Global markets sold off overnight as the US market slipped (S&P 500 index -1.5%) led by losses in the technology sector. The Nasdaq technology index pulled back sharply, falling 3% by the close of trade.
After dipping when the US Federal Reserve yesterday raised its growth forecast and said it will tolerate increasing inflation, US bond yields jumped 0.1% following a report the Bank of Japan may soften its grip on yields. That has been cited as a reason for pressure on rate sensitive US growth and defensive stocks overnight, with investors taking profits as technolgy stocks remain particularly volatile.
Wastewater treatment business De.mem (DEM) shares were in trading halt and continue to swing after announcing it plan to raise additional capital offering new shares at $0.28 a piece to acquire Citic – a specialty chemicals business serving Western Australia.
Given De.mem's success with recent acquisitions and their ability to cross-sell their existing product in an area they are under-represented (Western Australia) the deal will likely be hugely beneficial. Citic's ~50 Blue chip mining clients include the likes of BHP, Northern Star, Pilbara Minerals and Iluka Resources.
We encourage eligible shareholders to participate in the capital raise and continue to remain BUY rated on DEM at current levels.
Australia & New Zealand Market Movers
The Australian market closed lower again yesterday (ASX 200 Index -0.7%), as banks and late caps wilted on the prospect of future interest rates increasing sooner than anticipated. A surprising -0.5% fall in the unemployment rate to 5.8% (despite the participation rate remaining high) caused a sell-off in government bonds, leading bond yields to rise.
Large caps accounted for most of the losses with Commonwealth bank of Australia down -1.6%, and other banks also easing back. CSL fell, as generous stimulus cheques will likely make blood plasma donors less forthcoming over the near-term.
The New Zealand market was down on Thursday (NZX 50 index -1.0%), on the back of an announcement that NZ GDP figures were down -1% in the December quarter.
Travel stocks got a boost from the increasing likelihood of a travel bubble with Australia and the Pacific Islands next month. Auckland Airport set to benefit the most, while Air NZ would still be loss making, but limit their cash burn should the bubble open soon. Tourism Holding gets. ting a minor boost as they are more reliant on long haul travellers and given timing misses their peak season.
The Gentailers were weaker with Genesis down (-4%) on fears of interest rates could be set to rise, while Contact (-2.0%) and Meridian (-4.7%) were again impacted by the news of the impeding sell down from the ICLN green ETF expected to be decided by the start of April.
3 Things Markets will be Watching this Week
- Highlight this week include the latest US Federal Reserve rate decision and Fed Chair Jerome Powell’s news conference along with rate calls from the Bank of England and Bank of Japan. The announcements will be watched closely given the recent move in interest rate markets.
- In Australia, the latest minutes from the recent RBA meeting are due along with employment and retail sales data.
- In NZ, 4th quarter economic growth (GDP) data is scheduled for release later in the week while Briscoe Group, Fonterra and The Warehouse Group will all report earnings.