Global markets were mostly higher overnight (S&P 500 index +0.9%) as shares on Wall street rebounded after a two-day decline, with 9 of the 11 sectors in the green. Investors were comfortable with buying the dip, particularly in economy re-opening plays like Airlines and Cruise Liners which were sold-off heavily earlier. Materials, energy & financials sectors outperformed.
Netflix shares slumped -7.4% after the streaming giant reported subscriber growth which missed market expectations and guided they expect to only add 1m new subscribers in the upcoming quarter – suggesting things are starting to tail off for all the 'stay at home' stocks. The big question for technology stocks this earnings season will be whether they can meet the high bar expected by investors.
Delegat Wines (DGL:NZX)
Wine Maker Delegat's (DGL) shares were down -1.4% yesterday announcing its 2021 harvest which came in 37,470 tonnes which is 2% lower than the prior vintage and below forecast due to unseasonal cool spring weather. As a result Delegat has lowered their sales guidance for 2022 financial year of 3,41900 cases, and 3,783,000 cases both down -4.3% and -1.5% respectively from previous guidance. We view this as a minor hiccup and believe medium-term growth continues to remain promising.
Due to Delegat's extended valuation, we do believe it still trades on the expensive side – even when taking into account its future growth potential and for that reason we continue to remain HOLD rated, with the high NZ dollar another headwind.
Australia & New Zealand Market Movers
The Australian market (ASX 200 index -0.3%) traded lower following sell-off in equities markets around the world which were more affected and concerned with a rise in a third major wave of covid-19.
The major banks led the losses, followed by the miners despite iron ore reaching a 10-year high, with both sectors largely pinned o performance of the the economy. Energy stocks were also weaker as the price of brent crude oil fell to its lowest level in more than a week.
Afterpay shares fell -2.7% after a broker cutting their price target on the major buy now pay later company, following their sales update on Tuesday.
The New Zealand market (NZX 50 index -1.1%) fell on Wednesday, as global markets remain jittery on economic recovery as covid-19 continues to plague the world despite vaccine rollout efforts.
Auckland International Airport fell -2.4% as the ongoing pandemic will limit how much traffic will pass through its terminals, and further delay reopening to the rest of the world – even with the trans-Tasman bubble now open.
Kiwi Property Group shares rose +0.8% after receiving resource consent to build a $63m office building at Sylvia Park in Auckland and it will start construction in October this year. Other property stocks also performed well as they are more less directly impacted by the global pandemic.
Ryman Healthcare led the market lower down -3.7%, followed by A2 Milk -3.6% with the latter requiring borders to reopen to rebuild its daigou channel.
3 Things Markets will be Watching this Week
- Corporate earnings season gets into full swing this week with around 80 S&P500 companies reporting, including Netflix, IBM and American Airlines.
- Highlights globally include the ECB’s latest interest rate call.
- In Australia, Wesfarmers will host an Investor Briefing while a number of quarterly updates are due including BHP, Northern Star, Challenger, Sydney Airport, Oz Minerals, AMP, Evolution Mining, Santos, Brambles and Woodside.