Global markets were mostly higher overnight (S&P 500 index +0.07%) as most stocks rebounded from the prior days selloff which was sparked by inflation worries, as economic optimism won on the day.
The market was led by energy, materials and financials, while the more defensive utilities and real estate were the major drag on the market. The recent surge in commodity prices, including lumber and corn, is increasing inflation expectations and making cyclical stocks more attractive.
The technology sector was more or less flat with gains for Apple, Nvidia and Alphabet were offset by losses for Amazon, Facebook, Netflix and Microsoft. General motors jumped +4% and Activision Blizzard rose +3.% after both their earnings blew past expectations.
European markets (Stoxx 600 index +2.7%) outperformed as data showed the European private sector is continuing to grow. Basic resources led the market higher up +4.7%, followed by oil & gas +3.2%, materials +2.9% and Technology +2.7%.
Australia and New Zealand Banking Group (ANZ:ASX / ANZ:NZX)
Australia and New Zealand Banking Group (ANZ) shares were down -3.2% yesterday, despite delivering a solid result for the first half of the 2021 financial year – as investors were expecting more after Westpac's result on Monday.
The bank delivered a statutory profit after tax of $2.94 billion and cash profit (from continuing operations) of $2.99 billion, both up +45% and +28% respectively. The key driver of the result was a net credit reversal of $491 billion, driven by the economic outlook appearing much more promising than a year ago. ANZ also announced an interim dividend of 70 cents per share, double the previous year's and close to pre-covid levels.
We view this as a positive result and continue to remain BUY on ANZ as the economy rebounds, lowering its risk profile and also being the eventual benefactor to any modest rate increases over the medium-term.
Australia & New Zealand Market Movers
The Australian market was up again yesterday (ASX 200 index +0.4%), rallying into a new 14-month high and edging closer to its February 2020 all-time high.
Healthcare was the best performing sector of the day, with Biotechnology giant CSL up +2.4% after announcing that it continues to expand its plasma collection foot and collection rates were slowly improving from its pandemic slump. Most sectors traded a touch higher expect Technology which fell hardest after a weak lead from Wall street's technology stocks as Treasury Secretary Janet Yellen comments regarding interest rates spooked the markets.
QBE shares were up +4.1% after revealing strong first quarter numbers. Gross Written Premiums (GWP) lifted +28% from last year, and up +10% from 2019 first quarter on strong volume and price growth, adding the insurer would resume paying a dividend for the 2021 financial year.
The New Zealand (NZX 50 index -0.5%) market fell on Wednesday, as the market was spooked by prospects of rates increasing sooner than anticipated.
These comments caused high valued tech companies to fall heavily, while locally the gen-tailers which represent a significant part of the market were mostly weaker as they are sensitive to interest rate changes, with Contact and Mercury both down -1.7%,
Fisher and Paykel Healthcare, the largest company on the index fell -2.8%, after setting a date for its financial result. Investors are currently questioning its medium-term growth potential after the pandemic subsides, as well as weakness across high growth stocks following Janet Yellen's comments.
Restaurant Brands was the best performer of the day up +4.1%, after reporting solid sales growth.
3 Things Markets will be Watching this Week
- There are 140 S&P 500 companies reporting this week including PayPal, General Motor, DraftKings Inc, Wynn Resorts, AIG, Pfizer, Moderna Inc.
- Also this week in the US there is the release of monthly employment data (nonfarm payrolls) and the monthly ISM Manufacturing survey.
- Closer to home, we have the latest RBA interest rate decision, employment data in NZ and earnings from Westpac, ANZ, NAB, Macquarie Group and Z Energy