S markets were closed overnight for Martin Luther King Day.
Global markets were generally upbeat, digesting the latest gross domestic product data from China on Monday, showing their economy grew faster than expected between October and December.
The Chinese economy grew by 8.1% in 2021, slightly below the market’s expectation for around 8.4% growth for the year. However, in the fourth quarter China’s GDP rose 4% from a year ago, topping a Reuters poll that predicted a 3.6% increase. Asian shares ended mixed on Monday as worries over interest rate hikes in the US offset better-than-expected economic data in China.
The bigger news and surprise however came from China's Central Bank. While most central banks have started to move towards a hawkish stance, China's central bank cut interest rates for the 1st time in 2-years on Monday to counter an economic slowdown. Adding to concerns, Chinese President Xi Jinping has urged Western countries not to raise interest rates, warning “slamming on the brakes” could “challenge global economic and financial stability”.
European Markets (Stoxx 600 index +0.8%) rallied as most sectors rose led by media stocks.
After a sharp slide early this year, Wesfarmer shares were up +2.6% yesterday after releasing an update for its performance over the first half of its 2022 financial year. Wesfarmers expects to deliver a net profit after tax result in line with current consensus expectations at between $1,180m and $1,240m, a decline of 12.5% to 16.5% from the same corresponding period last year.
The result reflects pleasing results from its Bunnings and Wesfarmers Chemicals, Energy & Fertilisers business, which partially offset weak results from Kmart Group and Officeworks. The latter businesses were impacted by COVID-related disruptions, lower foot traffic, staffing issues (staff self-isolation once presented with a positive covid test) and cost inflation which had been a heavy drag on the stock.
On balance, we remain HOLD rated on Wesfarmers at current levels.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.3%).
Consumer discretionary were the best performing sector following Wesfarmers update, which buoyed other retailers, with JB Hi-Fi up +3.4%, Super Retail up +2.6% and Harvey Norman up +1.2%.
Energy Shares, were also stronger helped by positive economic outlook and further gains in oil prices. The Materials sector was biggest loser, as China’s fourth quarter GDP numbers weren’t strong enough to instill further confidence across iron ore miners.
The New Zealand market (NZX 50 index) edged higher on Monday up +0.1%.
Following Friday’s lead local Tech stocks were stronger as investors bought the dip, with Serko up +2.3% and Vista group up +2.3%.
Retirement villages were generally weaker as concerns over mortgage approval rates slumping due heightened scrutiny continue to dampen the outlook on residential property.
3 Things Markets will be Watching this Week
- Inflation data across the Eurozone and fourth quarter GDP data from China.
- US earnings Season kicks off with Bank of America, Proctor & Gamble, Netflix, Morgan Stanley, Intuit, Goldman Sachs, Alcoa, American Airlines and United Airlines among large caps scheduled to release results.
- Locally, Australia’s employment data and a number of quarterly production reports are also due in Australia including Rio Tinto, BHP, Woodside, Northern Star and Santos.