Global markets traded with a more upbeat tone overnight, with the US market (S&P 500 index +0.3%) snapping a three-day losing streak.
US CPI (Inflation) figures for the month of September jumped +0.4% to 5.4% – driven by unprecedented shipping challenges, material shortages, high commodities prices and rising wages have which have driven up costs for producers. The US Fed commenting that it would now consider (tapering) lowering its support for the government debt as early as November or December, by reducing its bond buying.
Tech stocks managed to make a recovery, while business better positioned to pass costs on to consumers fared better – with Utilities, Materials and Consumer Discretionary leading gains.
JP Morgan reported a solid result for third quarter but its shares still slipped -2.6%, not too much of a surprise considering the stock is still up more than 26% year to date. Delta Airlines result was better than expected but descended-5.4% as it cited higher fuel costs and other expenses will put pressure on fourth quarter earnings.
European Markets (Stoxx 600 index, +0.7%) was up overnight, as tech stocks lead gains, partially offset by losses form banks as investors digested US inflation data.
Bank of Queensland (BOQ:ASX)
Bank of Queensland share price fell -4.3% yesterday following the release of its 2021 full year results.
Although the bank delivered an 83% increase in cash net profit after tax to $412 million, its outlook appears to have spooked investors. Management warned that it expects its net interest margin to decline by ~0.05% to 0.07% in the 2022 financial year – due to competition and the low interest rate macroeconomic environment.
At current valuations we remain HOLD rated on BOQ, as in our view it is not attractively priced and does not have the scale to benefit from the eventual rate hikes like the major lenders will over the medium-term.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX 200 index -0.1%) for the third consecutive day.
Despite most sectors trading higher, losses from financials and material forced the market index lower. The price of iron ore reversed its recent recovery run, sending BHP (-1%), Rio Tinto (-3.2%) and Fortescue Metals (-5.3%) lower. Banks of Queensland's outlook on margin pressure weighed negatively on the big 4 banks as well.
Infant formula business Bubs Australia’s shares surged +38.9% after reporting its China facing business had rebounded strongly with total gross revenue for the September quarter doubling over the same corresponding period last year.
Consumer Discretionary stocks were stronger after ANZ reporting a surge in spending on the first day of NSW’s reporting this week.
The New Zealand market was up on Wednesday (NZX 50 index +0.2%), The big move came from A2 Milk, which lead the market higher up +12.4%, after its Australian rival Bubs reported a strong rebound in its China facing business. It was chopping session for the rest of the market which generally traded lower. Pacific Edge shares have slipped down to $1.36, closer to issue price of $1.35 per share for new shares for eligible shareholders.
In stock news, Vital Healthcare Property has announced a capital raise of $140m. The raise is being completed to fund the acquisition of Tennyson Centre, a "Cancer Centre of Excellence" in Adelaide, for A$93m as well as providing further capital to fund VHP's development pipeline. The company has reconfirmed 2022 earnings and dividend guidance, with trans-Tasman lockdowns having no material rent deferrals to date.
3 Things Markets will be Watching this Week
- Key events this week include CPI (inflation) data from the US and China.
- US Third quarter earnings season commences, with the major US Banks set to report this week
- Locally, Employment data in Australia is due and Business Confidence in New Zealand