Global markets were higher overnight, with US Markets (S&P 500 Index, +0.7%) reversing losses in the middle of the session, ending strongly in the green.
China announced a lockdown in Shanghai following a rise in covid cases, which saw price of oil fall -7% on global demand worries, as well as a quiet day of news on the Ukraine front.
Tech stocks led gains with most sectors trading higher, Tesla surged +8% after announcing plans for a stock split to pay a stock dividend. Apple rose +0.5% despite saying that it would cut iPhone and air pod production by -20% due to weakening demand, interestingly enough Apple shares are up 10-days in a row, its longest rally since 2014.
European markets (Stoxx 600, +0.3%) were up as most sectors traded in positive territory lead by autos, while energy lagged.
Nike Inc (NKE:NYSE)
Nike (NKE) shares were higher after delivering their 2022 third quarter result (ending December 2021). Top line revenue and bottom line profit came in better than expected, as strong demand and a shift to direct to consumer distribution helped offset supply chain issues and cost inflations. The company is now in a much better position now than pre-pandemic despite current macro-economic headwinds.
Revenue rose +5% to $10.9 billion, net profit after tax was $1.4 billion, down -4% from last year, and earnings per share came in at $0.88, well above management expectations of $0.73.
Despite macroeconomic headwinds Nike delivered a sound result. Their investment into digital sales and consumer direct sales channels will pay out over the long term connecting to consumers and improving margins. Strong demand and strategic pricing will help offset cost inflations which appears to be able to be offloaded on to the consumer. Operationally factories have returned back to pre pandemic levels, while supply chains remain an issue. The underlying issues in China appear to be subsiding with Nike reporting they are starting to see signs of recovery.
We maintain our BUY rating on the back of Nike’s drive to deliver new and innovative products consumers want, driving modest growth in North America – whilst turnaround in China should see a rebound and return to its strong growth trajectory, providing earnings upside.
Australia & New Zealand Market Movers
The Australian market edged higher yesterday (ASX200 index, +0.1%) for a fifth consecutive day.
The ASX’s two largest sectors Materials and Financials helped the market end in the green, the former benefitting from a +3% rise in iron ore. Rising bond yields put pressure across the greater market with tech stocks being hit hard and supporting gains for bank stocks, the Australian 3-year bond yield hitting tis highest level since 2014.
Star Entertainment rose +0.3% after its CEO resigned following royal commission enquiry into the suitability to hold a casino license in NSW.
The New Zealand market was down on Monday (NZX 50 index, -1.2%) weighed down by the NZX’s largest company Fisher and Paykel falling for a fourth day in a row down another -3.8% yesterday marking a -13% decline since announcing its revenue downgrade last week.
Most of the market was generally weaker, especially those that had made some traction recently, Pushpay falling 3.5%, Infratil down -3% and Auckland International Airport slipping -1.5%.
Ryman Healthcare continued to be a drag down -2.9% nearing 4-year lows (when excluding the short covid sell off).
Air NZ slipped -0.4% after it would claim $180m from the government’s $250m extension to cargo support scheme – and investors continue to prepare for the much anticipated $1 billion capital raise.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include US Non-Farm Payroll e,ployment data and China PMI report
- Locally, Australia will release their fiscal budget, and Synliat Milk reports its result.