We hope everyone is staying safe in lock-downs.
Global markets were mixed overnight, as US markets (S&P 500 +0.1%) stemmed losses following a two-day sell off.
Tech and Real estate stocks led the gains offsetting another harsh day for Energy and Materials. Metals prices slumped as part of a broader commodity selloff that extended to agriculture, oil and natural gas. Iron ore and copper were each down over -2%, with WTI crude oil slipping -2.5% and gold losing -0.5%.
In stock news, Nvidia shares jumped +3.9% after the chip giant’s quarterly earnings and revenue beat Wall Street estimates amid strong graphics cards sales and guided for better-than-expected growth. Robinhood shares tumbled -10.2% after warning investors that its third-quarter results could be affected by a slowdown in trading in stocks popular with retail investors and cryptocurrency.
Gains from US mega cap tech names offset losses from Chinese stocks listed in the US endured another day of selling after officials unleashed a fresh round of proposed regulations with Tencent and Alibaba each tumbling more than -6%. Accordingly, the Hong Kong (Heng Seng Index) was down -2%. European (Stoxx 600 index down -1.5%) led by the Energy Sector on weaker commodity prices.
Both the Australian and New Zealand dollar continued to weaken overnight, with broad based US dollar strength.
CSL shares jumped +3.1% yesterday after delivering a somewhat mixed result on Wednesday, with the recent gain fueled the bullish view on the company which looks past near term set backs. CSL delivered a solid result for the 2021 financial year with revenues rising +9.6% from last year to US$10.3m, and net profit after tax coming in at US$2,375m jumping +10% from the previous year.
However, management guided that 2022 would be a transitory year for the business where they expect to deliver a weaker profit due to covid restricting plasma collections, hitting current inventory levels.
We maintain our BUY rating on CSL as top-quality healthcare company with a continuous growth opportunity going forward –especially over the medium to long-term holding.
The market appears to now be overlooking the challenging year ahead and focused towards future growth. In our view CSL is still priced attractively at the current juncture when taking into account strong earnings growth from 2023 onwards.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX 200 index -0.5%) extending its run towards a fourth consecutive day of decline.
The Materials sector was the main laggard on the day again following weak commodity prices sending iron ore miners BHP (-6.4%), Rio Tinto (-5.7%) and Fortescue (-6.2%) all lower. To a similar degree energy stocks were also lower.
A handful of other blue chip names have been weaker recently as investors look to take profit after a healthy run heading into the current earnings season. While generally earnings results have been coming in strong, with the market trading at elevated levels some selling pressure was always expected.
Treasury Wine shares slipped -1.5% despite delivering a solid end to the 2021 financial year, as transitions away from its China business and focuses on premiumisation.
It is reported that Telstra is keen to participate in the auction for Meridian Energy’s Australian electricity retail and generation business, where an estimated price for the portfolio is $1 billion.
The New Zealand market performed strongly yesterday (NZX 50 index, +1.8%) shunning the local lockdown and welcoming interest rates remaining at record lows – for a bit longer.
Chorus led the market higher jumping +12.4% following the commerce commission draft RAB decision saw a favourable outcome – reducing regulatory overhang for the fibre optic provider.
Skellerup shares jumped +4.8% after beating its earnings guidance delivering net profit after tax of $188.5m.
Infratil shares were up +4% following their AGM where it reiterated its earnings guidance would be between $505m and $550m.
Auckland Airport fell on their 2021 full year result which was challenging as expected and the current lockdown not helping – while a bright side being the property side of the business continues to perform well to help deliver a reported profit on the back of strong revaluation gains.
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.