Global markets were weaker overnight (S&P 500 index -0.8%) as climbing Treasury yields created concerns equities are overvalued hitting shares of high-flying growth companies the hardest, while commodities rallied with investors pricing in stronger growth and faster inflation as the global economy recovers from the pandemic. The US Nasdaq Technology index pulled back -2.5%.
Shares of Apple, Microsoft, Alphabet, Tesla, and Amazon resumed their slide from the previous week, with Tesla suffering the biggest hit, down -8.5%. On the flipside, the industrials and financial sector rose +0.3% and +1.0%, respectively, while energy stocks surged 3.5% on higher oil prices. Value stocks continue to outperform recently as inventors betting on a rebound in industrial activity and a pick up in consumer demand in-line with the roll out of vaccine worldwide, while financials are seen as benefitting from higher interest rates.
Costa Group (CGC:ASX)
Agriculture company Costa group (CGC) shares were the star performer yesterday, jumping +13% after delivering tis 2020 financial year result, as it recovered from challenging drought conditions from the previous year.
Costa revealed that its revenue increased by +11.2% to $1.2 billion, and underlying operating earnings (EBITDA) rose 47.2% to $144.8m. The improvement was across the board with successful execution of business fundamentals including yields, quality, costs and COVID-19 management, as well as helped by favourable market conditions, supported by positive demand and pricing, especially in the citrus, berry and avocado categories. Costa continues to turn around after experiencing a couple of horrendous years in terms of difficult weather, growing conditions and one-off events.
While there are always agricultural related risks, we continue to remain BUY rated on Costa Group and the company now appears to be in its best position since listing, in our view.
Australia & New Zealand Market Movers
The Australian market fell on Monday (ASX 200 index -0.2%), as earnings season was in full swing. Higher interest rate worries were the major drag on equity valuations – particularly on stocks which have had a strong run trading on expensive valuations. Travel stocks managed to buck the trend edging higher as Australia's vaccine programmes begins to roll out, with Sydney Airport up +1.3%.
Macquarie rose +3.4% after announcing its 2021 profit will be 5% to 10% higher due to extreme winter weather in North America benefiting its physical energy and gas supply business. Insurance company NIB rose +6.5% after holding its interim dividend steady as first half profit rose +16% with covid-19 driving interest in private health insurance.
Advertising provider ooh Media surged +14% after revealing their 2020 numbers which were weak as expected, but the market was encouraged with trading conditions for the fourth quarter and start of 2021 was not as bad as feared, and the vaccine roll and workers to physically commute to work improve near term outlook.
The New Zealand market joined the general fall in global markets (NZX 50 index -1%) yesterday as investors re-evaluated equity asset valuations, given the NZ market is heavily dominated by lower risk dividend paying utilities – which have benefited from significant drop in interest rates which is now starting to reverse.
Heartland bank shares managed to hold flat, after reporting it lifted first-half net profit by 10.6% and said it expects the full-year result will come in at the upper end of guidance.
Domestic logistics firm Freightways pulled back -2.1% yesterday after reporting a weaker net profit of $22m for the six months ended December 2020.
3 Things Markets will be Watching this Week
- Once again, corporate earnings dominate the week ahead on both side of the Tasman.
Key results include Bluescope Steel, Chorus, Freightways, Mercury NZ, Summerset, Woolworths, Vocus, Sydney Airports, Scentre Group, Meridian Energy, Spark NZ, Flight Centre, Qantas, Zip Co, Stockland, Afterpay, Ramsay Health Care, Air NZ, a2 Milk, Precinct Properties, and Genesis Energy.
- The RBNZ’s official cash rate call on Wednesday will be a focus.
- From a macroeconomic point of view, investors will be keeping a nervous eye on bond markets as the growing chances of normalization on a global acceleration of vaccinations and rising commodity prices leads to a rise in bond yields amidst inflationary concerns. Vaccine & COVID news flow also continues to dominate headlines.