Global markets were lower overnight, with US markets (S&P 500 index -0.9%) slipping lower as consumer spending sparked recession concerns, capping off the S&P500’s worst half year performance since 1970, with the US index down -21%.
US personal spending data was lower than expected, experiencing the first monthly decline in real terms this year. The weaker momentum suggests a lower contribution to second-quarter GDP from private consumption, leading economists to revise their estimates lower.
Selling was broad-based once again, with energy, consumer discretionary and tech the major laggards, while utilities posted modest gains due to their more defensive nature during a recession.
European Markets (Stoxx 600 index -0.7%) closed lower as recession risk weighed on the market, with most sectors trading lower except for Healthcare.
Kiwi Property Group (KPG:NZX)
Kiwi Property Group held their AGM earlier this week providing no new news but highlighting they were well placed amid the upcoming economic uncertainty.
KPG have a manageable level of debt, and asset divestment will help partially fund their growth initiatives, namely expanding their mixed-used properties and build-to-rent residential apartments.
We remain Buy rated on KPG as we think the shares have priced in upcoming rate hikes and the stock offers an attractive dividend (considering the new higher-interest rate environment). Investors should also be selective and take advantage of any upcoming volatility over the remainder of the year.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index -2.0%), as the June sell-off resumed, sending the index down -13.5% for the year so far, with the index reporting its third negative Australian financial year in a decade.
All sectors closed in the red, with utilities, materials, real estate, energy, and financials all recording losses above -2%. Healthcare stocks fared much better, down only -0.2%.
The New Zealand market (NZX 50 Index -0.8%) was down on Thursday, ending the first half of the year down -16% as business confidence continues to diminish.
ANZ’s business confidence survey revealed that 62.6% of respondents expect economic conditions to worsen over the next 12 months, versus a net 55.6% that were negative in May.
E-Road fell another -3.4% to be one of the worst-hit stocks of the year down -72%. The recent sell-off has been due to its CEO exiting the position.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- Highlights this week include GDP, ISM manufacturing data out of the US.
- Locally, retail sales in Australia are due along with earnings from Metcash and Collins Foods while AGM’s will be held by Kiwi Property, CSR and Arvida.