Global markets were up overnight, as US markets (S&P 500 Index +1.2%) continued to rally as the US economy entered into a ‘technical recession’ (2 quarters of negative growth).
US second-quarter GDP growth came in weaker than the economist had predicted, with the economy shrinking by -0.9% over the year, missing the expectation of a modest growth of +0.4%. The market reaction suggests investors believe the Fed may become more dovish when it comes to its interest rate hike path (still conditional on inflation slowing down as that is the Fed’s primary focus as well as strength of the labour market). As a result, bond yields fell sharply and equities enjoyed a broad-based rally – wit the “bad news seen as good news”.
In stock moves, Meta (Facebook) fell -5.2% as its earnings missed and delivered its first quarterly revenue decline citing a challenging economic environment and increased competition. Apple and Amazon both reported earnings after the bell and are trading 3% and 13% higher in after-hours trade, both beating market expectations and providing upbeat guidance.
European markets (Stoxx 600 Index, +1%) were also up as investors digest earnings and US GDP figures. Ahead of the Eurozone figures tonight, German CPI inflation data came in much higher than expected, with headline inflation reaching its highest level in at least 30 years.
Macquarie (MQG:ASX)
Macquarie shares rose +3% yesterday after a strong first quarter update for the 2023 financial year, as favourable trading conditions saw net profit contribution rise from the same corresponding period last year – with no detailed figures provided.
Macquarie management advised that they continues to maintain a cautious stance, with a conservative approach to capital, funding, and liquidity that it believes positions the company well to respond to the current environment.
We are Hold rated on Macquarie given its valuation and near-term uncertainty. We believe it is a quality company and continue to hold it in our portfolio and think it is worth keeping on the watch list, and would be buying at a more attractive risk-adjusted valuation.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +1.0%) was up as markets digested a less hawkish than feared Fed decision.
Most sectors were up led by Materials and Energy, as commodity prices rose and a handful of miners reported earnings. Rio Tinto rose +0.7% underperforming its mining peers following its earnings missed expectations.
Tech shares also performed well following Wall street’s lead, Zip Co a stand out again up +22.6%.
The New Zealand market (NZX 50 Index, +1.7%) was up strongly as global recovery continues.
Mainfreight was the best performer rising +6.3% at its AGM, revealing growth was still strong in the past 16 weeks from April 1 with group revenue up by +32.5% to $1.4 billion. Profit soared +82.9% to $178.8m, with US revenue rising +41.4%.
3 Things Markets will be Watching this Week
- The Fed releases its interest rate decision, and the US announces GDP figures for the second quarter.
- A busy week of US corporate earnings led by tech heavyweights Microsoft, Alphabet (Google), Meta Platforms (Facebook).
- Locally, Australian inflation (CPI) data and AGM’s from Ryman Healthcare, Pacific Edge, Mainfreight and a half year result from Rio Tinto.
