Global markets were higher overnight, as the US market (S&P 500 index +1.0%) closed at a fresh record highs. Strong earnings from major companies continue to bolster investor confidence, with all sectors in the green.
Ford (+8.7%) and Merck & Co (+5.4%) were the standouts, both reporting stellar results beating expectations while also lifting guidance. Shares of Apple (+2.5%) and Amazon (+1.6%) were higher , ahead of their results (released after normal trading), while shares of Tesla continue to climb higher up +3.7% adding to a winning stretch after last week’s earnings beat. Caterpillar jumped +3.4% as strong commodity prices helped boost its quarterly profit, while eBay dropped -6.5% after providing weak revenue forecasts for the holiday period.
European Markets (Stoxx 600 index +0.2%) digested a more mixed array of earnings results and weighed up the ECB’s decision to keep interest rates and its monetary policy stance unchanged, despite ongoing inflationary pressures.
ANZ Banking Group (ANZ:ASX / ANZ:NZX)
ANZ ended up +0.7% yesterday, after reporting an impressive $6,198m cash earnings for the 2021 financial year, a +65% increase from the previous year and ahead of expectations.
This was driven largely by a significant reduction in bad debt provisions ($567m being reversed from the previous period) compared to the prior corresponding period, tightly managed expenses, and profit growth in Australia Retail and Commercial, which offset notably weaker Markets income.
ANZ announced a 72 cent per share final dividend bring their full year dividend to 142 cents per share, but looking ahead loan growth is likely to be more subdued.
While the outlook for core lending business should benefit from rising interest rates, this will be offset by pressure from other business which are expected to be weaker and for that reason we remain HOLD rated, and prefer Westpac which offers better upside and stronger earnings tailwinds from the implementation of a more aggressive cost out program, in our view
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX 200 index -0.2%), as investors react to prospect of higher interest rates.
Most sectors were weaker with Energy, Materials and Tech leading losses. Commodity stocks pulled back due to the implications of tighter monetary policy on the price of oil and other energy related commodities. Fortescue bucked the trend up +0.1% on solid shipment number for the September quarter and kept its 2022 guidance unchanged.
Financials were up, being able to directly benefit from increased interest rates, and investors upbeat around the banking sector following ANZ’s strong annual result.
JB Hi Fi rose +3.3% after announcing its first quarter sales only fell -7.5% despite lockdowns in Sydney and Melbourne. Coles inched up +0.1% following a solid first quarter update as as sales accelerated towards the end of the quarter.
The New Zealand market was lower on Thursday (NZX 50 index -0.4%) as markets absorb Australia’s strong inflation data and rise in bond rates.
Yield sensitive stocks were weaker (and represent a large chunk of the NZX), such as the gentialers Genesis Energy (-2.3%), Mercury NZ (-1.9%), and Meridian Energy (-1%) property stocks Argosy (-1.6%), Goodman Property Trust (-0.4%) and Retirement Village operators Arvida (-1%), Oceania (-2.1%), Ryman (-2.8%), and Summerset (-0.8%).
Air New Zealand dropped -2.4% after chair Therese Walsh said the airline expects to have drawn down $900m of its government loan by February.
3 Things Markets will be Watching this Week
- Key events this week include third quarter GDP print in the US and Eurozone, and CPI (inflation) releases Eurozone and Australia.
- 3rd quarter Earnings from Tech giants Alphabet, Microsoft, Amazon and Apple are set to report this week, along with Dow components Caterpillar, Coca-Cola, Boeing and McDonald’s.
- Locally, quarterly updates from ASX listed companies, AGM’s from Woolworths, Chorus, JB Hi-Fi, Star Entertainment, Challenger, Freightways, Air NZ, Carsales.com and SkyCity. A highly anticipated Investor Day will be held by a2 Milk on Wed while ANZ, Macquarie Group and Resmed will report earnings over the week.