Global markets were weaker overnight, but while US markets (S&P 500 -0.1%) slipped slightly they managed to finish the month strong +2.9%, wrapping up its seventh-straight month of gains – the longest wining streak since Jan 2018.
Closer to home, the Australian market broke a record, with the ASX have improving for an 11th consecutive month, the longest monthly streak in the market’s history. Looking in the rear vision mirror for the NZ market for August, the NZX rebounded +5%, the strongest month since November last year. NZ has underperformed global markets year to date and is now back at unchanged for the year (to the same level as January when we had the clean energy ETF inflows driving up the price of Meridian & Contact Energy).
The weakness in the session followed weak economic data from China. China manufacturing PMI data were on the soft side, more so for the non-manufacturing sector index which plunged to 47.5, well into contraction territory (below 50) reflecting by lockdown restrictions to contain the virus.
The US market was led lower by the Energy (-0.7%) and Tech (-0.6%) sectors, partial offset by the Real Estate (+0.6%) and Communication Services (+0.6%) sectors trading upwards. South Korea passed a new bill that will force Apple (-1.0%) and Alphabet (+0.0%) to open their app stores to alternative payments spurring weakness across the two tech giants.
European Markets trended down overnight (Stoxx 600 index -0.5%) as inflation numbers indicate that their central banks will start discussing a tapering in bond buying. Like the US, Europe ended the month up over 1% marking its seventh consecutive month of gains.
Harvey Norman (HVN:ASX)
The Harvey Norman share price was down -3.4% yesterday despite the retail giant delivering a record profit for the 2021 financial year. For the 12-months ended 30 June, Harvey Norman posted a 15.3% increase in total aggregated sales to $9,491m and a 63% jump in profit after tax to a record $743.1m,
Overshadowing this was news that sales were down sharply in July and August due to lockdowns – as well as the dividend which disappointed some.
Given Harvey Norman’s current valuation and our view that “stay at home” spending will likely to soften from here on out and not receive a similar surge in demand from previous lockdowns. We believe Harvey Norman is overvalued based on medium earnings expectations and therefore remain HOLD rated.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.4%), finishing the month strong near all-time highs and capping off 11th consecutive monthly gain.
CSL was up +0.5% leading the broader healthcare sector higher, Clinuvel Pharmaceuticals jumping +10.7%, Healius climbing +4.5%, ResMed up +3.3%.
Australian Tech stocks were strong following a strong lead by Wall street, Appen climbing +7%, Wisetech Global up +5.7% and Next Dc advancing +3.5%.
A dip iron ore prices saw major miners slip slightly whist miners linked to electricals were strong with Orocobre up +4.7% and Lynas up +3.3%. The Energy sector was also weaker as the recently rise in oil prices was believed to be short lived due to hurricane Ida.
The New Zealand market was up on Tuesday (NZX 50 index, +0.3%), on a relatively quiet day in regards to news flow but trade volume was high as funds rebalanced their portfolio’s.
Sky TV led the market higher up +8% on higher volume as investors bet on a turnaround.
Sanford shares fell -2.8% after releasing a trading update stating increased costs and shipping delays will cause the business to report a weaker profit.
Rua Bioscience was up 5% bouncing back after a weak session on Monday as investors reacted negatively to its dramatically increased cash burn rate.
It is also suggested Ampol may reportedly take a look at the auction for Meridian Energy’s Australian renewable energy business where the price for the portfolio is expected to be ~$1 billion.
3 Things Markets will be Watching this Week
- Locally Earnings season eases down. Major names including Fortescue, Altium, Harvey Norman, Healius, and Crown.
- ANZ Business Confidence survey in NZ will be released along with Q2 GDP in Australia.
- Globally, economic events this week include Nonfarm payrolls in the US along with the latest ISM activity data, Chinese PMI data and Eurozone CPI.
