Global markets were lower overnight, with US Markets (S&P 500 Index -1.6%) ending the March quarter down -4.9%, marking the fist quarterly loss since the first quarter of 2020.
Overnight it was sea of red with all sectors trading lower, with financials leading losses, as markets remain concerned over inflation induced slowdown in economic activity. Semiconductor and tech hardware stocks came under pressure as analysts were concerned over the PC market going forward, AMD (-8.3%), HP Inc (-6.5%) and Dell (-7.6%), while Nvidia fared better down only -1.5%.
The price of oil fell -5.9% after the US said it is considering releasing up to 180 million barrels from its oil reserves – the largest pull in almost 50 years to curb oil prices.
European markets (Stoxx 600 index -0.8%) were lower overnight night weighed down by weaker oil prices, with the index down -6.3%.
Closer to home, based on OneRoof-Valocity House Value Index houses prices in Auckland have reported its first quarterly decline in two years over the March quarter. While a tiny -0.1% decline, 58 of the 276 suburbs fell in value with some reporting double digit falls. Mt Roskill fell the most down -11.6%. This is starting to look like the beginning of a correction – especially with the market recently propped up by record cheap debt which is set to change as mortgage rates rise from record lows and tighter lending conditions hamper demand. Local equity markets appear to be pricing in upcoming weakness with many property facing companies trading much lower over the last 6-months, ushc as Ryman:.
Ryman Healthcare (RYM:NZX)
Ryman Healthcare has had a rough 7-month period, wiping away 4-year of gains. Despite the retirement sector experiencing strong demand, it is sensitive to residential house prices which had been spooked since the first talks of rate hikes from in the OCR in August 2021. Affecting Ryman more than its retirement peers is that it did trade at a much larger premium to its peers at 2.5-3x its net tangible asset, and a cooling property market will put pressure on margins.
We still like the sector as a whole and prefer Summerset and Oceania as our sector picks, holding up much better than Ryman, and with less debt better growth potential.
Australia & New Zealand Market Movers
The Australian market edged lower yesterday (ASX200 index -0.1%), with the index ending the quarter up +0.7% holding up much better than global peers over an extremely volatile quarter, helped by material financials and energy stocks offset losses across the remainder of the market.
A weak lead from Wall street saw technology stocks lead the market lower, with most sectors trading lower as peace talks in Ukraine failed to progress, while materials and communication stocks traded higher.
Battery miners got an extra boost on reports President Joe Biden was discussing adding commodities such as lithium, nickel and cobalt.
The New Zealand market edged higher on Thursday (NZX 50 index +0.1%), ending the first quarter down -7.9%, with Fisher and Paykel’s recent sell off preventing a march recovery like other indices.
Air NZ was the most volatile stock after announcing its $2.2 billion recapitalisation, ending the day down -6.2% as some investors were attracted to the rights offer at cheap shares at $0.53 each.
Auckland International Airport rose +1.7% benefiting from Air NZ’s relatively upbeat outlook and expectation of a return to pre covid travel levels by 2025. Tourism holdings did not get the same treatment down -3% after the Australian competition regulators delayed their decision on the upcoming Apollo acquisition – taking a similar stance to the NZ Commerce Commission.
Fisher and Paykel Healthcare fell -1.9% weighing down on the market while many other blue chip names were up to finish the quarter.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include US Non-Farm Payroll employment data and China PMI report
- Locally, Australia will release their fiscal budget, and Synliat Milk reports its result.
