Global markets were mixed overnight, US Markets (S&P 500 Index, -0.4%) ended the session lowering during a choppy session as it struggled to start the week on a positive note.
Tech shares continues to be a major drag on the market the NASDAQ Index falling -1.2%, consumer discretionary stocks were also hit hard as fear of recession and current level of inflation would impact consumers the most.
European markets (Stoxx 600 index, +0.04%) clawed back larger losses to end the session flat, as gains for resources stocks offset by plunge in tech stocks.
China released a weaker than expected data yesterday largely driven by the snap lockdowns to control its current covid outbreak. China’s April retail sales sank -11.1% from the previous year the decline double what was expected, and industrial output dropped -2.9%. There is some optimism that an imminent end to Shanghai’s lockdown and the easing of restrictions in many other cities will support a rebound in economic activity, but community spread of Omicron could easily re-emerge at any given time and send areas back into lockdown.
Contact Energy (CEN:NZX)
Contact energy delivered weak operating stats for the month of April, operating earnings (EBITDAF) coming in at $22. Down -$30m from last year and its lowest result record to date, due to low hydro generation, increased retail energy purchase costs and lower commercial netback.
Due to Contact’s defensive nature its shares have held up well amongst the market sell off, while rising rates makes its near-term dividend appear less attractive. At current levels we remain comfortable with our BUY rating as its earnings and dividend are set to grow over the medium-term following the completion of its Tauhaha project, the business more immune to general inflation and recession risk then most.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index, +0.3%) despite weak economic data from China disappointed.
Material stocks were lower and the major dragged on the market, being most sensitive to China, considering they are the major purchaser of their raw commodities. Most other sectors traded higher, tech shares extended their gains from Friday after a strong lead from Wall Street.
Brambles jumped +11.2% after the pallets crates and containers business after confirming talks about receiving a takeover bid from Private Equity firm CVC for around $20 billion.
The New Zealand market (NZX 50 index, -0.1%) edged lower on Monday as most of the local market traded in the green.
Ryman healthcare was the major drag down -7.8% after it was confirmed it would be dropped off the MSCI Standard Index at the end of this month. This dragged other property related stocks lower Precinct Property (-3.3%), Oceania Healthcare (3%) and Goodman Property Trust (2.4%).
Steel and Tube Holdings jumped +4.3% after expecting its operating profit would rise +69% from last year.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- Eurozone Inflation and employment figures
- Locally, earnings from James Hardie, Argosy Property, Briscoes, Goodman Property Group, Infratil, Oceania Healthcare and Ryman Healthcare
