Fed Reiterates Tightening Policy | Elders 

15 December 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, -0.8%) couldn’t surpass the mid-week hump, with all but two sectors closing in the red. 

Trading in Rua Bioscience (0.0%) was halted on news the Financial Markets Authority (FMA) has filed High Court civil proceedings against an Auckland-based retail investor, for alleged market manipulation of its shares. Other cannabis stocks are where the pain was felt with Greenfern Industries (-2.6%) and Cannasouth (-1.7%) both declining. 

On the economic front, according to the government’s half-year economic and fiscal update, New Zealand is projected to enter a shallow recession in the second quarter of next year. “A challenging year lies ahead” Finance Minister Grant Robertson noted after issuing the update. 

Australia Market Movers 

The Australian market (ASX 200 Index, +0.7%) gained on Wednesday, led by Utilities (+2.1%) and IT (+1.7%) stocks. 

St Barbara (+13.9%) was the top gainer of the day, following the announcement of its merger with Genesis Minerals (13.0%). 

Westpac (+0.4%) edged up after chairman John McFarlane announced that he will retire from his role after the bank’s 2023 annual general meeting in December. 

Philip Lowe noted yesterday that he will happily accept another term as Governor of the Reserve Bank of Australia when his seven-year tenure ends in September 2023. 

Europe Market Movers  

European markets (Stoxx 600 Index, +0.0%) were effectively flat on the day as it cautiously awaited the rate decision from the US Federal Reserve (8.00 am today), Bank of England (1.00 am tomorrow) and European Central Bank (2.15 am tomorrow). 

US Market Movers 

US markets (S&P 500 Index -0.7%) struggled to hold onto gains after, in its final meeting of the year, the Federal Reserve hiked interest rates by a percentage point, in a move widely expected by the market. The move brings the fed funds rate to a range of 4.25%-4.5%.  

However, stocks began to slip with all sectors in the red more drastically after the bank forecast more hikes through next year and would did not indicate any possibility of a pivot anytime soon keeping rates higher through next year with no reductions until 2024. 

Along with the increase came an indication that officials expect to keep rates higher through next year, with no reductions until 2024. The expected “terminal rate,” or point where officials expect to end the rate hikes, was put at 5.1%, according to the FOMC’s “dot plot” of individual members’ expectations, and inline with previous fed meeting. 

Stock in Focus: Elders (ELD.ASX) 

Elders shares rose +0.7% yesterday, as it announced it had acquired an 11.3% interest in PGG Wrightson via a private sale at NZ$4.35/share for a total investment ~NZ$37.1m (A$35.2m), with the purchases funded by debt. Elders said it does not currently intend to initiate a proposal to acquire full control of PGW, the purchase look to diversify its portfolio geographically. 
We are buy rated on both stocks, and it highlight underlying value of PGW, and while both stocks face weather related risks, their defensive nature makes them more immune to economic weakness. 

What Markets will be Watching this Week (UTC +13) 

Monday 
GB GDP MoM OCT 

Tuesday 
AU Westpac Consumer Confidence Index DEC 

Wednesday 
US Inflation Rate YoY NOV 

Thursday 
US Fed Interest Rate Decision 

AU Unemployment Rate NOV 

Friday 
GB BoE Interest Rate Decision 

EA ECB Interest Rate Decision 

US Retail Sales MoM NOV 

US markets (S&P 500 Index -0.7%) struggled to hold onto gains after, in its final meeting of the year, the Federal Reserve hiked interest rates by half a percentage point(+0.50%), in a move widely expected by the market. The move brings the fed funds rate to a range of 4.25%-4.5%.  

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