Bank of England’s Hawkish Tone | Fonterra Result

27 September 2021

Global markets were mostly in the green overnight US market (S&P 500 index, +1.2%), recovering from the early week sell-off, placing the market back in positive territory for the week (so far) – as fears around a crisis in China’s property market eased somewhat and as the Federal Reserve kept current monetary stimulus in place for a little bit longer. reigniting investor confidence.

Most sectors were up, led by energy and financials which were boosted by US 10-year Treasury yields rising to 1.39% following hawkish comments from central banks. Both teh US Fed, and Bank of England indicated they could open the door to a rate hike before the end of the year.

European Markets were up overnight (Stoxx 600 index, +0.9%) although the UK market was a touch lower following Bank of England’s hawkish commentary. The BoE said that recent developments, principally on the inflation side, had “strengthened the case” for the “modest tightening” projected at its August meeting, although uncertainty remained high.

Fonterra (FSF:NZX / FSF:ASX)

Fonterra shares jumped +5.3% yesterday leading the NZ market, following a strong result for the 2021 financial year.

Normalised earnings per share came in at $0.34 per share (the top end of 25 to 35 cent per share guidance), which allowed the co-operative to pay a 20 cent per share full year dividend. The result was helped by years of resetting and simplifying the business, as well as growing global demand for dairy coupled with constrained supply that has resulted in a higher farmgate price for the group.

Fonterra also added plans to divest assets – selling its Chilean Assets, and downsizing its Australian business to focus its business operations in New Zealand. Shrinking the capital base and return these to shareholders and to cap the fund as part of a new capital structure. 

While a solid result we continue to be HOLD rated to due the uncertainty of the new capital structure and likelihood of its to be more in favour of the farmers as opposed to non-farmer shareholders.

Australia & New Zealand Market Movers

The Australian market was up yesterday (ASX 200 index +1.0%), following the Fed’s more hawkish tone and stability in the market returning following better-than -expected outcome from Evergrande liquidity issue. All sectors, were up with tech and energy shares leading the market, the latter benefiting from a 2% jump in crude oil prices.

Renewed hopes that Australia will reopen boarder by Christmas saw travel stocks perform well, while  iron ore prices rebounded back up to US$108/tonne, news which was well received by the beaten down mining stocks. 

Zip rose +4.3% after announcing it would enter the India market by acquiring a minority stake in buy now pay later company ZestMoney.

The New Zealand market was up on Thursday (NZX 50 index +0.7%) following a strong lead from global stocks. 

A2 Milk (+3.2%) and Synlait (+2.7%) were up following Fonterra’s suit after their boss Miles Hurrell said strong milk prices were likely to continue. 

Cancer diagnostics firm Pacific Edge was put in a trading halt while it completed a placement of $60m to institutional investors.

3 Things Markets will be Watching this Week

  1. The ​key global events this week will be the US Fed meeting on Wednesday. 
  2. ​RBNZ Assistant Governor Hawkesby’s speech as the market considers whether there will be a 0.25% or 0.5% hike at the October 6 RBNZ meeting
  3. Kathmandu’s annual result, AGM’S held by AGL Energy, Mercury and Stride Property and COVID and lockdown updates both sides of the Tasman. 
Global markets were mostly in the green overnight US market (S&P 500 index, +1.2%), recovering from the early week sell-off, placing the market back in positive territory for the week (so far) - as fears around a crisis in China’s property market eased so

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