Global markets were lower overnight (S&P 500 index -0.7%), as investors rotated back into cyclical and value stocks as Treasury Secretary Janet Yellen's commented that interest rates need to rise somewhat to keep the economy from overheating. This sentiment echoed recent comments by some Federal Reserve members, but is far from the consensus view publicised by Chairman Jerome Powell – that the Fed is committed to low interest rates.
The tech heavy Nasdaq slumped -1.8% as mega cap growth technology stocks were hardest hit by profit taking on concerns of rising interest rates reducing valuations. Microsoft fell (-5.1%), Apple (4.1%), Nividia (-4%), Amazon (-3.2%) and Salesforce (-3%). Cyclical financial, materials, and energy sectors remained in the green.
European markets (Stoxx 600 index -1.4%), fell to a similar tune with tech stocks down -3.8% to lead the losses amid fears over high valuations and that the reopening of economies after tough covid-19 restrictions would limit their growth.
PGG Wrightson (PGW:NZX)
PGG Wrightson (PGW) shares have been recovering well as NZ primary sector performs well on the back of strong demand for most of their agriculture products both locally overseas.
Accordingly PGW delivered a solid result for the first half their 2021 financial year operating earnings up +21% to $42.1m, and recommence its dividend payments as covid-19 related uncertainty wains off for the agriculture sector.
While the fundamentals of PGW's are still attractive, we believe at their current valuation PGW is fully priced provided limited upside for investors and are not compensated for the risks such as weather and commodity priced faced by the less diversified smaller PGW business. We would prefer the stock at a more attractive risk (lower) adjusted valuation.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.06%), edging close to hitting fresh record high after the Reserve Bank of Australia provided an upbeat assessment of the domestic economy – and at the same time said it would continue to maintain easy monetary policy.
Companies that presented at Macquarie Australia conference were mostly higher as they gave investors insights into how their businesses are performing between the February and August earnings – highlighting inflation being the major cause of concern.
Gold miners ended the day stronger as the price of the precious metal rose, helped by weaker than expected US manufacturing activity, followed by energy stocks. Financials were flat with some profit taking after Westpac's result rally, while technology stocks were the worst performers on the market.
The New Zealand (NZX 50 index +1.0%) market rose on Tuesday, as beaten down dairy companies attracted buyers.
A2 Milk was the best performing stock of the day up +3.4%, after being sold off heavily, likewise its supplier Synlait rose +3% – both being impacted by travel restrictions impairing one of their key sales (Daigou) channels.
Mainfreight rose +2.2% heading into its financial result which is due later this month as it benefits from increased logistical demand and high freight costs. Fisher and Paykel healthcare rose +0.5% which is also tipped to deliver a strong result.
3 Things Markets will be Watching this Week
- There are 140 S&P 500 companies reporting this week including PayPal, General Motor, DraftKings Inc, Wynn Resorts, AIG, Pfizer, Moderna Inc.
- Also this week in the US there is the release of monthly employment data (nonfarm payrolls) and the monthly ISM Manufacturing survey.
- Closer to home, we have the latest RBA interest rate decision, employment data in NZ and earnings from Westpac, ANZ, NAB, Macquarie Group and Z Energy
