BoE restores order| Apple curbs enthusiasm 

29 September 2022

US markets (S&P 500 Index +2.0%) mounted a broad-based comeback on Wednesday, recovering from their 2022 low. 

Biogen (39.9%) shares soared following upbeat trial results of its new Alzheimer’s drug which is now projected to be a ‘blockbuster’. Home Depot (+5.0%), Boeing (+4.7%), and Walt Disney (+3.7%) were also stand out performers on the day. 

European markets (Stoxx 600 Index, +0.3%) closed slightly higher after recovering early ~2.0% losses.  

The big news for the day was the Bank of England announcing it will begin temporary purchases of long-dated UK government bonds in order to “restore orderly market conditions,” at “whatever scale necessary”. In response, yields on UK 30-year and 10-year dropped sharply, and the British pound (+1.6%) strengthened. 

Apple (AAPL: NASDAQ) 

Apple (-2.1%) was the only US30 stock in the red on Wednesday after it announced that it will be pulling back production of its new base model iPhone 14 in response to lower-than-expected demand. 

The base model is typically Apples most popular version, but prospective buyers may be opting for the discounted iPhone 13s, as consumer’s discretionary spending tightens. 

Amongst the Mega-Cap stocks, Apple is our preferred pick, and we remain BUY rated. The major strength of the business is how it uses its hardware to pull customers into the ecosystem purchasing complementary hardware products/accessories and then subscription-based services. APPL trades on ~26x earnings multiple which is still ‘reasonable’ and fairly justified – as opposed to other high growth tech stocks which are trading at much more lofty valuation metrics. 

Australian & New Zealand Market Movers 

The Australian market (ASX 200 Index, -0.5%) reversed early gains and closed lower on Wednesday. The Technology (-1.6%) sector performed the worst as Australia’s 10-year bond (-0.2%) yield rose above 4.0% during the trading session (before settling lower after the market closed). 

The Australian dollar (+1.4%) recovered some ground against the US dollar and now trades at $0.6519. 

The New Zealand market (NZX 50 Index, -0.9%) was dragged lower by real estate stocks. Argosy Property (-1.3%), Goodman Property (-3.2%), and Kiwi Property Group (-3.8%) all experienced significant sell-offs. 

The Warehouse Group (-6.1%) fell on Wednesday after its annual results revealed profit had dropped 18% to $89.3m due to a squeeze on its margins. Total revenue came in at $3.29 billion, down by only 3.5% compared to the previous period, and the second highest sales for the group. 

Scales Corp (+4.9%) turned around on Wednesday after dropping -6.8% on Tuesday. The only stock that finished higher on the day was Me Today (+6.7%). 

The New Zealand dollar (+1.6%) tracked higher in line with other G10 pairs.  

What Markets will be Watching this Week (UTC –4) 
 
Monday 

Germany Ifo Business Climate (SEP) 

 
Tuesday 
US Durable Goods Orders MoM (AUG) 

US New Home Sales (AUG) 
 
Wednesday 
Germany Consumer Confidence 

NZ Business Confidence (SEP) 
 
Thursday 
Germany Inflation YoY (SEP) 

China Caixin Manufacturing PMI (SEP) 

 
Friday 
Japan Consumer confidence (SEP) 

Euro Area Inflation Rate YoY Flash (SEP) 

US markets (S&P 500 Index +2.0%) mounted a broad-based comeback on Wednesday, recovering from their 2022 low. Biogen (39.9%) shares soared following upbeat trial results of its new Alzheimer’s drug which is now projected to be a ‘blockbuster’. Home Depot (+5.0%), Boeing (+4.7%), and Walt Disney (+3.7%) were also stand out performers on the day. 

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