New Zealand Market Movers
The New Zealand market (NZX 50 Index, +0.5%) rose on Monday with some companies set to benefit from China relaxing its zero-covid policy performing the best. Auckland International Airport (+2.6%) and Air New Zealand (+0.6%) among the gainers. However, gains were muted due to the reports being unconfirmed.
Eroad (+12.2%) surged after increasing its lower-end revenue guidance to $154 million from$150 million after renewing a two-year North American contract.
Australia Market Movers
The Australian market (ASX 200 Index, +0.6%) rose on Monday on the same optimism concerning China buoying the NZ market. Materials (+3.7%) and Energy (+1.4%) led sectorial gains, while IT (-2.2%) and Financials (-1.4%) led losses.
ANZ (-1.7%), NAB (-1.2%), and The Bank of Queensland (1.0%) all sold off following Westpac’s result which had some
Europe Market Movers
European markets (Stoxx 600 Index, +0.3%) rose slightly on Monday to a seven-week peak. Travel stocks (+1.6%) led the way higher, with the sector now at a three-month high. Meanwhile, European luxury stocks dipped, including LVMH (-1.5%), Pernod Ricard (-1.1%) and Hermes (-0.7%). Pernod Ricard reports earnings this week. We currently recommend exposure to the luxury drinks segment via Brown Forman and LVMH. Pernod’s results will give us more colour on the sector; currently it’s been largely immune to the recessionary environment and has acted as a “safe harbour” for investors (in liquor we trust?).
US Market Movers
US markets (S&P 500 Index +1.0%) gained ahead of the US midterm elections.
The elections will determine which party controls Congress and the direction of government spending and ability to enact policy/ regulation changes. Republicans are the favourite to win a majority in the House of Representatives and the Senate, which will likely stymy Democratic spending and regulatory plans. A deadlock in Congress is typically seen as positive for investors who are generally resistant to government interventionism.
Elsewhere, Meta (+6.5%) surged on reports that the company will begin mass layoffs this week to rein in its expenditure.
Stock In Focus: Westpac Group (WBC.ASX)
Westpac (-3.9%) sold off after reporting a 1.0% decline in its 2022 cash profit to $5.276 billion. Additionally, the bank noted the many uncertainties facing the company and their clients, including high inflation and rapidly rising interest rates however, they had not yet registered an increased in hardship or stressed assets. Most parts of the result were mostly inline but given the strong run in bank stocks over the last month investors were expecting better net interest margins towards the close of the year.
Westpac also raised its cost target from $8 billion to $8.6 billion, citing cost inflation and regulatory compliance costs.
We remain BUY rated on Westpac due to its attractive dividend, over the medium term as it benefits from margin expansion and adjusted cost out programme (like with any buy rating we to warn investors to act cautious and let some of volatility play out over the near-term, and is suited for medium-term investors). We anticipate loan growth to slow making for challenging market conditions which is mostly priced in and balance sheet adequate to handle a moderate pull-back in the house prices from here, a real risk is a major housing crisis which is now a slim but foreseeable risk to consider given rapid rate rises by central banks both sides of the Tasman.
What Markets will be Watching this Week (UTC +13)
Monday
Tuesday
AU Westpac Consumer Confidence
AU NAB Business Confidence reports.
Wednesday
CN Inflation Rate year-on-year OCT
Thursday
AU Consumer Inflation Expectations NOV
Friday
US Inflation Rate year-on-year OCT
GB GDP Growth Rate year-on-year Q3
NZ Business NZ PMI OCT
Saturday
US Michigan Consumer Sentiment NOV