Global markets were mostly higher overnight, with the US market (S&P 500 index +0.5%) climbing to new record highs, at the same time treasury yields slipped down to fresh three-month lows as investors shrugged off inflation concerns despite key inflation report showing a bigger than expected increase in price pressure.
Consumer prices (CPI) for the month of May rose at its fastest pace in 13-years, up 5% from a year ago, ahead of expectations of 4.7%. Excluding food and energy, core CPI rose +3.8% for the year, its fastest pace since 1992 – a third of the increase attributed to a sharp +7.3% increase in used cars and truck prices. The current numbers have been described by the fed as transitory, and belief it would be brief and short lived based on the nature of the goods and context being demand was extremely weak a year ago, coupled with pandemic induced pent up demand and supply chain lags.Signals that loose monetary policy is likely to remain loose and rates in the US remain unchanged for the interim.
Jobless claims for the week came in at 376,000, a touch higher than estimates but marked the lowest level since the pandemic begun.
This saw investors who have been on the fence the last couple of days jump back into the market treading cautiously on potential rate rises had inflation been deemed as 'out of control' and requiring easing monetary policy. Gains were mostly broad based led by Healthcare, Real Estate, and Technology stocks – most sensitive to rate changes.
European Markets were mainly flat (Stoxx 600 up +0.03%) as the market struggled to find a direction following US Inflation data, while ECB opted to keep their interest rates and asset purchase policy unchanged.
Sky City Entertainment (SKC:NZX)
Sky City Entertainment (SKC) shares have been recovering slightly up another +2.9% yesterday, and just announced trading conditions have been better than expected. SKC is experiencing strong performance from its local gaming businesses in New Zealand, particularly from electronic gaming machines, and consistent performances from both SkyCity Adelaide post opening of the expansion from December 2020 and the offshore online casino (SkyCity Malta). Assuming no property closures, SKC expect group normals operating earnings (EBITDA) to be between $247m and $253m for the 2021 financial year (ending 30 June 2021). Based on current guidance SKC expects to comfortably meet its financial covenants and pay a final dividend.
We continue to remain HOLD rated on Sky City given its current share price is mostly reflective of a near-full recovery of its business over the near-term – including benefits from the travel bubble. That a full recovery from international tourism still some time a way and would provide minor upside at current levels.
Australia & New Zealand Market Movers
The Australian market (ASX 200 index +0.4%) closed higher yesterday breaking into new record highs.
Strong gains were experienced from the real estate and tech sectors (both benefiting from rates remaining low) ahead of US inflation data release, which were offset by fall in energy as price of WTI oil slipped while extension in travel bans saw travel and leisure stocks trade weaker.
A number of blue-chip experienced healthy gains, CSL up +0.4%, Commonwealth Bank added 0.8%, Goodman group rising +2.3% and Wesfarmers
Real estate was the best performing sector as sales of new homes rose 15.2% in May up from April, Spectre Group up +2.5%, Dexus adding 3%, Shopping Centres Australasia closing +3.6%.
Xero did most of the heavy lifting for the local tech sector up +3%, EML payments leading the gains up +3.7%, and Afterpay rising +1%.
The New Zealand market fell (NZX 50 index -0.4%) as local investors were more wary of the upcoming US inflation data.
Vista Group was the biggest loser down -3.4% on light volume following a healthy jump on the earlier session, A2 Milk also down -2.9% undoing recent week of recovery.
Mainfreight fell -2.3% after chairman Bruce Plested sold $75m in shares to expand his Waiheke property.
3 Things Markets will be Watching this Week
- Central bank rhetoric globally remains in focus for investors.
- Easily the key data release this week is the May CPI print in the US, which will be released early Friday morning NZ time.
- Aside from consumer confidence data in Australia and NZ, other releases of note this week include the ECB meeting and Scales Corp hosting its AGM.
