Global markets were mostly lower overnight, as the US market (S&P 500 index -0.1%) slipped for a third straight session. There seems to be small profit taking as investors reassess the economic growth outlook, with growth likely to have peaked and the prospect of the Federal Reserve and the European Central Bank tapering their bond purchase programmes seemingly all contributed to market weakness.
The US Labour Department released the Job Openings and Labour Turnover Survey, which showed job openings rose to a record 10.9 million for the month of July. This prompted investors to take profit from mega cap tech names, while energy sector sustained the largest losses followed by materials, with investors shifting towards more defensive real estate and consumer staple stocks. PayPal shares were down -1.4% after announcing its intention to acquire Japanese buy now, pay later firm Paidy for US$2.7b.
European markets fell overnight (Stoxx 600 index -1.0%) as investors become nervous over economic growth and a change to the ECB's stimulus program, with losses led economically sensitive stocks.
Closer to home, the NSW government is aiming to ease lockdown restrictions and quarantine requirements for international travelers by mid-October once 70% of their residents are fully immunised – voluntary uptake and capacity constraints determining when this target can be reached.
The big local stock news yesterday was Macquarie, as its shares jumped +4.7% after announcing first half of 2022 financial year is performing better than expected and well ahead of market consensus.
MQG has provided guidance for the 1st half of 2022 result to be ‘slightly down’ on the 2nd half of 2021, implying a range of ~$1.8-2.0bn of net profit for the half year. That makes 4 quarters in a row where MQG has averaged $1bn in profit, and it is easy to see why the share pricy has been on a great run over the last year (above)
However, while MQG is a top quality business, we think the good news has been largely reflected in the share price, and prefer Westpac as our top pick in the banking sector – which is trading on a cheaper valuation. We remain HOLD rated on MQG.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX 200 index -0.2%), amid a fall in global equity markets.
Losses were mainly felt by blue chip stocks and gold miners and those exposed to the US economy. Real Estate and Consumer staples were the hardest hit sectors, while materials continues to be weak as iron ore prices continue to slide.
The New Zealand market was down on Wednesday (NZX 50 index, -1.0%) ending a 7-day rally as well as weak lead from global markets given concerned about the delta variant hindering economic growth globally.
A2 milk shares were the hardest hit down -3%, while its supplier Synlait fell -0.3% after announcing it would cut 15% of its staff to reduce costs.
3 Things Markets will be Watching this Week
- In a quieter week, Chinese trade data will be closely watched given the growing concerns around the state of the Chinese economy. .
- Central Bank Meetings in Europe (ECB) and Australia (RBA).
- Covid-19 and lockdown related announcements locally.