Global markets were mostly higher overnight (S&P 500 index +1.0%) as US equities mounted a comeback from their worst loss since October amid moves to limit the speculation that had spurred volatility in certain stocks.
A disappointing earnings outlook hurt shares of Apple, which fell -0.6% despite a strong 1st quarter result, which saw quarterly profit top US$100bn for the first time as strong sales in the new iPhone exceeded expectations.
Bloomberg reported rumours swirling among traders of heavy losses at multiple hedge funds, following the short-selling squeeze induced by retail investors – who have been using public forums to band together and target a handful of small cap stocks. The update overnight has been online trading platforms like Robinhood and Interactive Brokers putting on trading restrictions to reduce speculative activity. Meanwhile the SEC is actively monitoring the situation, with GameStop (-44%) and AMC Entertainment (-56%) selling off sharply overnight.
CSL (CSL:ASX)
CSL has pulled back recently as investors move more into value names such as the Aussie banks and out of healthcare stocks such as CSL. We think this an opportunity to BUY into a top-quality global healthcare business.
In our view CSL might be able to provide an impressive 1st half 2021 result on the 4th of February, and there will be an inevitable recovery of plasma collections as vaccines are rolled out globally.
Australia & New Zealand Market Movers
The Australian market sunk on Thursday (ASX 200 index -1.9%) as the force of Reddit's traders was felt on the ASX when popular hedge fund short targets were covered, causing outsized gains, while the rest of the benchmark joined a global sell-off led by technology stocks.
Short-seller favourite InvoCare rallied 5.7% as did Treasury Wine Estates, up 5.9%. InvoCare, the funeral operator, was challenged by COVID-19, which restricted participation in funerals, and Treasury Wine has suffered at the hands of tariffs imposed by China on Australian wine.
National Australia Bank says businesses are becoming less reliant on JobKeeper, but uncertain and sporadic border closures will hinder the recovery for some industries.
There was a strong trading update from Bubs yesterday, now the fastest growing IMF brand in Australia. CEO noted sales are improving across all channels after COVID disruption. However, Daigou remains a drag.
The New Zealand market fell sharply yesterday (NZX 50 index -2.2%) as the local market joined a sudden correction that hit exchanges around the world overnight.
Australia has extended its suspension of the travel bubble with New Zealand for another 72 hours, until Sunday afternoon. The announcement follows the positive tests of two more community cases in North Auckland.
Energy generator and retailer Trustpower, 51% controlled by Infratil, told the NZX on Thursday it was going to "test market interest" in its retail business, which has over 230,000 energy customers. Proceeds are likely to be reinvested in growing the generation business, at risk of oversupplying the wholesale market.
Retirement village Arvida also avoided the worst of the selloff, after today announcing occupation rights sales surged in the three months ended December with strong momentum continuing into the current quarter.
3 Things Markets will be Watching this Week
- The week ahead is dominated by the busiest week of earnings in the US with 122 S&P 500 companies reporting including: Apple, Microsoft, Tesla, Facebook, Visa, Samsung Electric, J&J, Mastercard, Chevron, McDonald’s and Caterpillar.
- Also in the US, we have the US Fed interest rate decision and release of quarterly GDP figures.
- In Australia, ResMed releases earnings and quarterly production reports are due from Fortescue, Oil Search, Oz Minerals, Origin Energy, Newcrest Mining and Evolution Mining.
Team
