Global markets were mixed overnight, as stocks on Wall Street rose for the first time in four days, boosted by a rebound in technology stocks, but gains were kept in check after the International Monetary Fund said the China-US trade war would slow global growth.
Rising US bond yields continue to keep a lid on equity markets across Asia, with the ASX and NZX remaining under pressure. Higher interest rates are weighing on growth-orientated stocks in the short term, and call into question high valuations on sectors such as Technology and Healthcare.
As we discussed yesterday, the pace of interest rate moves higher will be a key factor for driving markets, given the importance of interest rates for driving economic growth and influencing valuations. We are watching developments closely, as volatility looks to be returning to markets after what was another unusually quiet quarter for stocks.
Stock in Focus: Next DC (NXT:AX)
Data centre business NEXTDC was the best performer on the ASX index yesterday, despite lifting only 2.6% to $6.29. We have held a positive view on NXT as one of our top growth stocks on the ASX given its exposure to the “explosion of data” investment theme, as data continues to grow at a tremendous rate, and therefore the demand to store it securely and reliably.
Next DC announced it will take over a property trust which owns three facilities it runs, ending a long-running battle with its landlord in a $232 million deal. The deal was sealed with the acceptance of the $2 per share cash offer by 360 Capital, the majority owner of the Asia Pacific Data Centre Group property trust (APDC).
Next DC will tap existing reserves to fund its acquisition of the 70.8% of APDC it doesn't already own, and removes what has been a long running battle and distraction for the business.
We currently have a BUY recommendation on Next DC.
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Australia & New Zealand Market Movers
The Australian share market was lower on Tuesday ASX 200 index -0.97%) putting in another weak performance as healthcare and technology sectors were hit hard and caused the ASX to lag, hovering just above 6000 percentage points at the close of trade. Recent market leaders such as healthcare giant CSL led losses.
The New Zealand market continued to sell-off yesterday (NZX 50 index -0.84%) as NZ shares fell for a 7th day. Investors are readjusting to higher interest rates in the US, which is putting pressure on stocks that have been trading at high valuations. In stock news, Z Energy Chief Executive Mike Bennetts hit back at Prime Minister Jacinda Ardern's claim petrol companies were fleecing their customers. saying her attack was out of line with Z Energy's experience.
3 Things Markets Will be Watching this Week
1. Trade related news-flow is likely to continue to feature in headlines.
2. In an event light week, Tuesday’s Aussie Business Confidence survey will be carefully watched for any adverse impacts from US-China trade risk and the housing slowdown.
3. Important US inflation data is published on Friday.
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