Global markets were lower overnight, as US Markets were sharply (S&P 500 Index -2.96%) lower as fears of Russia-Ukraine crisis will lead to “stagflation”. Stagflation occurs when inflation rises while economic growth slows, and the US last suffered from this economic malady in the 1970s to early 1980s.
The US and allies are considering trade embargo’s on energy imports from Russia, which saw Brent crude oil soar to US$139/barrel at one point before settling lower, following Germany saying they would oppose a full ban but work on lowering their reliance on Russia for fuel, which eased the oil price rally. Fuel price driven inflation is set to slow the economy being a major cause of concern as it eats away at company margins and consumers spending confidence – therefore slowing economic growth.
Investors had a very risk off day, consumer discretionary leading losses, most sensitive to stagflation and lower spending following tech and financials. Airline and cruise liner stocks were down heavily as well as fuel prices rise, adversely impacting their operating costs.
European Markets were also down (Stoxx 600, -1.1%) as stagflation fears bring the market lower, banks and auto sectors led losses, while oil and gas stocks continue to climb higher.
Heartland Group (HGH:NZX / HGH:ASX)
Heartland shares were lower when it delivered it half year result, despite a strong half year net profit after tax of $47.5m, which was up +7.8% from last year. However, Heartland, did not provide a full year guidance unchanged due to covid challenges intensifying.
In the past Heartland traded at a discount to its Aussie lending peers due to the higher risk profile of its loans, but recently has been trading at a much larger premium, on a PE multiple and book value multiple basis. We remain HOLD rated on Heartland.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index -1%) as the war hits investor sentiment.
A continued rise in commodity rise saw energy and material stocks the only two sectors in the green, as markets fret around a supply shortfall.
Tech and healthcare shares lead losses as inflationary concerns saw the chance of upcoming multiple rate hikes increase.
Qantas was hit hard down -7.9%, as surging jet fuel pries will hurt earnings during its current recovery.
The New Zealand market was down on Monday (NZX 50 index -1.9%) as investors were concerned about the economic impacts of surging crude oil prices.
NZ Refining was part of a select few up for the day, as a benefactor of rising oil prices. Large blue-chip names were hardest hit, with Mainfreight down -6.8%, EBOS falling -4.8% and Fisher and Paykel slipping -3.4%.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include the latest US inflation (CPI) print.
- The European Central Bank (ECB) meeting and trade data from China will be closely watched.