Global markets slipped overnight, as US markets (S&P 500 Index, -0.3%) retraced slightly following a strong finish for the month of July. There have been two key news items of interest overnight, US House Speaker Pelosi’s pending visit to Taiwan and US ISM manufacturing data.
A number of sources, including Taiwan media, have suggested that Pelosi is expected to visit Taiwan from tonight and will meet Taiwan’s President on Wednesday, although the US and Taiwan are still “preparing for last minute changes”. China has previously warned against the visit from such a high-profile US government official and has threatened military action.
The US ISM manufacturing index fell to its lowest level in more than two-years to 52.8, but by not as much as feared, with the consensus expecting a drop to 52.0. Energy was the worst performing sector, as the price of oil slipped ~4% down to below $100/barrel.
European markets (Stoxx 600 Index, -0.2%) fell as commodity prices softened and investors digested a fresh batch of corporate earnings.
Locally, the Reserve Bank of Australia (RBA), will deliver its interest rate decision likely to be a 50 basis point lift to 1.85%, with a full forecast update due this Friday.
Infratil (IFT:NZX)
Infratil shares jumped +6.7% yesterday after finding a in investor to buy a 12% stake into its renewable energy business Longroad business for $300m. Infratil will need to invest a further $100m alongside German Insurer Munich Re and will maintain a 37% ownership stake.
The transaction values Longroad as a whole US$2 billion pre-money (pre-fresh capital injection). This is well above what the market and Infratil’s independent valuation of their stake in Longroad of US$220m (for 40%) at 31 March 2022, which is now much higher at $800m.
This transaction, alongside the sale of New Zealand’s passive mobile towers (both Spark’s and Vodafone) in July, continues the trend of private market valuations of infrastructure assets for like-minded, long-term investors exceeding listed market consensus especially in the current climate.
We remain Buy rated on Infratil.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.7%) was up yesterday, reaching a new 7-week peak, following a strong finish in global markets for the month of July.
Energy, Utilities and Healthcare were the best performing sectors on a generally upbeat day.
The New Zealand market (NZX 50 Index, +0.3%) was up on day full of large moves for some stocks.
On the flipside, Plexure soared +78% after renewing a 5-year contract with McDonald’s and provided an upbeat guidance. Even with the rise, the stock is still down -39% for the year.
Building consents for the 12-months to June came in at 50,736 down slightly from the previous month, which weighed down on Fletcher Buildings which slipped -1.9%.
3 Things Markets will be Watching this Week
- US Corporate Earnings continue, with nonfarm payroll (employment) data in the US out later in the week.
- The Bank of England’s rate decision and PMI manufacturing surveys across the globe.
- Locally, reserve Bank of Australia’s cash rate decision.