Global markets were mixed overnight (S&P 500 index +0.6%) after tepid consumer price data for February calmed inflation worries and Congress gave the final approval to one of the largest economic stimulus measures in US history.
US 10-year Treasury bonds have been a key driver of news lately, and the sell-off eased on the inflation news pushing yields down to a session low of 1.50%, compared to 1.61% earlier this week.
A rotation into sectors such as energy and financials continued, both in small and large-cap stocks, as investors bet on consumer spending when the US economy reopens. There was profit-taking across the big technology names overnight following their strong gains on Tuesday.
G8 Education Limited (GEM:ASX)
Childcare operator G8 Education (GEM) shares were lower when they released their 2020 full year result, greatly impacted by lockdowns lowering occupancy greatly and pushing revenues down -14.4%, and operating net profit after tax of $60m, down -11.3% from the previous year. Reported net profit(loss) after tax came in at -$187m which includes a non-cash impairment of $237m flagged earlier in the year.
The major drag being that the rebound for 2021 would not be as sharp as the market anticipated with management guiding 2021 will be a transitional recovery year back to near normal levels.
We continue to remain BUY rated on the company, given a recovery in occupancy appears likely and provides investors with upside potential at current levels.
Australia & New Zealand Market Movers
The Australian market slipped on Wednesday (ASX 200 index -0.8%) dragged down by miners and major banks.
The Tech sector rose after a strong lead from Wall street, Xero up +2.5%, Appen rising +3.3%, Next DC adding +1.6% and Afterpay surging +7.5% despite Australia securities and Investment Commission confirming it would launch a new probe into the buy now, pay later sector to ensure the likes of Afterpay and Zip heed new design and distribution obligations.
The RBA pushed back back against rising yields reaffirming the official cash rate will stay at a record low of 0.1% with wage growth unlikely to be consistent with the inflation target before 2024 – which saw the major banks pull back – with some profit taking in the mix. Likewise the major miners also easing back as the price of iron ore slid after its strong rally.
The New Zealand market rose yesterday (NZX 50 index +0.9%) partly undoing some damage done in recent weeks as bond yields fell from recent highs.
Air New Zealand led the market higher, climbing 3.5%, followed by Contact Energy which was up 3.2% as the Gentailers remain very sensitive to recent bond yield movements. Market heavy weight Fisher and Paykel Healthcare rose +2.9% having the greatest impact on the market.
Goodman Property Trust rose +0.5% after telling investors to expect a “significant property revaluation gain” in its full-year financial report for the year ending March 2021.
3 Things Markets will be Watching this Week
- Unfortunately, COVID related news-flow continues to dominate headlines, both in terms of lock-down and vaccine news – with the US now expecting vaccinations to be rolled out across the country by the end of May.
- The European Central Bank makes an interest rate call on Thursday.
- In terms of economic data, we will see the latest US inflation data, and the latest business confidence readings in Australia and NZ.