US markets (S&P 500 Index –4.3%) experienced their worst day since June 2020 as US inflation subsided less than expected (data showed an annual inflation rate of 8.3% versus 8.1% expected). As such, investors are bracing for the US Federal Reserve to ramp up its rhetoric about taming inflation. Bets are rising that next week’s rate hike will be 75-basis-points or greater, with the market now pricing in +84bps at 21st Sept Fed meeting.
The sell-off in US equities was broad-based with nowhere to hide, with all major sectors in the red, led by Communication Services (-5.6%), Technology (-5.4%), and Consumer Discretionary (-5.2%).
Closer to home, there was a similar theme with the NZ food price index +8.3% for August, released yesterday, along with REINZ housing data that was as bad as expected. NZ current 2nd quarter GDP figures are due tomorrow.
European markets (Stoxx 600 Index, -1.5%) swung from an early peak of +0.5% to close lower on the day after the release of the US inflation data. Retail stocks (-3.2%) and technology (-3.2%) stocks led losses as most sectors and major bourses slid into the red.
James Hardie (JHX: ASX)
JHX (+1.7%) rose on Tuesday, bringing its 5-day total to +7.0%. Contributing to the attention that JHX is receiving is the 2-day investor event the company held at the beginning of this week. During which, Hardies’s new CEO Aaron Erter (appointed on September 2) reiterated the company’s new strategy of driving demand by direct marketing to consumers.
The company’s forward guidance was also reaffirmed during the event. The strong backlog in new home construction in the US has given the company the confidence to provide 2023 full year sale guidance of +16-20% growth from its 2022 result.
FY23E guidance is for an adjusted net profit of US$730-780m, North America sales growth of 18%+, and an EBIT margin of 28-32%.
We believe JHX should be able to deliver and outperform during normal conditions and history shows it has done well to recover after the GFC and we maintain our High Risk Buy recommendation.
Australian & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.7%) rose in a broad advance with 9 of the 11 sectors positive on Tuesday.
Link Administration (-20.1%) resumed trading after a 24-hour halt and cratered as investors lost faith that a $2.5 billion buyout will eventuate.
Australian shares are poised to tumble on Wednesday, with the ASX 200 futures down 2.3%, following the developments in the US.
The New Zealand market (NZX 50 Index, -0.4%) fell 50 points to 11,762.15.
NZX Property stocks felt the most pain on Tuesday. Goodman Property (-0.5%), Kiwi Property Group (-1.0%), and Precinct Properties (-1.1%) were all affected by the Housing data from REINZ which showed an -18.3% fall in the volume of house sales.
What Markets will be watching this week
Monday
/
Tuesday
US CPI (Inflation) Data for August, James Hardie investor Day, NZ August housing data from REINZ
Wednesday
US PPI (Producer Inflation), Data, UK CPI and PPI data
Thursday
US retail sales data, Australian employment figures and NZ 2nd Quarter GDP data
Friday
Eurozone CPI data.