Global markets were mixed overnight, with US markets (S&P 500 index +0.7%) higher on a generally upbeat day that saw investors digest another batch of corporate as investors await upcoming US inflation (CPI) data.
There hasn’t been a great deal of news to digest, but everyone is watching global interest rates push higher and wondering how high they can go this cycle. The 10-year US Treasury yield hit fresh pandemic high’s now at 1.96%, a level not seen since November 2019. Wall Street is dealing with the possibility of inflation data reach an annual increase of 7.2% which would be the highest in almost 40 years (with data released Thursday).
In stock news, Pfizer shares slipped -2.8% after its sales missed expectations and their full-year sales forecast from its covid-19 vaccine and antiviral pill were less than what investors had hoped for. Other companies fared much better, Harley-Davidson rising +8% after reporting a surprise profit, while Amgen (+7%) and Chegg (+16%) rose strongly on earnings beats. Peloton shares rose +18%, after announcing an aggressive shake up, its CEO replaced by Ex Spotify/Netflix CFO and said it will cut 2,800 jobs and structure the company to slash costs and right size the business.
European Markets (Stoxx 600 index +0.01%) were flat as they await US inflation data as losses for tech shares were offset by gains for basic resources. BP slipped -2%, despite reporting its highest full year profit in eight years supported by strong commodity prices.
Macquarie Group (MQG:ASX)
Macquarie shares were up +3.9% yesterday following the release of its third quarter operational update, without going into any detail stating it was “a record quarter.”
This was driven by strong performances from its market-facing business. Management advised that the Commodities and Global Markets (CGM) and Macquarie Capital businesses have delivered a combined profit contribution that was up “substantially” on the prior corresponding period.
Macquarie has highlighted that a whopping US$75 trillion of total infrastructure investment will be required globally by 2040 – which bodes well considering they are the number one global infrastructure financial advisor in 2021.
We have always had a positive view on Macquarie in terms of it continuing to grow its profits but at the current juncture we believe the valuation is stretched, trading at a forward Price to Earnings multiple of ~18x and offering a dividend yield of ~3%. We continue to HOLD Macquarie in our Australian portfolio, but would prefer to BUY the stock at more attractive (lower) valuation multiples.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index, +1.1%). Most sectors traded positively led by materials again, following iron topping US$149 per tonne, while financials also performed strongly.
Travel stocks gaining strongly for a second day in a row, Webjet (+7.4%) and Flight Centre (+7.2%) leading gains, while other tourism beneficiaries such as casino and hotel operators also traded positively SkyCity (+5.1%), Star Entertainment (+3.9%), and Crown Resorts (+0.2%).
The New Zealand market (NZX 50 index, +0.3%) was up on Monday.
Tourism plays with Australian exposure led gains as Australia opens up, Sky City up +6.2% due to their Adelaide casino, while Air NZ rose another +4.7%.
Meridian Energy rose +1.3% after Tiwai point aluminium smelter announced it would stay open beyond the 2024 closure it had previously planned.
Contact energy was up +0.6% yesterday, after announcing that the Tauhara project is progressing well, expecting it to generate 168 megawatts, up from 152 megawatts – unfortunately the increased capacity and cost inflation means the project will cost $818m, a $140m above the initial investment and could be delayed by 3-6 months.
3 Things Markets will be Watching this Week
- US Inflation (CPI) data will be in focus given its importance in regards to its importance for the interest rate track.
- US earnings from the likes of Pfizer, Toyota, Coca-Cola, Walt Disney, PepsiCo, L’Oreal, Astra Zeneca, Unilever and Uber.
- Locally, Australian & NZ earnings season commences, with results of note from Suncorp, CBA, AMP and Downer EDI.