Global markets were lower overnight, as the US Market (S&P 500 index -0.4%) slipped for a fifth day in a row, deepening losses as investors awaits tomorrow’s Federal Reserve interest rate decision.
Most sectors traded lower except for technology and energy which both managed to post modest gains. US 10-year Treasury yields were up a further 12 basis points overnight to 3.48%, giving an extra reason for shares to fall further.
It wasn’t all bad news. FedEx shares surged +14% after the company announced it would raise its quarterly dividend by more than 50%, and Oracle jumped +10% on its earnings beat boosted by a “major increase in demand” across its infrastructure cloud business. We continue to like datacentres as a multi-year investment theme.
European markets (Stoxx 600 index -1.2%) ended the session down, wiping away an early gain as retail stocks led losses while banks traded in positive territory.
Sky City (SKC.NZX)
Sky City shares slipped -0.4% yesterday. with its 2022 full-year guidance helping to mitigate losses. SkyCity stated that relaxed covid-19 operating restrictions had seen strong performance from its local gaming business with positive domestic tourism, and the reopening of international borders also helping.
SkyCity now expects 2022 full-year operating earnings (EBITDA) to come in between $135m to $140m and normalised net profit of between $3.5m to $7m.
We are BUY rated on Sky City at current levels as our preferred tourism play, assuming a near full recovery of pre-covid earnings by 2024.
Australia & New Zealand Market Movers
The Australian market tumbled yesterday (ASX 200 index -3.5%) suffering its largest single-day loss since May 2020, (and it’s 15th largest single-day loss over the last 20 years) on fears that rapidly rising interest rates in the US will induce a recession. The ASX is still being buoyed by commodity stocks this year, which has meant it is “only” down -12% from its peak mid-last year. All sectors traded in the red, with energy stocks and tech shares leading losses, while financials and materials both being heavily linked to the economy also declined sharply.
The New Zealand market (NZX 50 Index -2.6%) fell sharply joining the global sell-off, and the NZX has also officially entered bear market territory as investors fret over the risk of recession.
Only a handful of stocks avoided the sell-off yesterday, but they were generally the ones that suffered heavy losses on Monday, such as a2 Milk and Tourism Holdings.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- Central bank meetings dominate the week ahead with rate decisions due from the US Fed, Bank of England, and Bank of Japan.
- The latest CPI (inflation) data from the Eurozone is also due along with a range of housing data in the U.S and activity data in China. Locally, employment data in Australia and Q1 GDP in NZ are the highlights.