Global markets were mixed overnight, as US markets (S&P 500 +0.3%) edged higher ahead of profit results due from the major global retailers – shrugging off news of weaker than expected economic data from China.
Healthcare and Utilities were the two strongest sectors while Energy and Materials led losses on the back of weaker commodity prices. Home Depot and Walmart were both up +1.1% and +0.8% respectively ahead of their result due on Tuesday, while Target and Lowe’s also traded strongly ahead of their result due on Wednesday. So far, 87% of S&P 500 companies that have reported have beaten expectations, in what has been the strongest quarterly earnings season since 2009.
Data showed China’s economic growth is slowing following retail sales for the month of July growing +8.5% from the same corresponding period last year. missing expectations of +11.5%. Online sales gained just +4.4% for the month, while industrial production increased by +6.4%. Asian Stocks were lower on the news flow with Japan (TOPIX index down -1.6%) and Hong Kong (Hang Seng -0.8%) markets hit hardest. Increased liquidity in the Chinese market (CSI 300) offset the news flow to end the session flat.
Contact Energy (CEN:NZX / CEN:ASX)
Contact energy shares slipped -0.5% yesterday despite delivering a solid result for the 2021 financial year. Operating earnings (EBITDA) came in at $553m, which was up +23% from last year. Contact released a conservative guidance 2022 financial year dividend expected to be 35 cents per share which is flat with the current year.
While near-term dividend guidance may have disappointed some, we remain upbeat on CEN's ability to grow earnings and dividends over the medium-term, especially following the completion of the Tauhaha project.
We remain BUY rated on Contact, with an attractively priced dividend over the medium-term, we see less downside risk from upcoming interest rate hikes at current levels versus other, lower yielding, utility peers.
Australia & New Zealand Market Movers
The Australian market slipped yesterday (ASX 200 index -0.6%) after a few earnings misses and concerns over the continue spread of covid locally prompting longer and stricter lockdowns in Australia’s major centres.
Beach Energy led losses slumping -9.9% after reporting a -37% drop in earnings while Bendigo and Adelaide Bank shares were also hit hard after their $524m profit failed to impress.
Financials and energy were the weakest sectors, followed by materials as commodity prices weakened.
Travel stocks were also hit hard as Victoria announced stricter lockdown restrictions and NSW posted record daily cases which is set to extend further. Sydney Airport slipped -0.7% fearing better than its peers after rejecting the revised $8.45 a share offer (which is 20 cents higher than its previous offer).
JB Hi-Fi jumped +2.5% after reporting a solid result as its net profit after tax soared +67.4% from last year up to $506.1m. Bluescope Steel rose +0.6% after its net profit after tax surged to $1.19 billion, providing shareholders were a final dividend of 25 cents per share, triple what it paid a year earlier.
Woodside announced it has agreed to a deal in principle to buy BHP’s $20 billion petroleum business however, further details will be finalised later in the week.
The New Zealand market was down on Monday (NZX 50 index, -0.3%) as most stocks traded weaker heading towards the RBNZ announcement on Wednesday.
A2 Milk bucked the trend the trend soaring +11.4%, as investors reacted to potential takeover from Nestle – however nothing official has yet to be announced.
Plexure shares rose +9.3% after announcing a merger with Task a payment platform provider for $125m – fully acquiring the company with equity.
3 Things Markets will be Watching this Week
- Key events this week include the RBNZ meeting where a 25-basis point hike is fully priced in and expected by the market.
- Locally Earnings season kicks into full gear. Major names include JB Hi-Fi, Contact Energy, BHP, Aristocrat, Coles, CSL, Oz Mineral, Woodside, EBOS, Fletcher Building, Spark, Auckland Airport, Sydney Airport – and quarterly updates from ANZ and Westpac.
- Economic data from China, US Fed minutes and employment data in Australia.
