New Zealand Market Movers
The New Zealand market (NZX 50 Index, +0.5%) advanced on Wednesday as NZ inflation data came in below RBNZ’s expectations.
New Zealand’s annual inflation rate remained at 7.2% after the release of the December quarter’s reading for 2022, inline with most market expectations but below RNBZ’s prompting forecasts that inflation has peaked, and the Reserve Bank of New Zealand can slow down the pace of interest rate hikes moving forward.
Ryman Healthcare (+4.3%) continued it advance on Wednesday, adding to the 5% it generated on Tuesday. Kiwi Property Group shares rose +4.3% after revealing record breaking sales for its retail and mixed used properties of $1.7B, which was up +26% from 2019 – its last year of trading unaffected by covid.
Australia Market Movers
The Australian market (ASX 200 Index, -0.3%) fell for the first time in 11 sessions after the release of Australia’s inflation data, which came in hotter-than-expected, at 7.8%.
Similar to NZ, the inflation print was slightly below RBA’s expectations but ahead of market expectations – reigniting concerns that the RBA is set to deliver further rate hikes in 2023.
IT (-1.2%) stocks were the hardest hit, with Energy (-1.2%) also retreating due to declining oil prices.
The Australian dollar climbed to a fresh 5-month high as the market priced in a ninth consecutive rate rise by the Reserve Bank of Australia’s on February 7.
WiseTech Global (+0.1%) remained flat after concluding its acquisition of North American transport management software company Envase Technologies for US$230 million.
Europe Market Movers
European markets (Stoxx 600 Index, -0.3%) declined on Wednesday despite data showing improved business sentiment in Germany. Oil and Gas (-0.9%) and Media stocks (-0.9%) led losses.
US Market Movers
US markets (S&P 500 Index –0.01%) ended flat clawing back earlier losses, as investors digest corporate earnings.
Microsoft’s (-0.6%) earnings beat was initially well received by the market, but turned sour as weak guidance fuelled concerns of slowing growth. It feels very much like it is a “wait and see” moment for the market, as investors weigh the possibility of the “goldilocks” rally fading amidst flat earnings.
Rupert Murdoch scrapped the proposed merger of Fox (+2.42%) and News Corp (4.94%) after investor pushback. In addition to scrapping the merger, News Corp is in talks to divest Move, its property platform which commands a multi-billion dollar valuation. We don’t think this is the end of merger talks – Murdoch scion Lachlan has long been jostling to consolidate power (Murdoch’s children have effective veto power) and we suspect that merger talks will be back on the table with either i) divestments to streamline the operation(s) or ii) the balance of power changing, with another Murdoch child being bought-out (likely James, whose views are a lot more liberal than Lachlan’s).
Stock in Focus: Salesforce (CRM)
Salesforce (CRM) is under activist pressure and hedge fund Elliot Management took a multi-billion dollar stake in the tech giant. This comes on the heels of Starboard, another activist investor, taking a significant stake at the end of last year. The company – run by arch-salesman Marc Benioff – offers market-leading sales management software as well as Slack, the messaging service, but the stock sits at 50% off its all-time highs from 2021, losing over $150B in value. Elliot are a ruthless activist – they will likely be pushing for job cuts, spending cuts and rationalisation to boost shareholder return. The key issue is operating margins – Benioff promised 30% operating margins would be be possible over the long-term – currently margins sit stubbornly in the region of ~20%, weighed down by costly acquisitions like that of Slack and Tableau. We think this is interesting because it’s a read-through for the whole tech industry: tech giants, awash with cash at zero interest rates, have engaged in M&A with little regard for value given. We will be watching closely to see how Salesforce manages activist pressure and suggest this is emblematic of coming activist battles other tech companies (AMZN, GOOG, ADBE) may be facing.
What Markets will be Watching this Week (UTC +13)
Monday
NZ Westpac Consumer Confidence DEC
Tuesday
NZ Balance of Trade NOV
NZ ANZ Business Confidence DEC
AU RBA Minutes of Dec Policy Meeting
Earnings From Microsoft, Johnson & Johnson
Auckland International Airport Monthly Traffic Update
Wednesday
EU Consumer Confidence DEC
CPI (Inflation) data for Australia and New Zealand
Earnings from Tesla
Quarterly updates from Fortescue, Woodside Energy and Mineral Resources
Thursday
GB GDP Growth Rate YoY Final Q3
Bank of Canada Interest rate decision
Earnings from Visa, LMVH, Mastercard
Friday
US Chicago Fed National Activity Index NOV
US fourth Quarter GDP
Earnings from ResMed
Saturday
US Durable Goods Orders MoM NOV