New Zealand Market Movers
The New Zealand market (NZX 50 Index, -0.6%) retreated at the end of the month, but still posted its best monthly performance since August 2021, up +4.31% since opening January 4.
Serko (-2.31%) was one of the months best performers, finishing up +14.4%, although plummeted at the end of the trading day Tuesday. The monthly performance is down to expectation that the company will surpass its pre-covid level of travel booking transactions in the 2023 financial year.
Savor Group (-8.3%) fell following the announcement that it’s engaging in a capital raise of $3.25m by issuing new shares to repay some of its debt to negate a rise in borrowing costs. Savor is offering five new shares for every 44 existing shares held by shareholders on Feb 10.
Some interesting data out of credit agency Centrix – more than 410,000 New Zealanders were behind in their payments in December and arrears were up across the board in the wake of higher interest rates. That’s a 10% increase YoY, which suggests that the cost of living is indeed getting harder for many Kiwis as the RBNZ continues to hike interest rates.
Australia Market Movers
The Australian market (ASX 200 Index, -0.07%) ended Tuesday flat, booking an impressive +6.2% monthly gain.
Consumer Staples lead sectorial gains, with Woolworths (+3.8%) the sectors best performer.
The Australian Bureau of Statistics released December’s retail sales which showed an unexpected decline of -3.9% from November’s figure, in a sure sign that Reserve Bank rate hikes are reducing consumer consumption. Forecasts were way off base, pointing to a -0.3% decline.
Elsewhere, Commonwealth Bank (+0.3%) hit a record high of $110.45 per share in intraday trading before retreating slightly.
Europe Market Movers
European markets (Stoxx 600 Index, -0.3%) declined on Tuesday, but gained +6.7% over the month.
Preliminary data showed that the Eurozone grew +0.1% in the fourth quarter of 2022, defying expectations for a -0.1% decline. However, the area’s largest economy, Germany, registered a 0.2% decline in the fourth quarter. Whilst in the context of ex-Eurozone growth +0.1% seems like very little, in the context of a very tight European labour market where growth rates tend to be low generally, it should give the ECB pause – flat growth is not the disaster that everyone was predicting for Europe 6-12 months ago. It suggests the ECB will need to do more to curb inflation.
UMG said it was in talks with major streamers like Spotify to remake the music streaming model, offering “superfan” tiers and cracking down on bots; UMG holds the dominant position in the music business, with a ~30% market share, and this move is likely aimed at eeking out higher revenues from the streamers, who are largely at the big three’s mercy (UMG, Sony, and WMG).
US Market Movers
US markets (S&P 500 Index +1.5%) capped off a strong month on Tuesday, posting its best January since 2019.
General Motors (+8.4%) jumped after reporting strong earnings – the company posted $2B in operating earnings for the quarter, rebounding from losses as supply chain issues ease. For ‘23 the company expects earnings of $6-7 per share, above analyst consensus of +$5.78. The risk here is the price war that Tesla (+3.9%) is engaging in; GM CEO Mary Barra said the company was not interested in engaging in a price war, but as they say – it only takes one to start a war. We remain neutral on GM given slowing used-car sales data which tends to act as a good analogue to new-car sales.
McDonald’s (-1.3%) (buy) beat on expectations – comp. sales grew 12.6%, whilst US sales grew 10.3%. In spite of the strong US dollar the company reported better earnings than ‘21 – $2.59 per share vs. $2.18 in ‘21. We think investors ought to be clear eyed about the risks: management said “The environment is going to continue to be challenging, I think, from a macro standpoint. And so do you reach a point where maybe it does start to materialise around the consumer?”
As we wrote in yesterday’s email, the question here is around pricing elasticity – for McDonald’s it is holding up pretty well, with growth continuing in spite of price hikes from the chain. We ask the same question as management – when do we see this materialisation?
What Markets will be Watching this Week (UTC +13)
Monday
NZ Auckland Anniversary
Tuesday
AU Retail Sales MoM
Wednesday
NZ Unemployment Rate
EU Inflation Rate YoY
US Mcdonald’s Earnings
Thursday
US JOLTS Job Openings
US Federal Reserve Interest Rate Decision
US Meta Platforms Earnings
Friday
UK Bank of England Interest Rate Decision
EU European Central Bank Interest Rate Decision
US Apple Earnings
US Alphabet Earnings
US Amazon.com Earnings
US Starbucks Earnings
US Estee Lauder Earnings
Saturday
US Non Farm Payrolls