Global markets were mixed overnight (S&P 500 index -2.1%) but US markets were hit hard as inflation for the month of April shocked.the market (up +4.2% year on year), driving down US equities and lifting US Treasury Yields and the US Dollar/
US core inflation (CPI) numbers for the month of April showed a +0.9% increase month on month, and 3.0% year on year, well ahead of consensus expectations as the largest monthly increase since April 1982, and largest annual increase since 1996.
The implication is that interest rates will be set to increase sooner than anticipated if this level of inflation was to continue to persist. US Federal Reserve Vice Chair Richard Clarida said he was surprised by the rise in consumer prices and “we would not hesitate to act” to bring inflation down to its goals if needed. The Technology heavy Nasdaq was hardest hit amongst the three major US indices down -2.7%, with all sectors but energy trading in the red.
European markets rose (STOXX 600 index +0.3%) on the back of positive earnings results as well as optimism about the economy reopening and booming commodity prices.
Pushpay (PPH:NZX / PPH:ASX)
Pushpay (PPH) shares were up +1.9% after delivering a strong set of numbers for the 2021 financial year.
The Church Payment and management software provider saw operating revenues jump +40% for the year, and operating earnings (EBITDAF) of $68.3, more than double the last year as it benefitted from customer growth, increased processing volumes and scale of operations – while overall growth is starting to slow as customer additions are at the lower end of medium to large category.
Looking ahead, Pushpay's earnings guidance appears conservative given uncertainty in the US market post covid-19 and Pushpay's heavy investment into growth initiatives, as well as development of additional products.
We continue to be BUY rated on Pushpay as we believe it is still reasonably priced with a solid growth path ahead (albeit at slower rate than experienced earlier).
Australia & New Zealand Market Movers
The Australian market (ASX 200 index -0.7%) fell for the second day in a row following global market moves.
CBA released a solid result for its third quarter, with cash net profit up +24% over the quarterly average reported in the first half. Despite the result CBA shares were lower along with the major banks, followed by the major miners as price of iron ore dipped from its record high.
Travel stocks were hardest hit following the federal government's expectations that international borders will remain closed until mid-2022 (longer than anticipated) – Sydney Airport fell -4.8%, Flight Centre was down -4.5% and Qantas declined -3.4%.
Losses were mitigated by a rise in tech stocks as investors buy the recent dip, followed by consumer discretionary stocks which also performed well.
New Zealand’s main share index fell again (NZX 50 index -0.6%) yesterday as inflation concerns weighed down on Blue Chip stocks.
Ryman Healthcare posted the biggest gain up +3.5% as Australia's latest budget allocated significant support and resources to the aged-care sector, followed by Fonterra which rose +3.3% recovering from its recent sell off. A2 Milk appeared to have found a bottom, and is safe from being removed from the MSCI AC World index. Rubber goods manufacturer Skellerup led losses falling -4.3%.
3 Things Markets will be Watching this Week
- COVID, lockdown, and vaccine related news-flow globally continues to dominate headlines.
- Economic data highlights this week include inflation prints in the US and China along with the latest retail sales data in the US.
- Closer to home, retail sales in Australia are due on Monday while a number of earnings reports will be released including Pendal, AusNet, CSR, Pushpay, Graincorp, Xero, Orica, Goodman Property and Tilt Renewables. CBA will round out the bank reporting season with its Q3 update while Meridian Energy will host an Investor Day on Tuesday.