Global markets were higher overnight, with US markets (S&P 500 index +0.9%) marking the fourth straight day of gains as investors direct their attention to mixed earnings results.
Alphabet (Google) rose +7.4% during normal trade following their strong earnings beat. Chipmaker AMD rose 5.1% on strong earnings and guidance, while Qualcomm rose +6.2% ahead of its earnings.
On the flipside, Paypal tanked -24.6% after issuing disappoint guidance, blaming inflation and Starbucks dipped -1% slightly after reporting earnings miss and cuts its earnings guidance outlook for 2022.
We see increased dispersion in returns across stocks this year, as some outperform while others lag, a good environment for stock picking rather than passively buying the market.
Overall it was a generally upbeat day as some stocks which recovered strongly over the last week also pulled back as investors looked to take profit, like Netflix (-6%), Tesla (-2.8%). After hours Facebook (Meta) has come our with a weak result.
European Markets (Stoxx 600 index +0.7%) lost steam along with the US markets but still ended up +0.7% as strong earnings outweighed concerns that the European Central Bank would announce interest rate hikes at its meeting today; financials increased +1.1% on prospects of higher rates.
Tower Insurance (TWR:NZX / TWR:ASX)
Tower Insurance shares jumped +5.2% yesterday after holding a positive AGM, reiterating their 2022 full year net profit guidance of $21m to $25m. The Tongan eruption update is still being assessed, with a clearer a picture 1-2 months away, with reinsurance cover up to $873m of cover for catastrophe events like this and a statement that the reinsurance excess of $11.25m is within the $20m aggregate Tower has set aside this year.
Operationally Tower is performing well experience Gross Written Premium growth of +12% over the same period last year which is related to inflation based rating adjustment and that customer numbers grew +6,000 over the first quarter to 310,000.
We remain BUY rated on Tower, as it offers an attractive divided yield ~7%, and part of its business (investment income) benefits from rising interest rates.
Australia & New Zealand Market Movers
The Australian market was up on Wednesday (ASX200 index +1.2%) as investors weigh up strong corporate earnings against recent interest rate driven sell-off.
Most sectors were up with Energy and Materials leading gains on strong commodity prices, a weaker Aussie dollar boosting earnings outlook for many exporters.
Telstra’s shares were up +1% after announcing plans to invest $1.6 billion into two major telecom infrastructure projects. Aristocrat shares rose +0.9% after failing to close the $3.9 billion Playtech acquisition after failing to reach 75% shareholder approval.
The New Zealand market (NZX 50 index +1.9%) was up strongly yesterday, with modest gains across most of the market.
Mainfreight led the market higher surging +6% after delivering a solid trading update, as it continues to benefit from attractive Air and Oceans rates, as revenue rose +45% from last year, and profit before tax up +85%.
Tower jumped +5.2% after reconfirming its earnings guidance of $21m to $25m, and reporting it adding 6,000 new customers.
Travel stocks were higher Auckland International Airport (+5.5%) and Air NZ (+2.7%) in anticipation of the NZ Government’s announcement today on possible relaxation of international borders for NZ citizens, (particularly critical workers) who are still required to self-quarantine at home.
3 Things Markets will be Watching this Week
- A big week of data, with US employment numbers (nonfarm payrolls), Bank of England and ECB meetings due this week
- US earnings from Alphabet, Meta Platforms (Facebook), and Amazon are set to be reported this week
- Locally, the RBA announcement on the cash rate will be made today and NZ employment data will be closely watched.
