Eurozone Inflation | A2 Milk

31 May 2022

Global markets were higher overnight, as US Markets remained closed in observance of Memorial Day Holiday.

European markets (Stoxx 600 index, +0.6%) traded higher boosted by optimism on China relaxing covid restrictions and additional stimulus measures to support the economy, however strong gains were trimmed after release of stronger than expected inflation data. Most sectors traded higher, with tech shares leading gains.

Eurozone inflation data continues to come in hot for the month of May. Spanish inflation jumped +8.5% for the year exceeding expectations of 8.1% as fuel and food prices continued to surge. German inflation coming in at an annual increase of +8.7% (a fresh multi-decade high), up from +7.8% in April and ahead of the 8% predicted.

A2 Milk (ATM:NZX/A2M:ASX)

A2 Milk shares surged +10.2% yesterday, after news Bubs inked a deal with the United States government to provide 1.25 million tins of baby formula in an effort to abate an infant formula shortage. A2 Milk have not yet received FDA approval to provide infant formula into the US market but have applied to do so, giving investors optimism they could benefit from it given their existing presence and distribution capacity via fresh milk– but it is still an uncertainty. If they were to it could be a viable option to fill the hole the China infant formula market left over the last two years, which isn’t showing signs of improving significantly over the horizon.

We remain HOLD rated on A2 Milk, and will watch this development closely. 

Australia & New Zealand Market Movers

The Australian market was up yesterday (ASX200 index, +1.5%) following a strong lead from Wall street on Friday sending tech stocks higher. 

It was an upbeat session with all sectors trading higher except for utilities. Materials was also another strong performer on news China’s covid cases are falling with Beijing set to ease restrictions which sent commodity prices higher.

Bubs was the best performer on the market soaring +77.3% after US president announced they inked a deal to purchase 27.5m bottles of infant formula into the US to meet their current infant formula shortage. Elders shares slipped -2.7% as it trades ex dividend. Schrole Group shares should be trading at about $0.35, the jump reflecting a 50 to 1 share consolidation (reducing the number of shares 50 fold, and effectively increasing the value of each share by 50x).

The New Zealand market (NZX 50 index, +0.7%) was up on Monday, on a mixed day of trade.

Metro Performance glass fell -7.3% after covid restrictions, rising costs and international shipping disruptions led to the company reporting a -$0.5m loss.

Arvida slipped -1.3% despite profits jumping +51% on strong revaluation gains. Fisher and Paykel jumped +3.3%, while Pacific Edge stumbled -10% as investors juggle between what is a fair valuation for the two growth healthcare stocks. 

3 Things Markets will be Watching this Week

  1. Geopolitical risks remain elevated given the Russia/Ukraine conflict.
  2. RNBZ monetary policy decision
  3. Local earnings from Kiwi Property Group, Arvida, Fisher & Paykel Healthcare, Pacific Edge, Mainfreight, Tower Insurance, Elders, and Select Harvest.
Global markets were higher overnight, as US Markets remained closed in observance of Memorial Day Holiday.

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