New Zealand
The New Zealand market (NZX50, -0.4%) was down yesterday after a strong finish to first quarter.
Locally markets will be waiting for RBNZ’s OCR decision tomorrow, which is expected to be another hike, the question is 25 or 50 points. The RBNZ’s goal is to reduce inflation at all costs and our feeling is they won’t stop hiking until they see some solid data indicating a move back to 2-3% inflation, in spite of mortgage holders starting to feel the pinch.
Centrix reports that NZ mortgages in arrears rose for the seventh consecutive month, up 23% year on year in February to 18,900, taking the proportion in arrears to a three-year high of 1.29%. The data adds to the picture of gloom in the housing market, after hefty falls in house prices and rock-bottom activity levels. We note recent data that indicates private property syndicates are sitting at 8-9% cap rates –– the whole sector is starting to feel a little “toppy” to us and our preference remains solid commercial “keystone” property — residential has more room to fall.
Australia
The Australian market (ASX200, +0.6%) rose on Monday, marking its 6th straight daily gain, with all sectors trading higher except for materials. Energy performed strongly on the back of oil prices jumping on production costs by OPEC+, while real estate and tech names rallied as investors risk appetite improved.
The RBA on the other hand is expected to hold its base rate flat today, as they viewed they have hiked enough, and will be in “wait and see” mode with how it pans out.
Beauty giant L’Oreal announced its acquisition of Australian skincare brand Aesop for $US2.525 billion — the acquisition is the biggest of its kind and indicates that the skincare market is still white-hot in spite of tightening wallets (Estee Lauder – buy – purchased Tom Ford for about $2.8B earlier in the year).
US
The S&P was up +0.37% on a day where the main news flow was i) small job cuts at McDonald’s and Amazon – in a continual sign of corporates cutting down on Pandemic-fueled hiring. We were amused to see that Google owner Alphabet is clamping down on the use of staplers (we’re not making this up) – every little bit counts these days. UFC owner Endeavour Group announced a merger with WWE in a deal that will value the combined group at +$21B. Currently Endeavour is valued at +$10B and WWE at +$6.65B so there’s a +$5B premium implied, which would theoretically value the combined entity at a hefty 41x earnings. The stock of both companies was down on the news – we struggle to see such a lofty valuation for the company in this market. No view, but we’re not buyers at this point.