Global markets were higher overnight, as the US market (S&P 500 index +0.6%) rose strongly towards the end of the session following the much anticipated US Federal Reserve decision, with gains broad based.
The Fed said it will begin tapering bond purchases “later this month” and will reduce buying by $15 billion a month, putting it on track to end the quantitative easing by the middle of next year – stating that the US economy is strong enough for it to slow pandemic buying/support. This timeline and amount was in line with expectations. However, the Fed said it is prepared to alter the pace of purchases if warranted by changes in the economic outlook. It follows that we could get US interest rate hikes in the 2nd half of next year.
A slew of corporate earnings and announcements jolted certain equities on Wednesday, Lyft jumped 8.2% on strong third-quarter results and CVS Health rose 5.7% on better-than-expected earnings. While some didn’t fair too well, Activision shares tumbled -14.1% after it said the launch of two games would be delayed and issued weak holiday guidance.
European Markets (Stoxx 600 index +0.3%) were higher as oil and gas stocks fell while miners rose +1%.
Closer to home, NZ’s Employment unemployment came in at 3.4% for the end of September, well below the 3.9% expected, while the key labour cost index rose by +0.7%. This puts RBNZ in a situation where 0.25% official cash rate hike in November appears almost certain, while opening up possibility of the 0.50% hike is on the cards. The dilemma is interpreting the data while taking into account the effects of the current Auckland lockdown which are still huge, and the impacts on businesses and employment once government supported wage subsidy schemes end.
Z Energy (ZEL:NZX / ZEL:ASX)
Z Energy managed to deliver a sound result for first half of the 2022 financial year (Ending 30 September 2021) including just over 5-weeks of lockdown. Total fuel volumes were up +11% from same period last year, as the current lockdown was less impactful (than the first being more restrictive and nationwide) and fuel volume pre lockdown must stronger than the same corresponding period last year. As a result, Earnings (Replacement cost EBITDAF) came in at $114m, up +20% from last year. Earnings were also supported by better refining volumes, while fuel margins tightened towards the end of the period due to rise in oil prices.
Z Energy announced a 7 cent per share interim dividend, and expect 2022 full year earnings to be between $270 to $310m despite the ongoing lockdown in Auckland.
We remain HOLD rated on Z Energy at current levels.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.9%), recording its best session in a month.
A strong lead from Wall Street and supportive commentary from RBA saw all stocks rise strongly except for Technology, with Materials and Financials leading gains.
CBA shares rose +1.2% after announcing it would partner up with Gemini to offer crypto investing to 6.5m of its mobile app users. AMP jumped +9.3% after announcing the sale of its stake in Resolution Life Australia for A$525m, marking its exit from the life insurance business.
Iron ore miners were up recovering from recent low’s despite the price of iron or slipping further due to weakening steel production and economic slowdown in China. Miners linked to electric vehicles were the highlight Orocobre up +6.7%, and Lynas Group rising +2.5%.
The New Zealand market was flat on Wednesday (NZX 50 index +0.01%) as investors digested the implications of strong employment data, with mixed results.
Stocks linked to the economy were generally higher, Tourism Holdings (+2.5%), Vista Group (+2%), Kathmandu +1.9% and Fletcher Building (+0.4%). Fisher and Paykel (+1.9%) and Pushpay (+1.6%) were both higher in anticipation of their half year results later this month.
Most of the market being sensitive to interest rates slipped, as the employment data increases the chances of a +50 basis point OCR hike in November.
3 Things Markets will be Watching this Week
- Key events this week include RBA announcement, Fed meeting this week, Bank of England announcement, and employment data (nonfarm payrolls) in the U.S.
- US Third quarter Earnings continues with Pizfer, T-Mobile, Uber, and Lyft among those reporting this week
- Locally, earnings from Westpac, Goodman Group, Amcor and Z Energy, quarterly updates from and AGM’s being held by Worley, Domino’s Pizza, Qantas, Spark NZ and Precinct Properties.