Global markets were lower overnight (S&P 500 index -0.25%) as investors continue to weigh up a rise in inflation and a spike in covid-19 cases in parts of the world.
Big Tech names came under pressure again, with Apple and Netflix down -0.9% , Microsoft shedding -1.2% and Tesla down more than -2% as famed investor Michael Burry (who went short US property market before the GFC) revealed a big short position on the electric carmaker.
The Tech sector continues to be the major drag on the US market, amidst a broader shift out of growth stocks and into cyclical, reopening trades in energy, financials, and materials. Communication services stock Discovery bucked that trend, up big after AT&T announced a $43 billion deal to merge WarnerMedia, which includes HBO, with Discovery. Marathon Digital (-9.6%) and Coinbase (-6.7%) fell as bitcoin tanked after Tesla (-3.8%) boss Elon Musk’s tweets suggested the carmaker might sell or its bitcoin holdings.
Major European markets were mostly weaker (Stoxx 600 -0.1%) as they consumed lackluster economic data from China as well as covid-19 concerns which outweighed reopening optimism on the day.
Aristocrat Leisure Limited (ALL:ASX)
Aristocrat (ALL) shares jumped +4.2% yesterday, following the release of their trading update. ALL expect net profit after tax for the first half of the 2021 financial year to be $412m (up +12% from the previous year), well above market expectations.
Citing the digital business performing strongly and land-based business recovering faster than anticipated. Management notes that the Digital business is benefiting from a diverse portfolio of world-class titles, as well as strong investment in User Acquisition (UA), Live Ops, new game content and features. Overall demand continues to be elevated, compared to pre-COVID levels. Organic growth continues to remain strong and with a solid balance sheet leaves room for further acquisitions.
We continue to remain BUY rated on Aristocrat as one of our preferred Aussie Tech sector picks, which should also run further as casinos re-open globally.
Australia & New Zealand Market Movers
The Australian market ended a touch higher yesterday (ASX 200 index +0.1%) as beaten down Aussie tech stocks made back some ground following a positive lead from Wall street on Friday as investors were comfortable buying the recent dip.
Gold miners also performed strongly helped by rally in precious metals, despite the price of iron ore falling major miners still edged higher for the day BHP +0.1% and Rio Tinto +0.5%.
Elder's (-3.5%) shares were lower despite delivering a sound result for the first half of the 2021 financial year – underlying net profit after tax coming in at $68.2m, up +31% from last year on the back of favourable market conditions.
Ampol (formerly known as Caltex) shares jumped +6.1% after the new Australian government refining package that will have the company maintain its Lytton refining operations until at least mid-2027.
Ardent leisure also jumped +7.8% after announcing it's US based Main-event business was up +40% in the month of April when compared to the same month two-years ago. The major banks were mixed, with Macquarie leading losses down -4.9% as it went ex dividend.
The New Zealand market rose slightly on Monday (NZX 50 index +0.2%) as investors piled into smaller stocks.
Vista Group jumped +5.7% as it bounced back from the inflation concern sell off, Scales rose +3.2% and Pushpay was up 3.1%.
Tower insurance fell -5.8%, after downgrading its earnings guidance for the 2021 financial year due to higher house claims costs driven by increasing frequency of large house claims and lower investment income. A2 Milk continues to fall heavily down another -4.5%, along with its milk supplier Synlait Milk (-1.0%)
3 Things Markets will be Watching this Week
- Key events this week include the latest US Federal Reserve minutes, US housing starts and existing home sales, Inflation prints across Europe, PMI data across much of the globe and a dump of Chinese data on Monday including Industrial Production and Retail sales.
- This week 20 S&P 500 companies are due to report along with some of China’s largest companies and a few large international companies including Walmart, Home Depot, Lowe’s, Target, VF Corp, Ralph Lauren, Cisco, Applied Material, Tencent, JD.com, Baidu Inc, Vodafone and Porsche SE.
- Locally, the latest employment data in Australia is due along with earnings releases from Incitec Pivot, Trustpower, James Hardie, Kiwi Property, Webjet, Infratil, Serko, Ryman Helathcare, Aristocrat, My Food Bag and Oceania Healthcare.