Global markets rebounded overnight, with US Markets (S&P 500 Index +2.2%) charging higher after an initial decline. Stocks rebounded in the final hour of trading as investors digested the Fed’s hawkish tone which was seen as helping the economy over the long term by lowering inflation.
The US Federal Reserve announced it would raise rates by 25 basis points to 0.50%, its first increase since 2018 – which was widely anticipated, while some may have feared for a 50-basis point hike. The Fed has pencilled in another 6 hikes for the remainder of the year, and 3 more for 2023 bringing the rated to 2.75% by the end of 2023. The tone is to priorities combating inflation over economic growth as they raised their inflation estimates to +4.1% this year. But continue to state that employment rate would remain stubbornly low ~3.5% which will remain healthy for the general economy over the medium-term.
Most sectors traded higher lead by technology, as many beaten up sectors rebounded strongly in that margins for businesses would be better if inflation is controlled. The Financial sector also performed well as their profits will benefit from a higher interest rate environment.
European Markets closed higher (Stoxx 600 index +3%) on renewed optimism of progress in talks between Russia and Ukraine, in a bid to find a peace deal, with tech shares leading gains.
Asian markets were up strongly – Chinese CSI 300 Index up +4.3%, while Hong Kong’s Hang Seng soared +9.1%, as it partially recovers form Monday and Tuesday’s sell off. The bulk of the gains came after a Chinese state media report signalled support for Chinese stocks, and as U.S/Chinese regulators are progressing toward a co-operation plan on U.S.-listed Chinese stocks. Which saw the likes Tencent surge +23.2%, Alibaba soared +27.3% and NetEase jumped +23.4%.
Invocare (IVC:ASX)
Funeral services company Invocare (IVC.ASX) shares were up after its full year result came in better than expected, driven by a recovery in key value drivers.
IVC returned to form during the first half, delivering a 11% increase in operating revenue to $527.1m and a 22% lift in operating earnings (EBITDA) to $125.5m. Inovcare’s net profit improved strongly thanks to a turnaround in prepaid due to improved operating conditions but also non-operating earnings being robust, with a recovery in the mark to market valuation of Prepaid funds under management which delivered most of the profit turnaround. Net profit after tax came in a at $80.16m up significantly from a loss of -$11.5m in the previous year.
We remain BUY rated on Invocare
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index +1.1%) helped by a strong lead from Wall Street.
Aussie tech shares led the market, as investors were willing to snap them up with all sectors trading in the green. Financials were also stronger heading into the Fed decision.
The New Zealand market was up on Wednesday (NZX 50 index +0.6%) trading in a more upbeat fashion helped up a strong lead by Wall Street as oil prices tanked and much anticipated reopening of boarder for international travellers.
Full Vaccinated Australians will be able to enter New Zealand freely (without quarantine or self-isolation) from next month, and a wide list of countries with visa-waivers from May. This saw travel and tourism stocks all climb higher, Air NZ up +2.2%, Tourism Holdings climbing +1.8%, and Sky City Casino out +3.2%.
Mercury had the biggest gain up +4.5%, while Pushpay suffered the largest lowest giving back some of its previous day gains down -2.7%
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include the US Fed interest rate meeting, Bank of England and Bank of Japan rate calls, inflation data from the Eurozone, and Chinese retail sales, industrial production, and fixed assets investment.
- Locally, NZ fourth quarter GDP results, and Australia’s employment data.