Global equity markets were mostly weaker overnight (S&P500 index -0.4%) with US markets traded lower as interest rate sensitive technology stocks were sold off in favour of cyclical names and those set to benefit from economic recovery following release of more strong economic data.
The ISM Non-Manufacturing indicator of services activity pointed to a record level of expansion and jobless claims and private payroll numbers were better than expected – with the market waiting in anticipation of the monthly jobs report due on Friday. Interestingly, President Biden indicated that he maybe open to a lower corporate tax rate than 28%, in negotiation for his infrastructure spending bill.
Utilities and consumer staples were the best performing sectors followed by Financials, with Goldman Sachs (+1.5%) and Bank of America (+1.3%). Ford Motor rose +6.9% after releasing strong sales data for the month of May, including sales for its Electric Vehicles (EV's).
European markets (Stoxx 600 index -0.1%) was little changed, following a heavy slump in early session to recover losses as Eurozone factory activity data beat expectations.
Waste water treatment company DEM shares were up +2.5% yesterday, after delivering a solid trading update for the current (2nd – June) quarter.
DEM expect cash receipts to come in at $4.5m to $5m, which represents growth +32% to 47% growth from the previous year. Excluding the new Capic acquisition, 2021 first half cash receipts is expected to grow +23% (at the mid-point of the guidance)from the previous year with growth driven by recurring revenues, projects and equipment sales as the business scales up.
We continue to remain BUY rated on De.mem with growth from the underlying business and synergy from the recent Capic acquisition set to provide upside for investors over the medium-term.
Australia & New Zealand Market Movers
The Australian market rose again yesterday (ASX 200 index +0.6%), supported by another solid session of trading across most of the market.
All sectors were in the green except consumer discretionary, with energy stocks being the best performer as the price of Brent crude jumped another +1.5%.
Financials were also strong after a broker upgrade forecasting the major banks ANZ (+1.5%), Westpac (+1.1%), Commonwealth Bank (+0.9%), National Australia Bank (+0.9%) would continue to outperform the broader market.
Retail conglomerate Wesfarmers (-2.1%) was down following comments from the CEO saying ongoing covid-19 related lockdown and operating restrictions would make retail trading volatile – added to by the recent Melbourne lockdown being extended.
The New Zealand market was a touch weaker yesterday (NZX 50 index -0.1%) on another quiet day of trade as investors wait for the much awaited jobs data from the US which is to set the tone for signs in economic recovery and guidance on when global rates could rise.
NZ King Salmon dropped -5% after releasing another challenging trading update, as warmer water over the summer months hinder fish harvest levels – resulting in smaller fish. Management did not provide guidance but added demand remained strong with lower volumes set to be partially offset by better pricing delaying its post-covid recovery. Scales shares being one of the few top performers up +2.8%.
3 Things Markets will be Watching this Week
- Highlights this week include US Nonfarm payrolls (monthly employment data), and the latest ISM Manufacturing print in the US.
- Central bank rhetoric globally remains in focus for investors.
- Locally, the RBA takes centre stage on Tuesday along with Q1 GDP in Australia.