Global markets were up overnight, as US Markets (S&P 500 Index, +1.2%) initially started in the red but charged higher for the remainder of the day, marking the third day in the green as investors remain comfortable with the Fed’s rate hike plan.
Gains were broad-based with all sectors trading higher, energy and materials leading the charge as peace talks with Russia and Ukraine struggled to make progress, sending oil prices back up.
European Markets closed higher (Stoxx 600 index +0.4%) recovering from an initial fall with oil and gas stocks leading the charge.
The Bank of England raise its cash rate by 25 basis points to 0.75% for the third consecutive time – with a more cautious tone noting further hikes “might” be needed in the coming months and that the Russia-Ukraine conflict is expected to keep inflation higher for longer.
Asian markets were up strongly again with Hong Kong’s Hang Seng soaring +7%, and Chinese CSI 300 Index up +2.0%, after Beijing said they would show support to stabilise equity markets.
Fonterra (FSF:NZX / FSF:ASX)
Fonterra shares fell -2% yesterday despite their result coming in ahead of expectations, as they guided for a softer second half.
Revenue for the half came in at $10.6 billion, up +10% from the previous while gross margins soften due to higher input costs with record dairy prices (which are beneficial to farmers). Net profit after tax came in at $364m down -13% or 22 cents per share. Fonterra guided full year earnings to be between 25 to 35 cents per share, which at the mid-point would fall below the 33 cents per share achieved in 2021 but a significant turnaround from the 2019 low of 19 cents per share.
We are SELL rated on Fonterra and the recent result again highlights the inherent conflicts in FSF’s business model which do not favour shareholders.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index, +1.1%) rallying to a month high, helped by another strong lead from Wallstreet, and unemployment falling to its lowest level in a decade.
A rebound in tech shares was felt across the globe, and likewise on ASX to be the best performing sector – with Block surging +10.2%, Xero and Wisetech Global both jumping +3%, and Aristocrat up +2%.
While the strong employment data boost material and financial stocks, the latter also benefiting from the fed rate hike as well us upbeat economic outlook regardless of hiking rates.
The New Zealand market was up on Thursday (NZX 50 index, +1.0%) after a strong global lead of peace talks and certainty from the Fed, while locally NZ’s GDP rose +3% in the December quarter to offset the lockdown ridden September quarter.
Most of the market was upbeat, high risk stocks leading gains as investors felt confident the worst of the current sell-off could be over.
Travel and tourism plays were also up, Auckland International Airport rising +4%, Air NZ ascending +1.4% and Sky City climbing +1% all benefiting from sooner than anticipated reopening to international travellers. Tourism Holdings was up +2.1% as well, but also announced its has sold its minority stake in Roadpass digital to its JV partner Thor for $23.9m booking a $1.6m gain.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include the US Fed interest rate meeting, Bank of England and Bank of Japan rate calls, inflation data from the Eurozone, and Chinese retail sales, industrial production, and fixed assets investment.
- Locally, NZ fourth quarter GDP results, and Australia’s employment data.