Global stocks were higher overnight, with the S&P 500 up +0.34% advancing to fresh all-time highs. Surprisingly, The US 10-year Treasury yield fell to 1.3% on expectations that growth rates are peaking and expectations for inflation to moderate.
Energy stocks led losses, as the price of WTI Crude slipped -1.5%. Bank stocks were weaker, adversely affected by lower treasury yield rates hurting their future profitability prospects. Stocks set to benefit from lower rates were stronger, with materials leading the market high on stronger commodity prices, followed by healthcare.
European Stocks (Stoxx 600) rose +0.8% as commodity related stocks recovered from the previous session and Euope's largest tech company SAP rose +3.5% making the biggest contribution to the index's gain following a broker upgrade.
Closer to home, the travel freeze on NSW & Queensland has been extended indifferently. Meantime ‘green flights’ for Kiwi’s stuck in NSW & Queensland will be able to travel home from midnight Friday (assuming a negative pre-departure test taken within 72 hours before departure). Westpac and ANZ have joined ASB and BNZ in picking the first OCR move will be in Nov of this year. Westpac economists are now picking the RBNZ will raise interest rates three times by May of next year while ANZ economists see the Official Cash Rate hitting 1.75% by Feb 2023.
Argosy Property (ARG:NZX)
Argosy Property shares have been trading higher recently as it is believed to be entering the Global Real Estate Index (FTSE EPRA NAREIT), as with Stride Property group. The more established peers being Goodman Property, Kiwi Property Group and Precinct Property are already in the fund and didn't experience a similar rally. This could be a similar situation to the Clean Energy ETF event that occurred with Contact and Mercury earlier.
We remain HOLD rated on Argosy, on its current valuation now trading +10% above its net tangible asset per share, we see limited upside from here given our view interest rates should rise and put pressure on property valuations.
Australia & New Zealand Market Movers
The Australian market jumped yesterday (ASX 200 index +0.9%), reversing the previous session sell-off.
Most sectors were in the green led by tech stocks, with Afterpay leading gains amongst the blue chip stocks up +4.5%. Energy stocks were the major laggard of the market trading weaker following a slip in oil prices.
Bank stocks were also stronger following an upbeat report showing they look set to benefit from the credit growth forecast based on recent home loan approvals data.
Sydney Airport slipped another -1.3% since popping on Monday – it is reported Macquarie Group (with potential partners including local pension funds) are looking to make a new joint offer for the airport.
The New Zealand market edged lower on Tuesday (NZX 50 index -0.4%), as investors reposition their portfolios, selling their winners in exchange for value.
Freightways led the losses down -2.7%, after climbing 80% over the last 12-months. Fletcher Building was down -2% as it trades at 4-year highs and doubled its share price over the last 12-months – Fisher and Paykel and EBOS were also weaker.
A2 Milk was the biggest gainer of the day up +3.8%, extending its recovery rally. Scales were up +3%, and Auckland Airport rose +2.4% as investors looked for value.
3 Things Markets will be Watching this Week
- Key events this week include Fed's June meeting minutes for their inflation view and bond tapering
- In Australia, covid-19 related developments, RBA's meeting on cash rate, building approvals and retail sales data.
- In NZ, Goodman Property and Investore Property are holding AGM's, and Summerset's second quarter sales update.