Global markets were mostly down overnight, with the US market (S&P 500 index, -1.3%) falling below its 100-day moving average as investors feared persistently high inflation as surging energy prices continue with oil +3% overnight.
Losses were felt across most of the market as Treasury yields rose slightly, although the tech sector hardest with all the mega caps down (2 – 5%) as the tech sector takes the bulk of the "risk off"sell-down as as high growth names sentiment is impacted from the backdrop of higher rates. Facebook tumbled -4.9% after a former employee said the company prioritizes profits over public safety, raising regulatory concerns.
The Energy sector was in a green supported by a rise oil prices after OPEC+ stuck to its schedule of gradual output increases amid strong demand.
Merck shares gained another +2.1%, following through on an 8% surge on Friday after the drug maker said its oral antiviral treatment developed with Ridgeback Biotherapeutics for Covid-19 reduced the risk of hospitalization, and Australia has accepted orders for the drug.
European Markets (Stoxx 600 index -0.4%) were down overnight, as tech stocks led losses and concerns over an energy crunch spreading as European power and gas prices surged before the onset of winter.
Shares in Chinese property giant Evergrande are in trading halt amid reports that the developer has agreed to sell a controlling stake in its property-services arm to raise much-needed cash. The stock was halted ahead of a “major announcement”, with Hopson Development Holdings reportedly planning to acquire 51% of the property-services unit at an implied price of HK$40bn (US$5.1bn). Hopson’s bonds plunged on the news.
Closer to home, cabinet announced Auckland will remain in level 3 lock-down and the remainder of the country in level 2, with some easing on restrictions on social gatherings but nothing significant for retailers or hospitality businesses in Auckland.
Pacific Edge (PEB:NZX / PEB:ASX)
After a successful and oversubscribed placement with institutional investors which raised $80m, Pacific Edge announced a Retail offer to raise an addition $20m.
Retail investors will be entitled to apply for up to $50,000 of new shares under their Retail offer, with shares offered at the lower of $1.35 or 5-day weighted average price of Pacific Edge to 13th October 2021 – when the retail offer is closed – we would encourage existing shareholder to take up their allocation. The purpose of raising the capital is to ensure it has the resources and capacity to capitalise on its recent commercial milestones and to execute and accelerate its growth strategy in markets of scale.
We still believe it is still a relatively early time to invest and PEB’s market capitalisation of $1.2 billion is still relatively small for a healthcare company given their ambitious targets in the US market. We see upside potential from Pacific Edge meeting its US revenue targets and with positive cashflow over the near-term and plenty of cash on hand it should help boost the research and development of its other cancer diagnostic products such as – gastric, colorectal, and endometrial cancers and melanoma, as well as scale up its operations and expand into Asia. We remain BUY rated.
Australia & New Zealand Market Movers
The Australian market was up on Monday (ASX 200 index +1.3%) partially recovering from Friday’s sharp sell off and brushing off concerns regarding Evergrande shares going into a trading halt.
Travel stocks were stronger again, with some reaching 52-week highs, Flight Centre soaring up another +9.6%, Webjet +2.9%, Corporate travel firmed +3.3% and Qantas up +1.8% after announcing its cornerstone partnership with Emirates will extend for another five years.
CBA rose +5.1%, after completing tis $6 billion off-market buyback which was said to be heavily oversubscribed by $18 billion – the other major banks following suit and making sizeable gains.
Further strengthening in the oil price saw energy stocks also trade higher. While Tech and healthcare shares were weaker.
The New Zealand market was up yesterday (NZX 50 index, +0.4%) taking on a more positive lead with most global markets.
Infratil shares rose +1.9% after announcing will partner with Auckland Radiology Group to create a national diagnostic imaging business – Infratil contributing $30m-$60m for acquisition & own 50.1%.
3 Things Markets will be Watching this Week
- Key events this week include RBNZ rate call this Wednesday, and RBA decision this Tuesday.
- US Non-Farm Payroll Data due later this week (monhtly employment figures)
- Covid and lock-down related news flow both sides of the Tasman.