Geopolitical risk | Nonfarm Payrolls | Blackpearl says “AI”

9 October 2023

The Major news over the weekend is attacks in Gaza, and the declaration of war from Israel. The added geopolitical risk will add to another volatile and cautious market for the week ahead, offsetting the strong end to global markets on Friday. Looking ahead to higher oil prices while we expect OPEC to continue business as usual.


US

US markets (S&P500 Index, +1.2%) was up buoyed by non-farm payroll data —

the US economy added 336,000 new jobs in September (well above the 227,000 the market had expected), the largest increase since the start of the year, this alone should have spooked markets for being too strong. However, wage growth was a modest +0.2%, within the Fed’s target range – while the economy is still resilient slow wage growth is a soft positive on inflation coming down.

Non-Farm Payroll

Additionally at the time price of oil and bond yields had pulled back significantly over the week from their recent highs. On company specific news Tesla announced it plans to cut prices of Model 3 and Model Y vehicles in the US, as sales start to slow down. Noting a lot of “blue chips” sitting at 52 week lows — Coca Cola, Brown-Forman, Kraft-Heinz, etc. Neither buy nor sell recommendations — but interesting to note that a lot of these companies are alcohol/food related. Ozempic continues its ascent…?


NZ/Aus

The NZ Market (NZX50 Index, -0.2%) was a touch lower on quiet trade as the interest rate-sensitive gentailers dragged the market lower as other stocks recouped some losses earlier in the week. We tend to be neutral on the gentailers, preferring “dirty” Genesis.

We had to raise an eyebrow at Blackpearl Group’s recent capital raise deck (another $5mn, if you please). The NZX-listed company (the NZX’s only listing last year) made good use of the buzzword of the year – “AI”. It is front and centre of the deck – “driven by AI, built for people”. Link. Blackpearl’s main activities include operating a mailer service and an email signature service. What wasn’t in the presentation was Blackpearl’s cash burn — a loss of $7,004,373 last year.

Noting Infratil has revalued its data centres up to $3.9bn — Infratil is our favourite “buy and hold” investment in NZ. Bullish read-through for NextDC, the data centre operator across the ditch.

The Australian market (ASX 200 Index, +0.4%) was up on Friday containing the weekly loss to -1.3%. It was a mixed day of trade with a sharp rise in bank stocks and miners doing the heavy lifting.

Magellan Financial was the worst performer down -18.5% after reporting a $4 billion drop in funds under management in September down to $35 billion.


Week Ahead

Tuesday

NZ Migration data

Wednesday

NZ REINZ Housing market data

Thursday

UK GDP

Friday

US Inflation Data

China Inflation Data Start of US Earnings season

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