Global markets were mixed overnight, as the US market (S&P 500 index -0.2%) traded lower as retail sales for the month of August were stronger than expected.
August’s retail sales increased +0.7% for the month against the Dow Jones estimate of a decline of -0.8%. However, the “good news” soothed concerns around slowing economic growth but caused 10-year treasury rate to rise slightly to 1.33% and had an adverse effect on most stocks – given the implications of the data supporting the Federal Reserve’s plans to taper stimulus.
Closer to home, the strong economic data trends continued. The New Zealand economy grew +2.8% in the second quarter which is better than expected and driven by retail trade, at an annual GDP rate of +17.4%. This caused NZ Treasury yields to jump, in anticipation of the RBNZ’s rate decision in October which is setting up for a 0.50% OCR hike despite the current lockdown.
European Markets were up overnight (Stoxx 600 index +0.4%) buoyed by travel and leisure stocks after the UK announced it may drop travel quarantine requirements. Meanwhile, Chinese stocks remain under pressure.
Myer Holdings (MYR:ASX)
Department store operator Myer has had its shares charging +16% higher yesterday following the releases of strong full year result for the 2021 financial year (ending July 2021).
Myer reported a +5.5% increase in sales to $2,658.3m the key driver of this growth was its online business, which grew +27.7% from last year and now represents 20.3% of Myer’s total sales. This led to Myer delivering a net profit after tax of $51.7m a huge improvement on the $13.4m loss it recorded a year earlier – which was heavily impacted by the lockdown.
While the turnaround is impressive the current lockdown restrictions is casting a cloud of uncertainty, especially heading into crucial Christmas trading period and we are still wary given the majority of profit attributed to government support (Job keeper wage subsidies) and rent waivers totaling ~$51m.
While retail spending and the economy is set to remain supportive, we remain HOLD rated on MYER as we prefer to avoid the stock.
Australia & New Zealand Market Movers
The Australian market was up on Thursday (ASX 200 index +0.6%).
The session boosted by unemployment numbers falling to a 12-year low of 4.5% – however the figure excludes people not activity looking for work which was up due to the current lockdown lowering the participation rate (people activity looking for work)
All sectors were up except for one, with Energy stocks again leading the charge followed by healthcare and financials. Consumer discretionary was the only sector marginally in the red.
Telstra shares were up +0.5% yesterday following their investor day presentation where the outlined its new growth plan by 2025 which would include further costs savings to help generate earnings growth and eventually increase dividends.
The New Zealand market was down yesterday (NZX 50 index -0.4%).
The market had mixed reviews with the defensive, high growth and property companies all generally weaker (being most sensitive to rate hikes). On the flip side, Heartland bank led the market higher rising +6.5% being a beneficiary to both a strong economy and higher interest rates, as well as the ANZ and Westpac also trading higher.
Meridian Energy was up +0.5% after announcing national hydro storage increased from 103% to 126% of the historical average and retail sales volumes were 12.2% higher than August 2020.
Z Energy shares climbed +0.3% after confirming its earnings guidance to be in a range of $270m to $310m, despite the current lockdown dampening demand.
Contact Energy shares had a more muted response to a strong operating stats for the month of August.
3 Things Markets will be Watching this Week
- Key events this week include inflation (CPI) prints in the U.S, Eurozone and U.K along with activity data in China including Retail sales and Industrial Production.
- Australia’s latest employment data and second quarter GDP in NZ are due. Brambles, Telstra, Zip and Pushpay will host Investor Days.
- Covid and lockdown updates both sides of the Tasman
