Global markets were mostly higher overnight (S&P 500 index +0.15%) with the US market eking out a small gain to hit a fresh record high.
The Federal Reserve released minutes from its most recent meeting that reinforced the U.S. central bank’s position to remain patient before raising rates, expecting it to take some time for the economy to meet its employment and inflation goals. JP Morgan's CEO projected strong growth for the US economy into 2023 with help from Biden's $2.25 trillion infrastructure bill.
To foot the bill, a proposed rise in US corporate tax rate from 21% to 28%, and a proposed 15% minimum tax would be imposed on both foreign and domestic earnings, boosting tax paid by removing the incentive for companies to shift investments overseas. However, the plan has been softened from the one Biden campaigned on earlier, with the minimum tax only applying for companies with income exceeding $2b (previously $100m) and some tax credits would also apply, meaning that just 45 companies would be liable for the tax – “the most aggressive tax avoiders”, according to the US Treasury. It is early days and the final tax law could be watered down further – with markets brushing off the news so far.
Kathmandu (KMD:NZX)
While not an obvious winner, Kathmandu (KMD) shares were higher following the trans tasman bubble announcement.
KMD was one of the few listed retailers that didn't fully capitalise from last year's retail spending boost and experienced mixed results across its now diversified range, particularly for its travel related products and Kathmandu winter range which were depressed. With the bubble coming 2 months earlier than most anticipated it could help elevate winter product lines, particularly with Aussies traveling towards NZ for the ski season.
We are HOLD rated on Kathmandu and remain on the fence. Members should keep an eye on the weekly for a detailed report on KMD.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.6%) edging closer to the record high achieved on the eve of the pandemic February 2020. The market was led by the energy sector, helped by a rise in oil prices, closely followed by the real estate sector.
Qantas shares continued to rise up +2.7% following up on Tuesday announcement of the trans-tasman travel bubble, while another beneficiary Sydney Airport, saw a more muted +0.2% gain on its second day. The technology sector also continued its recently recovery up +1%, returning back to its highest point since February as pressure from rising yields starts to ease.
The New Zealand market rose on Tuesday (NZX 50 Index +0.7%) buoyed by news that the International Monetary Fund lifted its forecasts for global growth now forecasting a 6% expansion in 2021, which would be the fastest rate in decades.
Local exporters performed strongly led by Fisher and Paykel healthcare (+3.5%), along with A2 milk (+2.4%) and Pushpay (+3.5%).
Renewable electricity generators Meridian Energy (+2.3%) and Contact Energy (+2.2%) rose as investors questioned how much of an impact the sell-down will affect them and try to establish a fair valuation.
The Global Dairy Auction overnight saw a repeat of the high price for whole milk powder, which saw Fonterra Shareholders’ Fund drop -4.4% as the strong auction indicates demand for the product but also raises the input cost for the co-operative – benefiting farmers.
3 Things Markets will be Watching this Week
- The pandemic will remain in focus, but theme of US strength vs Europe looks set to continue, with further restrictions being placed on the AstraZeneca vaccine in Europe after reports of adverse side effects. As with the US, the UK is showing good signs, as it has vaccinated 47% of the population and will begin easing restrictions.
- The US Federal Reserve releases minutes from its latest meeting.
- Locally, we have the latest RBA cash rate call along with metrics for the 1st quarter from Summerset Group along with AGM’s from Scentre Group and NZX.
Team
