to invest into growth driving higher R&D and sales and marketing spend which resulting in a net loss of $9.1m which didn’t bode well with investors, as well as softer than expected subscriber growth.
While growth was slower than market had anticipated we are still encouraged by Xero still achieving double-digit growth and its large total addressable market and for that reason we are still BUY rated with a high-risk caveat given the volatility surrounding technology shares. We believe this is an opportune time to add a small position at current levels for a medium-term view but be wary of further near-term downside risk in a highly volatile market.
Australia & New Zealand Market Movers
The Australian market was down (ASX200 index, +0.2%) on Thursday, the US hot inflation print inducing a market wide sell off.
All sectors traded lower, with tech stocks tanking Australia’s largest tech stock Block (who acquired after pay) was down -17.6% as crypto currencies crashed, given their large stockpile of bitcoin.
CBA rose +0.6% after reporting a $2.4 billion profit for the third quarter coming in ahead of expectations.
CSL slipped -0.8% after it pushed the timeline for its takeover of Vifor Pharma saying it “now expects the regulatory approval process to take a few more months”.
The New Zealand market (NZX 50 index, -0.5%) was down yesterday following another global sell-off, in a day full of broad-based selling.
EBOS rose +2%, after note suggesting there is a possibility it could enter the MSCI replacing Ryman Healthcare which rose +6.1% – reporting the latest gain of the day, experiencing heavy swings day to day recently.
NZ King Salmon had the biggest decline again down -12.5%, while Air NZ slipped -2.7% giving back its previous day gains.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- Inflation data from US and China (CPI and PPI)
- Locally, earnings from Westpac, Xero, Pushpay and trading update from CBA