Pavan Sharma

US markets (S&P 500 Index +1.2%) advanced on Monday, as it recovers from one of its worst weeks since September. 

We anticipate loan growth to slow making for challenging market conditions which is partly priced in and balance sheet adequate to handle a moderate pull-back in the house prices from here, a real risk is a major housing crisis which is now a slim but foreseeable risk to consider given rapid rate rises by central banks on both sides of the Tasman.

Many internationally important events will occur this week, including the interest rate decisions the US Federal Reserve, The Bank of England, and the European Central Bank. Locally, we have Food Inflation data on Tuesday and NZ GDP Growth Rate on Thursday. 

Just like BHP, Rio Tinto shares have rebounded recently, partly on hopes of China eventually reopening and as Chinese authorities provided stimulus to the property sector to boost construction activity, supporting iron ore pricing. Commodity prices have held up well due to supply and demand dynamics, but also as an inflation hedge. With the latter likely to ease, we believe added pressure from a slowing in economic activity means we are nearing the end of the current commodity cycle boom.

The New Zealand market (NZX 50 Index, +0.1%) barely eked out a gain on Thursday. The story of the day was Fonterra hiking its earning guidance to $0.50 to $0.70 per share, up from previous guidance of $0.45 to $0.60 per share. In response, Fonterra Shareholders’ Fund Units (+4.7%) rallied.

Kiwi Property Group shares slipped after delivering their 2023 half year result. KPG reported net loss came in at -$151.1m, due to incurring a non-cash revaluation loss of its portfolio of $213.3m, which was flagged earlier reflecting higher interest rate environment softening cap rates on investment properties. Net tangible asset fell from $1.45 down to $1.31, with KPG trading at a large discount to account for further weakening over the near-term which appears likely.

Fisher & Paykel Healthcare shares are up +16% a week after it reported revenue of $690.6m for the six months ended 30 September 2022, above the $670m forecast by the company in August. Revenue was down -23% from the previous corresponding period, but up by +21% on the comparable pre-pandemic period.  

The New Zealand market (NZX 50 Index, -0.2%) inched down on Wednesday despite gains made by the big energy generators, including Meridian Energy (+2.0%), Genesis Energy (+0.8%), Manawa Energy (+0.6%), and Mercury NZ (+0.4%).