Global markets were stronger overnight (S&P 500 index +1.4%) recouping some of last week's losses caused by the Federal Reserve's policy as investors "bought the dip" .
The Fed policy meeting was of course the market highlight last week, particularly given the increase in the number of Fed members who are now pencilling in a rate hike in 2023 according to the ‘dot plot’ chart. Just over half (13 of 18) now see rate increases starting in 2023, while a chunky 40% (7 of 18) see the first move as early as next year. Markets were further pressured on Friday when Fed member Bullard again highlighted the risk of policy tightening next year.
Market sentiment continues to flip, with Financials and Materials leading the market higher. Reopening plays were also stronger with Norwegian Cruise Line and Boeing both ending the day up over +3%.
European stocks (Stoxx 600 index, +0.7%) were also higher overnight, experiencing a similar reversal to US markets, Autos the best performing sector up +3% as most sectors finished in the green.
Pacific Edge Limited (PEB:NZX)
Pacific Edge (PEB) shares were up +3.3% yesterday, after announcing US healthcare giant Kaiser intends to use their second CXbladder product Triage from the beginning of July 2021.
Kaiser will start commercial use of Triage in a single clinic comprising six urologists, and plans to progressively roll-out Triage, alongside Monitor, across their network. Triage is used for patients presenting with haematuria (blood in the urine and a key indicator of bladder cancer), and has the potential to represent a large part of the bladder cancer total addressable market.
This is a potentially positive outcome for PEB, and is the type of development required to continue strengthening the company’s commercial ladder. In our view, the fact Kaiser has decided to implement an additional product shortly after Monitor provides some assurance Monitor is providing positive outcomes.
We continue to remain BUY rated on Pacific Edge and view this as a positive development as part of their broader product roll-out.
Australia & New Zealand Market Movers
The Australian market slumped lower yesterday (ASX 200 index -1.8%) reacting to Friday's global sell-off, as combination of central bank comments and strong economic data both locally and overseas has investors bringing forward their interest rate hike forecasts.
Interestingly, preliminary Australian retail sales data for the month of May were up +0.1% from the previous month (missing consensus of +0.4% monthly gain due to Victoria's fourth lockdown), and up +7.4% year on year. Encouraging for supermarkets, grocery sales were only down -0.9%, while household goods down -5.5% year on year. Fashion was up +44.2% year on year benefiting from store reopening and lower restrictions with restaurant bookings up with reopening trades like fashion, travel and food service likely to continue to grow – and benefit from gradual opening of international borders.
Financials were the major drag led by a -5.4% fall from Australia's largest bank, Commonwealth bank, with other major banks also weaker. Mimicking global markets on Friday, Aussie Energy and Material sector were also sold off heavily on weaker commodity prices.
Travel stocks were also weaker as a new outbreak of covid-19 started to develop in NSW, Qantas down -3.7%, Sydney Airport slipping-2.8% and Webjet declining -2.3%. Sydney Airports May traffic statistics highlighted domestic passengers in May (1.347m) returned to 60.8% of their 2019 level but were -9.5% month on month – weakness driven by the Victorian lockdown and hotspots declared in Sydney in early May – while International passengers in May were 6.8% of May 2019 and +66.0% month on monmth. The improvement was driven by the travel bubble with NZ.
Boral announced as entered an agreement to sell its US Building Products business to Westlake for US$2.15b (A$2.9b) as it continues to clean up its business structure.
The New Zealand market (NZX 50 index -0.4%) declined on Monday, like the Aussie market reversing Friday's gains in reaction to Wall Streets sell off on Friday.
A2 Milk and Pushpay were both down -3.7% and -3.3% yesterday, giving back some of last week's gains. Air NZ shares descended (-2.2%) lower as investors digest the news of its recent trading update and upcoming capital raise.
Mercury Energy was up +1.6% on news it won the bid to purchase Trustpower's retail business for $441m. Trustpower has agreed to sell its retail business to Mercury NZ, which should allow the company to gear up further than prior allowances and potentially improves its attractiveness as a 100% renewable generation exposure.
3 Things Markets will be Watching this Week
- Key events this week include Bank of England interest rate decision, US GDP numbers, and Fed Chair Powell testifying to Congress on the Covid-19 response and economy
- In Australia there will be retail sales for the month of May and Westpac Consumer Confidence data.
- In NZ, Oceania Healthcare has scheduled its AGM for this week.