Global markets were up overnight, with the US market (S&P 500 index +0.3%) closing just shy of its record high as investor sentiment was boosted by another session of better-than-expected earnings reports.
It was a lackluster session in terms of specific news, but, broader risk appetite has improved with corporate earnings the focus. In saying that, the Nasdaq continues to lag as technology stocks took a breather, with Netflix shares trading lower as their guidance outlook failed to impress the market.
The China property crisis remains in headlines, on reports Evergrande's proposed sale of its property management unit may have fallen through..
European Markets (Stoxx 600 index +0.4%) were up overnight, with most sectors in positive territory. Food and beverage stocks +1.9% led gains, while travel and leisure stocks slipped more than -1%.
Closer to home, banks continue to hike mortgage rates & ANZ no longer offering any mortgage below 3%, they are pushing thru +45bps change with now 4-5 year fixed rates well above 5%, and other banks are likely to follow suit.
Fletcher Building (FBU:NZX / FBU:ASX)
Fletcher Building shares have been trading higher over the last couple of days since their AGM, letting investors know they have been trading well since Auckland returned to level 3 and construction activity is back on across the country.
Unfortunately due to the 5-week level 4 lockdown in Auckland Fletcher anticipates margins will be weaker for the first half of the 2022 financial year, but anticipated a strong second half and management is upbeat construction activity will remain supportive for further earnings (EBIT) margin expansion to 10% in 2023.
FBU also remain committed to their share buyback programme with 329,0000 shares bought yesterday.
We remain BUY rated on Fletcher Building – which is set to benefit from Government’s push to incentivize and push residential building activity to meet the housing crisis.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.5%) following a positive lead form Wall street and a number of positive updates.
Worley rose +7.4% after a broker upgrade stating with would be best benefit from increased investment into zero carbon emission energy transition, after winning a major service contract with Shell.
Kogan.com rose +6.7% after reporting gross sales rose +21.1% from the previous year and the retailer managed to reduced inventory levels which was a concern for investors. Beach Energy tumbled -3.7% due to delays to Western Flank production and lower realised gas prices.
Financials led the market higher as covid cases start to ease, hinting towards a return to normality.
The New Zealand market was up on Wednesday (NZX 50 index +0.4), as investors jitters eased.
A2 Milk led the market higher again +6.2% following another competitor Danone reporting a recovery in its daigou infant formula sales channel (which had been the major bane to A2 Milks’ share price for most of the pandemic). There was also an Aussie broker upgrade on the stock as well as pressure from a short squeeze, again forcing short sellers to close their positions.
Kiwi dollar pressure weighed down on exported Mainfreight slipping -2.7%, while Fonterra (-2.3%) and Pushpay (-1.1%) were also down.
New housing rules announced by the Government and National Party may raise questions about the quality and appropriateness of new homes being developed, one construction expert says “the question mark is whether or not they are in keeping with the locale, sight lines, daylight provision”. The new rules benefit smaller sites to erect 3x 3-story homes without building consent, increasing land value of sites which previously had no development opportunity and the longer term boosting supply.
3 Things Markets will be Watching this Week
- Key events this week include third quarter economic growth data (GDP) out of China and CPI (inflation) prints across Europe
- US Third Quarter Earnings Season kicks into gear this week.
- Locally, NZ CPI (Inflation) data is due as well as quarterly updates from listed companies, while the latest lock down restriction updates will be closely followed
