Guide To Markets Sheets:
Our regular Guide to Markets Summaries are now available – the NZ and Australian sheets cover companies that recently reported as of March; while the US summary covers Q4 earnings. They are a “one-stop shop” which sum up out buy/sell/hold recomendations as well as offering commentry on our thinking.
They can be found here:
Australian Market View Summary
Stock in Focus: Apple Inc (AAPL)
Computing giant Apple annouced their own Buy Now Pay Later (BNPL) scheme, which will launch in the US first. In one way this is part of the broader “bank-ification” of Apple: it basically holds a lot of money on its balance sheet and lends it out in various ways, as well as collecting residual payments each month for services like Apple Cloud. In another way, more bearish, it is a clear sign of Apple’s shift from innovation to charging an exisiting user-base. We also think the read-through here is interesting: a BNPL scheme is an attempt to squeeze even more money out of App store merchants (Apple’s BNPL will be avail. throughout the App store) – they will be paying their commission to Apple and Apple will be making money via supplying the BNPL facility. We remain hold rated on Apple. Consumer spending will have a breaking point, and slowing iPhone-sales and supply-related delays in China will continue to bite. At the moment the company has been immune to inflation and cost-related pressures, but rememeber that every company finds its place within a cycle, and Apple is no different. “During a bear market stocks return to their rightful owners”.
Chart in focus: Expectations for the Fed’s terminal rate changed dramatically this month
The chart above is too big to ignore, we think — note how market expectations have changed dramatically from March 1 to March 21. With inflation continuing; is it likely the Fed funds rate looks like 4.5%? If the answer is no, then logic dictates the whole asset classes are in for a wild ride going forward. We still think 5.5-6.00% looks to be the terminal Fed rate.
New Zealand Market Movers
The New Zealand market (NZX50, +1.3%) rebounded strongly on Tuesday as investors nerves start to ease. Not much news flow, but risk assets performed well while property stocks also had another strong day of trade.
Australia Market Movers
The Australian Market (ASX200, +1.0%) had a another positive day of trade yesterday, with most sectors trading higher.
Lithium Miner Liontown Resources surged +68.5% after receiving a $2.50 per share takeover bid reigniting the sector – which has been beaten down recently. Lynas – where to from here?
Banks: APRA (Australian Prudential Regulation Authority) which overlooks the Australian Banking system, stated that Australian depositors are in a better position than US, as Australian banks hold more capital and that the banking system can handle a situation where house prices were to fall -43% and unemployment rise to 11% – under their stress test modelling. This situation would put pressure on bank shareholders with periods of no-dividend payouts in this extreme scenario.
Additionally, Westpac’s CEO said mortgage competition is the most intense he has ever seen although banks have to keep writing loans or risk losing market share – adding margin pressure. Seperately CBA’s
CEO said housing construction, aged care and consumer spending are key areas the bank is watching for further signs of stress.
US Market Movers
The S&P 500 fell 0.16% on a flat day of trade. Binance, the crypto exchange, reportedly had ~$2B of outflows last month (another FTX in the making?). Alibaba reported a plan to split the business into six segments, possibily unlocking shareholder value yet we remain on the fence re: China.
What we’re watching for the week ahead
Monday
Australia:
Premier Investments 1H Earnings;
NZ:
Synlait Milk 1H Earnings
Tuesday
US:
Conference Board Consumer Confidence, Richmond Fed;
Australia:
Retail Sales, AUB Group EGM.
Wednesday
US:
Pending Home Sales;
Australia:
CPI;
NZ:
NZ King Salmon FY Earnings, Property for Industry AGM.
Thursday
US:
Initial Jobless Claims, Q4 GDP; Eurozone:
Consumer Confidence; Japan:
Tokyo CPI; NZ:
Building Permits, ANZ Business Confidence.
Friday
US:
Personal Income/Spending, PCE Deflator, Chicago PMI; Eurozone:
CPI, Unemployment Rate; UK:
Q4 GDP; China: Composite PMI; Australia:
Private Sector Credit, AMP AGM; NZ:
ANZ Consumer Confidence.