Global markets were mixed overnight, with the US market (S&P 500 index +0.8%) higher as investors concerns around the slowdown in economic activity start to ease, but markets appear to be moving in a sideways patch.
Positive sentiment saw US Treasury yields rise to 1.30% helping lift bank stocks higher, with Citigroup up 2.4% and Morgan Stanley 1.1% higher. Gains were broad based across the market with all sectors in the green except for one – as utilities experienced a minor decline. Energy stocks were the standout performer as WTI crude oil rose from its recent slump after a US government report showed a bigger-than-expected decline in crude stockpiles signaled a rapidly tightening market.
European Markets were down overnight (Stoxx 600 index, -0.7%) as UK inflation data soared to a nine-year high in August with CPI up +3.2% year on year, well ahead of expectations and above 2% recorded in July.
Asian markets continue to underperform, with the HK market down nearly -2% as all the news coming out of China recently has been ostensibly negative, with another outbreak of COVID19 centred in Fuijian province, widespread lockdowns causing a soft patch in economic activity, regulatory crackdowns across a wide range of sectors (with casinos added to the mix overnight), and risk of some contagion effect in the property market, with the possible imminent collapse of Evergrande Group after Chinese authorities told major lenders to the company not to expect interest payments due next week on bank loan
Briscoes Group (BGP:NZX)
Briscoes Group stormed up to new record highs yesterday, a day after reporting a solid result for the first half of the 2021 financial year. They reported net profit after tax of $47.5m up +69% from last year, with the 6 month period largely unaffected by any lockdown restrictions and benefiting from persistently strong demand with revenues up +18.3% from the previous period which was heavily impacted by the first lockdown.
The group added that expected a ~$17m and anticipate net profit for the full year could be as a high as $85m.
Given there is a lack of clarity on this retail spending momentum persisting over the medium-term we remain HOLD rated. Especially BGP’s current valuation (~18x earnings). With the shares trading at record highs, the market may be getting too optimistic that this recent surge in growth will continue at its current rate over the medium-term, in our view.
Australia & New Zealand Market Movers
The Australian market was down on Wednesday (ASX 200 index -0.3%), taking a weak lead from Wall Street.
Most sectors were lower, both material and energy stocks lower as most commodity prices were lower across the session. Flowing through from RBA’s announcement to keep rates unchanged until 2024, Tech and Real Estate stocks were higher, while Healthcare stocks led gains.
Brambles fell -2.1% as investors question the amount of capital investment required to achieve some form of growth. Qantas announced its first commercial flight in almost 2 years is set to take off on December 18th to London, LA, Vancouver and Singapore – travellers required to be vaccinated and proof of a negative covid-19 test depending on the destination.
The New Zealand market was a touch lower yesterday (NZX 50 index -0.1%) in a quiet session.
Tower Insurance held an encouraging investor presentation, providing no guidance which could be viewed as good news given recent flooding and storm events, current lockdown restrictions likely lowering claim expenses.
3 Things Markets will be Watching this Week
- Key events this week include inflation (CPI) prints in the U.S, Eurozone and U.K along with activity data in China including Retail sales and Industrial Production.
- Australia’s latest employment data and second quarter GDP in NZ are due. Brambles, Telstra, Zip and Pushpay will host Investor Days.
- Covid and lockdown updates both sides of the Tasman